Atento
Annual Report 2020

Plain-text annual report

22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 20-F 1 attoform20f_2020.htm FORM 20-F UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2020 Commission file number: 001-36671 Atento S.A. (Exact name of Registrant as specified in its charter) Atento S.A. (Translation of Registrant’s name into English) Grand Duchy of Luxembourg (Jurisdiction of incorporation or organization) 1, rue Hildegard Von Bingen, L-1282, Luxembourg Grand Duchy of Luxembourg (Address of principal executive offices) Jose Antonio de Souza Azevedo, Chief Financial Officer Address: Rua Paul Valery, 255, 4º andar, Chácara Santo Antonio, 04719-050, São Paulo, Brazil Telephone No.: +55 (11) 3779-0881 e-mail: investor.relations@atento.com (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act. Ordinary Shares, no par value Title of each class Trading Symbol(s) ATTO Name of each exchange on which registered New York Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: None (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None (Title of Class) Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 15,000,000 ordinary shares [_] Yes [X] No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. [_] Yes [X] No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). [X] Yes [_] No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [_] Accelerated filer [X] Non-accelerated filer [_] Emerging growth copany [_] If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X] Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 1/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm US GAAP [_] International Financial Reporting Standards as issued by the International Accounting Standards Board [X] Other [_] If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. [_] Item 17 [_] Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [_] Yes [X] No https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 2/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Atento S.A. TABLE OF CONTENTS PRESENTATION OF FINANCIAL AND OTHER INFORMATION PRESENTATION OF FINANCIAL INFORMATION TRADEMARKS AND TRADE NAMES CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS A. Directors and Senior Management B. Advisers C. Auditors ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE A. Offer Statistics B. Method and Expected Timetable ITEM 3. KEY INFORMATION A. Selected Financial Data B. Capitalization and Indebtedness C. Reasons for the Offer and Use of Proceeds D. Risk Factors ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company B. Business Overview C. Organizational Structure D. Property, Plant and Equipment ITEM 4A. UNRESOLVED STAFF COMMENTS ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS A. Operating Results B. Liquidity and Capital Resources C. Research and Development, Patents and Licenses, etc. D. Trend Information E. Off-Balance Sheet Arrangements F. Tabular DisclosureE. Off-Balance Sheet Arrangement of Contractual Obligations G. Safe harbor ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Senior Management B. Compensation C. Board practices D. Employees E. Share Ownership ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders B. Related Party Transactions C. Interests of Experts and Counsel ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and Other Financial Information B. Significant Changes ITEM 9. THE OFFER AND LISTING A. Offering and Listing Details B. Plan of Distribution C. Markets D. Selling Shareholders E. Dilution F. Expenses of the Issue ITEM 10. ADDITIONAL INFORMATION A. Share Capital 3 5 6 6 8 8 8 8 8 8 8 8 8 8 15 15 15 34 34 36 46 46 48 48 50 63 69 69 71 72 72 72 72 76 77 79 81 81 81 82 83 83 83 84 85 85 85 85 86 86 86 86 86 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 3/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm B. Memorandum and Articles of Association C. Material Contracts D. Exchange Controls E. Taxation F. Dividends and Paying Agents G. Statement by Experts H. Documents on Display I. Subsidiary Information ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A. Debt Securities B. Warrants and Rights C. Other Securities D. American Depositary Shares PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS ITEM 15. CONTROLS AND PROCEDURES A. Disclosure Controls and Procedures B. Management’s Annual Report on Internal Control over Financial Reporting C. Attestation Report of the Registered Public Accounting Firm D. Changes in Internal Control over Financial Reporting ITEM 16. [RESERVED] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT ITEM 16B. CODE OF ETHICS ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT ITEM 16G. CORPORATE GOVERNANCE ITEM 16H. MINE SAFETY DISCLOSURE PART III ITEM 17. FINANCIAL STATEMENTS ITEM 18. FINANCIAL STATEMENTS ITEM 19. EXHIBITS 86 93 93 93 96 96 96 96 96 98 98 99 99 99 99 99 99 99 99 99 100 100 100 100 100 100 101 101 101 101 101 102 102 102 102 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 4/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Basis of Presentation and Other Information PRESENTATION OF FINANCIAL AND OTHER INFORMATION Except where the context otherwise requires or where otherwise indicated, the terms “Atento”, “we”, “us”, “our”, “the Company”, and “our business” refer to Atento S.A., a public limited liability company (société anonyme) incorporated under the laws of Luxembourg on March 5, 2014, together with its consolidated subsidiaries. Atento S.A. was formed as a direct subsidiary of Atalaya Luxco Topco S.C.A. (“Topco”). In April 2014, Topco also incorporated Atalaya Luxco PIKCo S.C.A. (“PikCo”) and on May 15, 2014 Topco contributed to PikCo: (i) all of its equity interests in its then direct subsidiary, Atalaya Luxco Midco S.à.r.l. (“Midco”), the consideration for which was an allocation to PikCo’s account “capital contributions not remunerated by shares” (the “Reserve Account”) equal to €2 million, resulting in Midco becoming a direct subsidiary of PikCo; and (ii) all of its debt interests in Midco (comprising three series of preferred equity certificates (the “Original Luxco PECs”)), the consideration for which was the issuance by PikCo to Topco of preferred equity certificates having an equivalent value. On May 30, 2014, Midco authorized the issuance of, and PikCo subscribed for, a fourth series of preferred equity certificates (together with the Original Luxco PECs, the “Luxco PECs”). On October 7, 2014, we completed our IPO and issued 4,819,511 ordinary shares at a price of $15.00 per share. As a result of the IPO, the Share Split and the Reorganization Transaction, we had 73,619,511 ordinary shares outstanding and owned 100% of the issued and outstanding share capital of Midco, as of November 9, 2015. On August 4, 2015, our Board of Directors (“The Board”) approved a share capital increase and issued 131,620 shares, increasing the number of outstanding shares to 73,751,131. On July 28, 2016, the Board approved a share capital increase and issued 157,925 shares, increasing the number of outstanding shares to 73,909,056. On November 6, 2018, the Board approved a share capital increase and issued 1,161,870 shares, increasing the number of outstanding shares to 75,070,926. On January 18, 2019, the Board approved a share capital increase and issued 335,431 shares, increasing the number of outstanding shares to 75,406,357. On July 28, 2020, an extraordinary shareholder’s meeting approved the conversion of 75,406,357 ordinary shares without nominal value, representing the entire share capital of the Company, into 15,000,000 ordinary shares without nominal value using a ratio of conversion of 5.027090466672970, and subsequently amending article 5 of the articles of association of the Company. Acquisition and Divestment Transactions On September 2, 2016, the Company through its direct subsidiary Atento Brasil acquired 81.49%, the controlling interest of RBrasil Soluções S.A. (RBrasil). On May 9, 2017, we announced an extended partnership with Itaú, a leading financial institution in Brazil, through which we will leverage the industry-leading capabilities of RBrasil and Atento Brasil S.A. (“Atento Brasil”) to serve Itaú’s increasing demand for end-to-end collections solutions, customer service and back office services. On June 9, 2017, the Company, through its subsidiary, Atento Brasil, acquired 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of Interservicer – Serviços em Crédito Imobiliário Ltda. (jointly, “Interfile”), a leading provider of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil. Through this acquisition, we expect to be able to expand our capabilities in the financial services segment, especially in credit origination, accelerate our penetration into higher value-added solutions, strengthen our leadership position in the Brazilian market and facilitate the expansion of our credit origination segment into other Latin American markets. On June 30, 2017, we announced the signing of a strategic partnership and the acquisition of a minority stake in Keepcon, a leading provider of semantic technology-based automated customer experience management, through our subsidiary Contact US Teleservices Inc. The acquisition of a minority stake in Keepcon follows our overall strategy to develop and expand our digital capabilities. Our goal is to integrate all of our digital assets to generate additional value for clients and drive growth across verticals and geographies. We aim to turn the business disruption generated by the digital revolution into differentiated customer experience solutions generating competitive advantages for customers. We expect that the investment in Keepcon by Atento will expand the artificial intelligence and automatization capabilities of our omnichannel platform. 3 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 5/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On June 7, 2019, the Company acquired the minority interest corresponding to 18.51% of the shares of RBrasil, now holding 100% of the company's shares. On May 17, 2019, the Company acquired the minority interest corresponding to 49.99998% of Interfile Serviços de BPO Ltda. and 49.99989% of Interservicer - Serviços em Crédito Imobiliário Ltda., now holding a 100% interest in these companies. On June 23, 2019, Contact US Teleservices, Inc. signed with Keepcon a first amendment to the Put&Call option agreement. In addition to this, Atento Brasil, also signed an Offer Letter with Keepcon on October 29, 2019, for the provision of certain monitoring and classification services on processes of social media and other channels, through out 36 months as from the date of its signature. Other Transactions On August 10, 2017, Atento completed a refinancing transaction of its financing structure throughout its subsidiary Atento Luxco 1. The new financing structure included an offering of US$400.0 million aggregate principal amount of 6.125% Senior Secured Notes due 2022 (the “Offering”). Atento used the net proceeds from the Offering, together with cash on hand, to redeem all of the Issuer’s outstanding 7.375% Senior Secured Notes due 2020 and all of the existing debentures due 2019 of its subsidiary Atento Brasil. The Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s wholly-owned subsidiaries on a joint and several basis. On August 18, 2017, Atento filed a Form F-3 with the SEC, for the sake of up to $200,000,000 Ordinary Shares by Atento and 62,660,015 Ordinary Shares Offered by the selling shareholder. In consequence, the selling shareholder may offer and sell from time to time up to 62,660,015 of Ordinary Shares, covered by the Form F-3. These Ordinary Shares were offered in amounts, at prices and on terms to be determined at the time of their offering, if any. On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividends pay- out in line with industry peers and practices. The declaration and payment of any interim dividends will be subject to approval of Atento’s corporate bodies and will be determined based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and liquidity factors. The Board of Directors intends to review the dividend policy regularly and so accordingly is subject to change at any time. On October 31, 2017, our Board of Directors declared a cash interim dividend with respect to the ordinary shares of $0.3384 per share paid on November 28, 2017 to shareholders of record as of the close on November 10, 2017. On November 13, 2017, Atento filed a Supplemental Prospectus with the SEC, for the sale of Pikco of 12,295,082 ordinary shares. After the offering Pikco owns 48,520,671 ordinary shares in Atento, representing 64.34% of the outstanding shares. On July 26, 2018, our Board of Directors approved the share buyback program. We estimated a repurchased amount of 30 million US. Dollars to be concluded in up to 12 months. The total shares repurchased was 1,106,158 corresponding to $8.2 million. On April 4, 2019 Atento Luxco 1 S.A., a wholly-owned subsidiary of Atento S.A., closed an offering of an additional US$100 million aggregate principal amount of its 6.125% Senior Secured Notes due 2022 in a private placement transaction. The Additional Notes were offered as additional notes under the indenture, dated as of August 10, 2017, pursuant to which the Issuer previously issued US$400 million aggregate principal amount of its 6.125% Senior Secured Notes due 2022. On February 4, 2020, a general meeting of shareholders of the Company approved a new authorization by the general meeting of the Company to the Board of Directors of the Company to acquire its own fully paid-up shares on the New York Stock Exchange or any other exchange without making an acquisition offer to the shareholders of the Company, for a period of 5 years, for a maximum number of shares to be acquired, which shall be up to 30% of the Company’s share capital, at a redemption price per share which shall represent (i) not less than 50% of the lowest closing price per share and (ii) not more than 50% above the highest closing price per share, in each case as reported by the New York edition of the Wall Street Journal, or, if not reported therein, any other authoritative sources to be selected by the Board of Directors of the Company over the ten (10) trading days preceding the date of the purchase of the shares (or the date of the commitment to purchase the shares). 4 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 6/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On May 6, 2020, Atento S.A. (the “Company”) announced the arrangements to facilitate HPS Investment Partners, LLC and certain of its affiliates’ (collectively, “HPS”), GIC’s, and an investment fund affiliated with Farallon Capital Management, L.L.C. (“Farallon”)’s (collectively, the “Institutional Investors”) acquisition of ordinary shares of the Company currently held indirectly by Bain Capital in exchange for senior PIK notes currently held by the Institutional Investors (the “Transaction”). Following the completion of certain regulatory conditions, including antitrust filings in Brazil and Mexico, the Director Nomination Agreements, each dated May 6, 2020, by and between the Company and each of HPS, GIC and Farallon (each, a “Director Nomination Agreement”), and the Registration Rights Agreement, dated May 6, 2020, by and among the Company, HPS, GIC and Farallon (the “Registration Rights Agreement”), have become effective as of June 22, 2020. Atento will also terminate the existing registration rights agreement, dated as of October 6, 2014, by and between the Company and Atalaya Luxco Pikco S.C.A., which has become effective upon completion of the Transaction on June 22, 2020. Exchange Rate Information In this Annual Report, all references to “U.S. dollar” and “$” are to the lawful currency of the United States and all references to “euro” or “€” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time. In addition, all references to Brazilian Reais (BRL), Mexican Peso (MXN), Chilean Peso (CLP), Argentinean Peso (ARS), Colombian Peso (COP) and Peruvian Nuevos Soles (PEN) are to the lawful currencies of Brazil, Mexico, Chile, Argentina, Colombia and Peru, respectively. The following table shows the exchange rates of the U.S. dollar to these currencies for the years and dates indicated as reported by the relevant central banks of the European Union and each country, as applicable. Euro (EUR) Brazil (BRL) Mexico (MXN) Average 0.90 3.48 18.69 Colombia (COP) 3,054.33 Chile (CLP) Peru (PEN) Argentina (ARS) 676.73 3.38 14.78 2016 December 31 Average 0.89 0.95 2017 December 31 Average 0.85 0.83 2018 December 31 Average 0.89 0.87 2019 December 31 Average 0.88 0.89 2020 December 31 0.81 3.26 20.62 3,000.71 667.29 3.36 15.89 3.19 18.92 2,951.28 648.86 3.26 16.56 3.31 19.66 2,984.00 615.22 3.25 18.65 3.65 19.24 2,955.34 641.38 3.29 28.12 3.87 19.65 3,249.75 695.69 3.38 37.70 3.94 19.25 3,281.35 702.77 3.34 48.22 4.03 18.86 3,277.14 744.62 3.32 59.89 5.15 21.49 3,694.46 792.17 3.50 70.64 5.20 19.91 3,432.50 711.24 3.62 84.15 We present our historical financial information under International Financial Reporting Standards (“IFRS”) as issued by the International PRESENTATION OF FINANCIAL INFORMATION Accounting Standards Board (the “IASB”). Atento’s Financial Information The consolidated financial information of Atento are the consolidated results of operations of Atento, which includes the years ended December 31, 2016, 2017, 2018, 2019 and 2020. Rounding Certain numerical figures set out in this Annual Report, including financial data presented in millions or thousands and percentages, have been subject to rounding adjustments, and, as a result, the totals of the data in this Annual Report may vary slightly from the actual arithmetic totals of such data. Percentages and amounts reflecting changes over time periods relating to financial and other data set forth in “Item 3. Key Information– A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects–A. Operating Results–Management’s Discussion and Analysis of Financial Condition and Results of Operations” are calculated using the numerical data in the financial statements or the tabular presentation of other data (subject to rounding) contained in this Annual Report, as applicable, and not using the numerical data in the narrative description thereof. 5 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 7/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents TRADEMARKS AND TRADE NAMES This Annual Report includes our trademarks as “Atento,” which are protected under applicable intellectual property laws and are the property of the Company or our subsidiaries. This Annual Report also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names. In 2017, Atento launched its digital business unit under the brand “Atento Digital”. Atento Digital’s mainstream offering encompasses a wide range of digital capabilities that enhance customer experience and increase efficiency across the customer lifecycle, from acquiring to managing and retaining customers. Atento Digital’s offer also includes consultancy services and solutions for advancing digital transformation processes while fully leveraging existing systems. Atento Digital is a trademark registered by Atento. In 2020, Atento launches its Startup accelerator named “Atento Next”. In line with the objective of having innovation at the center of its business strategies, Atento Next, will put the company close to the selected startups, to bring even more innovation to the company and its customers. CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS This Annual Report contains estimates and forward-looking statements, principally in “Item 3. Key Information—D. Risk Factors”, “Item 4. Information on the Company—B. Business Overview” and “Item 5. Operating and Financial Review and Prospects”. Some of the matters discussed concerning our business operations and financial performance include estimates and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Our estimates and forward-looking statements are based mainly on our current expectations and estimates on projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to certain risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others: · the impact of the COVID-19 pandemic on our business and its effects on our customers ability or desire to purchase our services; · disruption caused by the COVID-19 pandemic in jurisdictions in which we operate and globally and government measures in response to the COVID-19 pandemic; · the competitiveness of the customer relationship management and business process (“CRM BPO”) market; · the loss of one or more of our major clients, a small number of which account for a significant portion of our revenue, in particular Telefónica; · risks associated with operating in Latin America, where a significant proportion of our revenue is derived and where a large number of our employees are based; · our clients deciding to enter or further expand their own CRM BPO businesses in the future; · any deterioration in global markets and general economic conditions, in particular in Latin America and in the telecommunications and the financial services industries from which we derive most of our revenue; · increases in employee benefit expenses, changes to labor laws and labor relations; · failure to attract and retain enough sufficiently trained employees at our service delivery centers to support our operations; · inability to maintain our pricing and level of activity and control our costs; 6 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 8/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · consolidation of potential users of CRM BPO services; · the reversal of current trends towards CRM BPO solutions; · fluctuations of our operating results from one quarter to the next due to various factors including seasonality; · the significant leverage our clients have over our business relationships; · the departure of key personnel or challenges with respect to labor relations; · the long selling and implementation cycle for CRM BPO services; · difficulty controlling our growth and updating our internal operational and financial systems as a result of our increased size; · inability to fund our working capital requirements and new investments; · fluctuations in, or devaluation of, the local currencies in the countries in which we operate against our reporting currency, the U.S. dollar; · current political and economic volatility, particularly in Brazil, Mexico, Argentina and Europe; · our ability to acquire and integrate companies that complement our business; · the quality and reliability of the technology provided by our technology and telecommunications providers, our reliance on a limited number of suppliers of such technology and the services and products of our clients; · our ability to invest in and implement new technologies; · disruptions or interruptions in our client relationships; · actions of the Brazilian, EU, Spanish, Argentinian, Mexican and other governments and their respective regulatory agencies, including adverse competition law rulings and the introduction of new regulations that could require us to make additional expenditures; · damage or disruptions to our key technology systems or the quality and reliability of the technology provided by technology telecommunications providers; · an increase in the cost of telecommunications services and other services on which we and our industry rely; · an actual or perceived failure to comply with data protection regulations, in particular any actual or perceived failure to ensure secure transmission of sensitive or confidential customer data through our networks and other cybersecurity issues; · the effect of labor disputes on our business; and · other risk factors listed in the section of this Annual Report entitled “Item 3. Key Information—D. Risk Factors”. The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements are intended to be accurate only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. You should therefore not make any investment decision based on these estimates and forward-looking statements. 7 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 9/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report. We do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS A. Directors and Senior Management Not applicable. B. Advisers Not applicable. C. Auditors Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE A. Offer Statistics Not applicable. B. Method and Expected Timetable Not applicable. ITEM 3. KEY INFORMATION A. Selected Financial Data The following selected financial information should be read in conjunction with the section “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements, included elsewhere in this Annual Report. Following the Reorganization Transaction and the IPO, our financial statements present the results of operations of Atento. The consolidated financial statements of Atento are substantially the same as the consolidated financial statements of Midco prior to the IPO, as adjusted for the Reorganization Transaction. Upon consummation, the Reorganization Transaction was reflected retroactively in the Company’s earnings per share calculations. The following table sets forth selected historical financial data of Atento. We prepare our financial statements in accordance with IFRS as issued by the IASB. Our financial reporting periods presented in the table below reflects the consolidated results of operations of Atento, as of and for the years ended December 31, 2016, 2017, 2018, 2019 and 2020. 8 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 10/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Selected Consolidated Other Financial Information ($ in millions other than share and per share data) Revenue Operating profit Profit/(loss) from continuing operations Loss from discontinued operations Profit/(loss) for the year Earnings/(loss) per share-basic from continuing operations (**) Loss per share-basic from discontinued operations (**) Earnings/(loss) per share-diluted from continuing operations (**) Loss per share-diluted from discontinued operations (**) Dividends declared per share (**) Number of shares (**) Weighted average number of shares outstanding-basic (**) Weighted average number of shares outstanding-diluted (**) Balance sheet data: Total assets Equity Capital stock 2016 (*) 1,757.5 116.4 3.4 (3.2) 0.2 0.25 (0.20) 0.25 (0.20) - 14,702,154 14,683,828 14,738,092 1,377.6 430.2 0.048 As of and for the year ended December 31, 2017 1,921.3 92.4 (13.6) - (13.6) (1.16) - (1.16) - 1.64 14,702,154 14,702,154 14,702,154 1,330.3 377.8 0.048 2018 1,818.2 89.5 20.5 - 20.5 1.26 - 1.25 - - 14,933,275 14,688,705 14,875,018 1,213.4 340.1 0.049 2019 1,707.3 12.6 (80.7) - (80.7) (5.63) - (5.63) - - 15,000,000 14,446,297 14,446,297 1,304.6 207.0 0.049 2020 1,412.3 40.3 (46.9) - (46.9) (3.33) - (3.33) - - 15,000,000 14,082,904 14,082,904 1,176.1 119.7 0.049 (*) Exclude discontinued operations - Morocco. (**) As a consequence of the reverse share split occurred on July 28, 2020, number of shares, earnings/(loss) per share and dividends per share were retrospective adjusted by applying the ratio of conversion of 5.027090466672970 into the previous amount. Summary Consolidated Historical Financial Information ($ in millions) Revenue Profit/(loss) from continuing operations Loss from discontinued operations Profit/(loss) for the year EBITDA (1) Adjusted EBITDA (1) Adjusted Earnings (2) Adjusted Earnings per share (in U.S. dollars) (3) (**) Adjusted Earnings attributable to Owners of the parent (2) Adjusted Earnings per share attributable to Owners of the parent (in U.S. dollars) (3) (**) Capital Expenditure (4) Total Debt As of and for the year ended December 31, 2016 (*) 2017 2018 2019 Change (%) Change excluding FX (%) As of and for the year ended December 31, 2020 Change (%) Change excluding FX (%) (***) 1,921.3 1,818.2 1,707.3 (13.6) - (13.6) 196.9 221.0 58.4 3.99 55.2 3.77 (67.5) 486.3 20.5 - 20.5 184.8 184.8 59.1 4.03 57.2 3.89 (89.9) 459.8 (6.1) N.M. N.M. N.M. (17.0) (17.0) 2.1 N.M. N.M. N.M. (9.9) (9.9) (80.7) - (80.7) 153.4 153.4 (23.2) (139.2) (149.2) 1,412.3 (46.9) - (46.9) 161.2 161.2 (10.2) (17.3) (41.9) N.M. (41.9) 5.1 5.1 (56.1) (1.61) (139.9) (147.4) (0.72) (55.0) (23.9) N.M. (128.7) (10.2) (57.2) (1.65) (66.3) 720.6 N.M. (26.3) 56.7 (128.7) (20.5) 57.5 (0.72) (35.9) 726.6 (56.1) (45.9) 0.8 (2.8) (35.5) N.M. (35.5) 23.1 23.1 (64.2) (63.3) (64.7) (63.8) (18.0) 6.0 1,757.5 3.4 (3.2) 0.2 213.7 221.9 48.2 3.27 48.1 3.27 (48.2) 534.9 194.0 340.9 Cash and cash equivalents Net debt with third parties (5) (*) Exclude discontinued operations - Morocco. (**) As a consequence of the reverse share split occurred on July 28, 2020, number of shares, earnings/(loss) per share and dividends per share were retrospective adjusted by applying the ratio of conversion of 5.027090466672970 into the previous amount. (***) Uses the current currency FX for the variation of 2019 versus 2020. N.M. means not meaningful (13.1) 141.8 344.5 133.5 326.2 124.7 209.0 595.9 517.6 (3.5) (6.6) 67.6 75.3 82.7 81.5 (8.6) 9 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 11/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents (1) In considering the financial performance of the business, our management analyzes the financial performance measures of EBITDA and Adjusted EBITDA at a company and operating segment level, to facilitate decision-making. EBITDA is defined as profit/(loss) for the period from continuing operations before net finance expense, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude restructuring costs, site relocation costs and other items not related to our core results of operations. EBITDA and Adjusted EBITDA are not measures defined by IFRS. The most directly comparable IFRS measure to EBITDA and Adjusted EBITDA is profit/(loss) for the year/period from continuing operations. We believe EBITDA and Adjusted EBITDA are useful metrics for investors to understand our results of continuing operations and profitability because they permit investors to evaluate our recurring profitability from underlying operating activities. We also use these measures internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as to evaluate our underlying historical performance. We believe EBITDA facilitates comparisons of operating performance between periods and among other companies in industries similar to ours because it removes the effect of variances in capital structures, taxation, and non-cash depreciation and amortization charges, which may differ between companies for reasons unrelated to operating performance. We believe Adjusted EBITDA better reflects our underlying operating performance because it excludes the impact of items which are not related to our core results of continuing operations. EBITDA and Adjusted EBITDA measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present EBITDA-related performance measures when reporting their results. EBITDA and Adjusted EBITDA have limitations as analytical tools. These measures are not presentations made in accordance with IFRS, are not measures of financial condition or liquidity and should not be considered in isolation or as alternatives to profit or loss for the period from continuing operations or other measures determined in accordance with IFRS. EBITDA and Adjusted EBITDA are not necessary comparable to similarly titled measures used by other companies. These non-GAAP measures should be considered supplemental in nature and should not be construed as being more important than comparable GAAP measures. See below under the heading “Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)” for a reconciliation of profit/(loss) for the period from continuing operations to EBITDA and Adjusted EBITDA. EBITDA and adjusted EBITDA reported are presented applying the accounting and disclosure standard in highly inflationary economy our operations in Argentina. (2) In considering the Company’s financial performance, our management analyzes the performance measure of Adjusted Earnings. Adjusted Earnings is defined as profit/(loss) for the periods from continuing operations adjusted for certain amortization of acquisition related intangible assets, restructuring costs, site relocation costs and other items not related to our core results of operations, net foreign exchange impacts and their tax effects. Adjusted Earnings is not a measure defined by IFRS. The most directly comparable IFRS measure to Adjusted Earnings is profit/(loss) for the periods from continuing operations. We believe Adjusted Earnings is a useful metric for investors and is used by our management for measuring profitability because it represents a group measure of performance which excludes the impact of certain non-cash charges and other charges not associated with the underlying operating performance of the business, while including the effect of items that we believe affect shareholder value and in-year returns, such as income tax expense and net finance costs. Our management uses Adjusted Earnings to (i) provide senior management with monthly reports of our operating results; (ii) prepare strategic plans and annual budgets; and (iii) review senior management’s annual compensation, in part, using adjusted performance measures. Adjusted Earnings is defined to exclude items that are not related to our core results of operations. Adjusted Earnings measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present an Adjusted Earnings related performance measure when reporting their results. Adjusted Earnings has limitations as an analytical tool. Adjusted Earnings is neither a presentation made in accordance with IFRS nor a measure of financial condition or liquidity, and should not be considered in isolation or as an alternative to profit or loss for the period from continuing operations or other measures determined in accordance with IFRS. Adjusted Earnings is not necessarily comparable to similarly titled measures used by other companies. These non-GAAP measures should be considered supplemental in nature and should not be construed as being more important than comparable GAAP measures. 10 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 12/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents See below under the heading “Reconciliation of Adjusted Earnings to profit/(loss)” for a reconciliation of Adjusted Earnings to our profit/(loss) for the period from continuing operations. (3) Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding. As a consequence of the reverse split occurred on July 28, 2020, weighted average number of ordinary shares outstanding was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding, being 14,683,828, 14,702,154, 14,688,705, 14,446,297 and 14,082,904 for the years ended December 31, 2016, 2017, 2018, 2019 and 2020, respectively. (4) We define capital expenditure as the sum of the additions to property, plant and equipment and the additions to intangible assets during the period. (5) Total debt as of December 31, 2019 and 2020 is impacted by IFRS 16, which requires lease liabilities relating to former operating leases not related to short term or low value leases to be recognized as debt. Such additional lease liabilities were $187.9 million and $144.1 million as of December 31, 2019 and 2020, respectively. In considering our financial condition, our management analyzes net debt with third parties, which is defined as total debt less cash, cash equivalents (net of any outstanding bank overdrafts) and short-term financial investments. Net debt with third parties has limitations as an analytical tool. Net debt with third parties is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance, and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt with third parties is not necessarily comparable to similarly titled measures used by other companies. These non-GAAP measures should be considered supplemental in nature and should not be construed as being more important than comparable GAAP measures. See below under the heading “Financing Arrangements” for a reconciliation of total debt to net debt with third parties utilizing IFRS reported balances obtained from the financial information included elsewhere in this Annual Report. The most directly comparable IFRS measure to net debt with third parties is total debt. Cash Flow Selected Data: ($ in millions) Cash flows from operating activities Cash flows used in investing activities Cash flows (used in)/provided by financing activities Net increase/(decrease) in cash and cash equivalents Effect of changes in exchange rates Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 2016 141.9 (75.1) (62.7) 4.2 5.8 184.0 194.0 For the year ended December 31, 2019 2018 2017 114.5 (90.9) (84.3) (60.8) 8.6 194.0 141.8 81.2 (41.2) (33.7) 6.3 (14.5) 141.8 133.5 46.5 (55.9) 5.0 (4.4) (4.5) 133.5 124.7 2020 127.0 (38.2) 1.0 89.8 (5.5) 124.7 209.0 11 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 13/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss): ($ in millions) Profit/(loss) from continuing operations Net finance expense (**) Income tax expense (a) Depreciation and amortization EBITDA (non-GAAP) (unaudited) (***) Restructuring costs (b) Site relocation costs (c) Contingent Value Instrument (d) Other (e) Total non-recurring items (****) Adjusted EBITDA (non-GAAP) (unaudited) (***) (*) Exclude discontinued operations – Morocco. For the year ended December 31, 2016 (*) 2017 2018 2019 2020 3.4 107.8 5.2 97.3 213.7 33.7 9.3 (41.7) 6.9 8.2 221.9 (13.6) 93.5 12.5 104.4 196.9 16.8 - - 7.3 24.1 221.0 20.5 55.6 13.4 95.2 184.8 - - - - - 184.8 (80.7) 57.1 36.2 140.8 153.4 - - - - - 153.4 (46.9) 82.4 4.8 120.9 161.2 - - - - - 161.2 (**) Net finance expense includes finance income, finance costs, changes in fair value of financial instruments and net foreign exchange loss. (***) For the year ended December 31, 2019, the EBITDA was positively impacted in $52.4 million due to the application of IFRS 16. Depreciation and finance costs were negatively impacted in $49.3 million and $17.5 million, respectively, due to the application of the IFRS 16. For the year ended December 31, 2020, the EBITDA was positively impacted in $46.7 million due to the application of IFRS 16. Depreciation and finance costs were negatively impacted in $44.0 million and $14.4 million, respectively, due to the application of the IFRS 16. (a) In the first quarter of 2019, in connection with a global tax audit of the 2013-2016 tax periods, Atento Spain, as the representative company of a Spanish tax group composed of Atento S.A.’s direct Spanish subsidiaries (the “Spanish Tax Group”), signed a tax agreement with the Spanish tax authorities. The Spanish Tax Administration audited various aspects of the Spanish Tax Group including the deductibility of certain specific intercompany financing and operating expenses incurred during the acquisition of Atento Spain. The Spanish Tax Administration found that the tax treatment applied by the Company does not comply with the relevant tax rules leading to a discrepancy. As a result of this discrepancy, the amount of tax credits of the Spanish Tax Group, together with the corresponding effects in subsequent tax periods, has been reduced in an amount of $37.8 million. Accordingly, the tax credits for losses carryforward in our financial statements for the first quarter of 2019, was negatively affected by $37.8 million. (****) We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below: (b) Restructuring costs incurred in 2016 primarily included several restructuring activities and other personnel costs that were not related to our core result of operations. Restructuring costs for the year ended December 31, 2016 and 2017 are compounded of two main concepts: i) investments to lower our variable cost structure, which is mostly labor and ii) investments to drive a more sustainable lower-cost and competitive operating model. Both were direct response to the exceptional and severe adverse macroeconomic conditions in key markets such as Spain, Argentina, Brazil, Mexico and Puerto Rico, which drove significant declines in volume. The restructuring program carried out in 2017 to adjust the indirect costs structure has been finalized in the fourth quarter of 2017. 12 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 14/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents (c) (d) (e) Site relocation costs incurred for the year ended December 31, 2016 include costs associated with our strategic initiative to relocate call centers from tier 1 cities to tier 2 cities in Brazil to achieve efficiencies through lower rental costs, attrition and absenteeism. Site relocation costs incurred for the year ended December 31, 2016, are related to the investments in Brazil, to relocate and consolidate our sites from higher to lower costs locations. This program started in 2014 when 53 percent of our sites were in Tier 2 cities. On November 8, 2016 the CVI nominal value of ARS666.8 million, or $135.6 million, was terminated. As a result, in 2016 we recognized a gain of $41.7 million in “Other gains” representing the principle amount of the CVI. Other non-recurring items for the year ended December 31, 2016 refer mainly to other costs with the sale of Morocco operation related to the accrual of the reserve in amount of $3.1 million as guarantee to the buyer for potential indemnity related to eventual liability assessed from the period before the sale. For 2017, other non-recurring items relates mostly to the recognition of the costs incurred or expected to be incurred to recover the operations in Mexico and Puerto Rico affected by recent natural disasters. These estimated costs of $3.2 million are related to third quarter of 2017 and includes costs that were incurred but could not be charged to customers (mainly salaries and benefits) and other extraordinary costs related to the natural disasters. In addition, there were costs incurred on the secondary offer process occurred in November 2017. Reconciliation of Adjusted Earnings to profit/(loss): ($ in millions) Profit/(loss) from continuing operations Amortization of acquisition related intangible assets (a) Restructuring costs (b) (**) Site relocation costs (c) (**) Other (d) (**) Change in fair value of financial instruments (e) Net foreign exchange loss Contingent Value Instrument (f) Financial non-recurring (g) Depreciation non-recurring (h) Tax effect (i) Total of add-backs Adjusted Earnings (non-GAAP) (unaudited) Adjusted basic Earnings per share (in U.S. dollars) (***) (unaudited) (*) Exclude discontinued operations – Morocco. For the year ended December 31, 2016 (*) 2017 2018 2019 2020 3.4 24.2 33.6 9.3 6.9 (0.7) 21.1 (26.2) - - (23.5) 44.7 48.2 3.27 (13.6) 22.4 16.8 - 7.3 (0.2) 23.4 - 17.7 2.8 (18.2) 72.0 58.4 3.99 20.5 21.2 - - - - 28.8 - - - (11.3) 38.7 59.1 4.03 (80.7) 20.6 - - - - 9.1 - - - 27.7 57.5 (23.2) (1.61) (46.9) 18.3 - - - - 27.8 - - - (9.4) 36.7 (10.2) (0.72) (**) We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below: (a) (b) Amortization of acquisition related intangible assets represents the amortization expense of customer base, recorded as intangible assets. This customer base represents the fair value (within the business combination involving the acquisition of control of Atento Group) of the intangible assets arising from service agreements (tacit or explicitly formulated in contracts) with Telefónica Group and with other customers. Restructuring costs incurred in 2016 primarily included several restructuring activities and other personnel costs that were not related to our core result of operations. Restructuring costs for the year ended December 31, 2016 and 2017 are compounded of two main concepts: i) investments to lower our variable cost structure, which is mostly labor and ii) investments to drive a more sustainable lower-cost and competitive operating model. Both were direct response to the exceptional and severe adverse macroeconomic conditions in key markets such as Spain, Argentina, Brazil, Mexico and Puerto Rico, which drove significant declines in volume. The restructuring program carried out in 2017 to adjust the indirect costs structure has been finalized in the fourth quarter of 2017. 13 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 15/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents (c) (d) (e) (f) (g) (h) (i) Site relocation costs incurred for the year ended December 31, 2016 include costs associated with our strategic initiative to relocate call centers from tier 1 cities to tier 2 cities in Brazil to achieve efficiencies through lower rental costs, attrition and absenteeism. Site relocation costs incurred for the year ended December 31, 2016, are related to the investments in Brazil, to relocate and consolidate our sites from higher to lower costs locations. This program started in 2014 when 53 percent of our sites were in Tier 2 cities. Other non-recurring items for the year ended December 31, 2016 refer mainly to other costs with the sale of Morocco operation related to the accrual of the reserve in amount of $3.1 million as guarantee to the buyer for potential indemnity related to eventual liability assessed from the period before the sale. For 2017, non-recurring items relates mostly to the recognition of the costs incurred or expected to be incurred to recover the operations in Mexico and Puerto Rico affected by recent natural disasters. These estimated costs of $3.2 million are related to third quarter of 2017 and includes costs that were incurred but could not be charged to customers (mainly salaries and benefits) and other extraordinary costs related to the natural disasters. In addition, there were costs incurred on the secondary offer process occurred in November 2017. In 2018 we did not have any other non-recurring items. Since April 1, 2015, the Company designated the foreign currency risk on certain of its subsidiaries as net investment hedges using financial instruments as the hedging items. As a consequence, any gain or loss on the hedging instrument, related to the effective portion of the hedge is recognized in other comprehensive income (equity) as from that date. The gains or losses related to the ineffective portion are recognized in the statements of operations. For comparability, these adjustments are added back to calculate Adjusted Earnings. On November 8, 2016 the CVI nominal value of ARS666.8 million, or $135.6 million was terminated. As a result, in 2016 we recognized a gain of $41.7 million in “Other gains” representing the principle amount of the CVI. The interest reversal of $19.9 million was recognize on “Finance Cost”. Financial non-recurring relates to the costs incurred in the debt refinance process occurred in August 2017, which includes: (i) 2020 Senior Secured Notes call premium of $11.1 million and amortization of issuance costs of $4.9 million; (ii) Brazilian debentures due 2019 penalty fee of $0.7 million and remaining balance of the issuance cost of $1.0 million. Non-recurring depreciation relates to the provision for accelerated depreciation of fixed assets in Puerto Rico and Mexico, due to the recent natural disasters (See “Cautionary note regarding forward looking statements”). The tax effect represents the impact of the taxable adjustments based on tax nominal rate by country. For the years ended December 31, 2018, 2019 and 2020, the effective tax rate after moving non-recurring items is 30.5%, 57.4% and 354.9%, respectively. In the first quarter of 2019, in connection with a global tax audit of the 2013-2016 tax periods, Atento Spain, as the representative company of a Spanish tax group composed of Atento S.A.’s direct Spanish subsidiaries (the “Spanish Tax Group”), signed a tax agreement with the Spanish tax authorities. The Spanish Tax Administration audited various aspects of the Spanish Tax Group including the deductibility of certain specific intercompany financing and operating expenses incurred during the acquisition of Atento Spain. The Spanish Tax Administration found that the tax treatment applied by the Company does not comply with the relevant tax rules leading to a discrepancy. As a result of this discrepancy, the amount of tax credits of the Spanish Tax Group, together with the corresponding effects in subsequent tax periods, has been reduced in an amount of $37.8 million. Accordingly, the tax credits for losses carryforward in our financial statements for the first quarter of 2019 was negatively affected by $37.8 million. (***) Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding. As a consequence of the reverse split occurred on July 28, 2020, weighted average number of ordinary shares outstanding was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding, being 14,683,828, 14,702,154, 14,688,705, 14,446,297 and 14,082,904 for the years ended December 31, 2016, 2017, 2018, 2019 and 2020, respectively. 14 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 16/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Reconciliation of total debt to net debt with third parties ($ in millions, except Net Debt/Adj. EBITDA LTM) Debt: Senior Secured Notes Super Senior Credit Facility Brazilian Debentures BNDES Lease Liabilities (1) Other Borrowings Total Debt Cash and cash equivalents Net debt with third parties (2) (unaudited) Adjusted EBITDA LTM (3) (non-GAAP) (unaudited) Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited) 2016 As of December 31, 2018 2017 2019 2020 303.3 - 156.6 71.4 3.6 - 534.9 (194.0) 340.9 221.9 1.6x 398.3 - 21.1 50.4 10.5 6.0 486.3 (141.8) 344.5 221.0 1.6x 400.0 - 14.7 24.0 5.5 15.5 459.8 (133.5) 326.2 184.8 1.8x 501.9 - - 1.2 194.8 22.8 720.6 (124.7) 595.9 153.4 3.9x 505.6 30.0 - 0.6 152.7 38.9 727.8 (209.0) 518.8 161.2 3.2x (1) Consider the impact on December 31, 2020 of application of IFRS 16 (former operating leases not related to short-term or low-value leases are now shown as debt) was $144.1 million and $8.6 million of other financial leases. (2) In considering our financial condition, our management analyzes Net debt, which is defined as total debt less cash and cash equivalents. Net debt is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies. (3) Adjusted EBITDA LTM (Last Twelve Months) is defined as EBITDA adjusted to exclude certain acquisition and integration related costs, restructuring costs, site relocation costs, financing fees, IPO costs, asset impairments and other items not related to our core results of operations. B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors External Risks The CRM BPO market is very competitive. Our industry is very competitive, and we expect competition to remain intense from a number of sources in the future. We believe the principal competitive factors in the markets in which we operate are industry expertise, service quality, price, and the ability to add value to a client’s business. We face competition primarily from other CRM BPO companies and IT services companies. In addition, the trend toward offshore outsourcing, international expansion by foreign and domestic competitors and continued technological changes may result in new and different competitors entering our existing markets. These competitors may include entrants from the communications, software and data networking industries or entrants in geographical locations with lower costs than those in which we operate. 15 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 17/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Some of these existing and future competitors may have greater financial, human and other resources, longer operating histories, greater technological expertise and more established relationships in the industries that we currently serve or may serve in the future. In addition, some of our competitors may enter into strategic or commercial relationships among themselves or with larger, more established companies in order to increase their ability to address the needs of existing customers and reduce operating costs, or enter into similar arrangements with potential clients. Further, trends of consolidation in our industry and among CRM BPO competitors may result in new competitors with greater scale, a broader geographic footprint, better technologies and price efficiencies attractive to our clients and potential clients. Increased competition, our inability to compete successfully, and pricing pressures or loss of market share could result in reduced operating profit margins which could have a material adverse effect on our business, financial condition, results of operations and prospects. A substantial portion of our revenue, operations and investments are in Latin America and we are therefore exposed to risks inherent in operating and investing in the region. For the year ended December 31, 2020, we derived 41.2% of our revenue from the Americas and 43.2% from Brazil. We intend to continue to develop and expand our facilities in the Americas and Brazil. Our operations and investments in the Americas and Brazil are subject to various risks related to the economic, political and social conditions of the countries in which we operate, including risks related to the following: · inconsistent regulations, licensing and legal requirements may increase our cost of operations as we endeavor to comply with myriad of laws that differ from one country to another in an unpredictable and adverse manner; · currencies may be devalued or may depreciate or currency restrictions or other restraints on transfer of funds may be imposed; · the effects of inflation and currency depreciation and fluctuation may require certain of our subsidiaries to undertake a mandatory recapitalization; · certain governments may expropriate or nationalize assets or increase their participation in companies; · certain governments may impose burdensome regulations, taxes or tariffs; · political changes may lead to changes in the business environments in which we operate; and · economic downturns, political instability, civil disturbances may negatively affect our operations, pandemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus). Any deterioration in global market and economic conditions, especially in Latin America, and, particularly in the telecommunications and financial services industries from which we generate most of our revenue, may adversely affect our business, financial condition, results of operations and prospects. Global market and economic conditions, including in Latin America, in the past several years have presented volatility and increasing risk perception, with tighter credit conditions and recession or slower growth in most major economies continuing into 2019. Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. Many of our clients’ industries are especially vulnerable to any crisis in the financial and credit markets or to economic downturns. A substantial portion of our clients are concentrated in the telecommunications and financial services industries, which were especially vulnerable to the global financial crisis and economic downturn that began in 2008. For the year ended December 31, 2020, 39.0% of our revenue was derived from clients in the telecommunications industry, which Telefónica corresponds for 31.8%, and 34.6% of our revenue was derived from clients in the financial services industry, including insurance, which there are two customers that individually corresponds for more than 5% of the Company level. Our business and future growth largely depend on continued demand for our services from clients in these industries. 16 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 18/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents As our business has grown, we have become increasingly exposed to adverse changes in general global economic conditions, which may result in reductions in spending by our clients and their customers. Global economic concerns such as the varying pace of global economic recovery continue to create uncertainty and unpredictability and may have an adverse effect on the cost and availability of credit, leading to decreased spending by businesses. Any deterioration of general economic conditions, or weak economic performance in the economies of the countries in which we operate, particularly in Brazil and the Americas may have a material adverse effect on our business, financial condition, results of operations and prospects. Brazil and the Americas, for example, comprised 87.3%, 87.1% and 84.4% of our revenue respectively, for the years ended December 31, 2018, 2019 and 2020. In addition, key markets such as the telecommunications and financial services industries comprised 73.6% of our revenue for the year ended December 31, 2020. Increases in employee benefit expenses as well as changes to labor laws could reduce our profit margin. Employee benefit expenses is our largest expense and accounted for $1,365.2 million in 2018, $1,301.0 million in 2019 and $1,060.4 million in 2020, or 75.1%, 76.2% and 75.1%, respectively, of our revenue in those periods. Employee salaries and benefits expenses in many of the countries in which we operate, principally in Latin America, have increased during the periods presented in this Annual Report as a result of economic growth, increased demand for CRM BPO services and increased competition for trained employees such as employees at our service delivery centers in Latin America. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Total operating expenses.” We will attempt to control costs associated with salaries and benefits as we continue to add capacity, but we may not be successful in doing so. We may need to increase salaries more significantly and rapidly than in previous periods to remain competitive, which may have a material adverse effect on our business, financial condition, results of operations and prospects. Wage increases or other expenses related to the termination of our employees may reduce our profit margins and have a material adverse effect on our business, financial condition, results of operations and prospects. If we expand our operations into new jurisdictions, we may be subject to increased operating costs, including higher employee benefit expenses in these new jurisdictions relative to our current operating costs, which could have a negative effect on our results of operations. Furthermore, most of the countries in which we operate have labor protection laws, including statutorily mandated minimum annual wage increases, legislation that imposes financial obligations on employers and laws governing the employment of workers. These labor laws in one or more of the key jurisdictions in which we operate, particularly Brazil, may be modified in the future in a way that is detrimental to our business. If these labor laws become more stringent, or if there are continued increases in statutory minimum wages or higher labor costs in these jurisdictions, it may become more difficult for us to discharge employees, or cost effectively downsize our operations as our level of activity fluctuates, both of which would likely have a material adverse effect on our business, financial condition, results of operations and prospects. Brazil has approved changes in the payroll exemption policy, which benefited most of the sectors. The modifications were made by Law 13,670, dated May 30, 2018. Taxation on the gross revenue of call center companies, with a 3% tax on gross revenue, was maintained. For our economic activity, it is much more advantageous to collect an aliquot ranging from 1% to 4.5% on gross revenue, called Social Security Contribution on Gross Revenue (CPRB), as stipulated by the law, than to collect a 20% social security contribution on total payroll, as occurs with companies outside the tax exemption system. The new law stipulates the end of taxation on gross revenue for all sectors as of December 31, 2020. When the law comes into effect, non- exempt companies will be required to collect a Social Security contribution of 20% of payroll. The new Brazilian Government, installed on the January 1, 2019, announced it is examining a new modification to the law, wishing to continue with the exemption of payroll for some sectors. We intend to monitor this situation. Our operating results may fluctuate from one quarter to the next due to various factors including seasonality. Our operating results may differ significantly from quarter to quarter and our business may be affected by factors such as: client losses, the timing of new contracts and of new product or service offerings, termination of existing contracts, variations in the volume of business from clients resulting from changes in our clients’ operations or the onset of certain parts of the year, such as the summer vacation period in our geographically diverse markets and the year-end holiday season in Latin America, the business decisions of our clients regarding the use of our services, startup costs, delays or difficulties in expanding our operational facilities and infrastructure, changes to our revenue mix or to our pricing structure or that of our competitors, inaccurate estimates of resources and time required to complete ongoing projects, currency fluctuations and seasonal changes in the operations of our clients. 17 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 19/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We typically generate less revenue in the first quarter of the year, which is related of the fact that our clients and their customers generally spend less after the year-end holiday season. We have also found that our revenue increases in the last quarter of the year, particularly in November and December when our business benefits from the increased activity of our clients and their customers, who generally spend more money and are otherwise more active during the year-end holiday season. These seasonal effects also cause differences in revenue and income among the various quarters of any financial year, which means that the individual quarters of a year should not be directly compared with each other or used to predict annual results of operations. In addition, the sales cycle for our services, typically from six to 12 months (from the date the contract is entered into until the beginning of the provision of services), and the internal budget and approval processes of our prospective clients, make it difficult to predict the timing of new client engagements. Also, we recognize revenue only upon actual provision of the contracted services and when the criteria for recognition are met. The financial benefit of gaining a new client may not be realized at the intended time due to delays in the implementation of our services or due to an increase in the startup costs required in building related infrastructure. These factors may make it difficult for us to prepare accurate internal financial forecasts or replace anticipated revenue that is not received as a result of these delays. Natural events, including pandemics or disease outbreaks, such as the novel coronavirus (COVID-19), wars, cyberattacks, terrorist attacks and other acts of violence involving any of the countries in which we or our clients have operations could adversely affect our operations and client confidence. Natural events (such as floods, earthquakes and disease outbreaks), terrorist attacks and other acts of violence or war may adversely disrupt our operations, lead to economic weakness in the countries in which they occur and affect worldwide financial markets, and could potentially lead to economic recession in our markets, which could have a material adverse effect on our business, financial condition, results of operations and prospects. These events could adversely affect our clients’ levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and to our business operations around the world. If we experience a temporary or permanent interruption in our operations at one or more of our data or contact centers, through natural disaster, casualties, operating malfunction, cyberattack, terrorist attack, sabotage or other causes, we may be unable to provide the services we are contractually obligated to deliver. Failure to provide contracted services could result in contractual damages or clients’ termination or renegotiation of their contracts. The results of these incidents could include, but are not limited to, business interruption, disclosure of non-public information, decreased customer revenues, misstated financial data, liability for stolen assets or information, increased cybersecurity protection costs, litigation and reputational damage adversely affecting customer confidence. Although we maintain internal controls to protect our company and our clients from events that could interrupt our delivery of services, there is no guarantee that such controls will be effective or that any interruption will not be prolonged. Any prolonged interruption in our ability to provide services to our clients for which our plans and precautions fail to adequately protect us could have a material adverse effect on our business, results of operations and financial condition. Fluctuations in, or devaluation of, the local currencies in the countries in which we operate against the U.S. dollar could have a material adverse effect on our business, financial condition, results of operations and prospects. As of December 31, 2020, the majority of our revenue was generated in countries that use currencies other than the U.S. dollar, mostly the local currencies of the Latin American countries in which we operate (particularly, currencies such as the Brazilian Reais, the Mexican Peso, the Chilean Peso and the Argentinean Peso). Both Brazil and Mexico have experienced inflation and currency volatility in the past and Argentina is classified as a hyperinflationary economy. While inflation may not have a significant effect on the profit and loss of a local subsidiary itself, depreciation of the local currency against the U.S. dollar would reduce the value of the dividends payable to us from our operating companies. We report our financial results in U.S. dollars and our results of operations would be adversely affected if these local currencies depreciate significantly against the U.S. dollar, which may also affect the comparability of our financial results from period to period, as we convert our subsidiaries’ statements of financial position into U.S. dollars from local currencies at the period-end exchange rate, and statements of operations and cash flows at average exchange rates for the year, except for Argentina. Conversely, where we provide offshore services to U.S. clients and our revenue is earned in U.S. dollars, an appreciation in the currency of the country in which the services are provided could result in an increase in our costs in proportion to the revenue we earn for those services. The exchange rates between these local currencies and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future. For the years ended December 31, 2016, 2017, 2018, 2019 and 2020, these fluctuations had a significant effect on our results of operations. 18 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 20/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In addition, future government action, including changes in interest rates and monetary policy or intervention in the currency exchange markets and other government actions to adjust the value of the local currency may trigger inflationary increases. For example, governmental measures to control inflation may include maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and reducing economic growth. As a result, interest rates may fluctuate significantly. Furthermore, losses incurred based on the exchange rate used for reporting purposes may be exacerbated if regulatory restrictions are imposed when these currencies are converted into U.S. dollars. The occurrence of such fluctuations, devaluations or other currency risks could have a material adverse effect on our business, financial condition, results of operations and prospects. The Brazilian government exercises significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could adversely impact our business, financial condition, results of operations and prospects. For the years ended December 31, 2018, 2019 and 2020, revenue from our operations in Brazil accounted for 48.3%, 48.5% and 43.2% of our total revenue, respectively, and Adjusted EBITDA from our operations in Brazil accounted for 53.8%, 72.8% and 50.7% of our total Adjusted EBITDA, respectively (in each case, before holding company level revenue, expenses and consolidation adjustments). Historically, the Brazilian government has frequently intervened in the Brazilian economy and occasionally made drastic changes in policy and regulations. The Brazilian government’s actions to control inflation and implement macroeconomic policies have in the past often involved wage and price controls, currency devaluations, capital controls and limits on imports, among other things. Our business, financial condition, results of operations and prospects may be adversely affected by changes in policies or regulations, such as: · devaluations and other currency fluctuations; · inflation; · interest rates; · liquidity of domestic capital and lending markets; · energy shortages; · exchange controls and restrictions on remittances abroad (such as those that were briefly imposed in 1989 and early 1990); · monetary policy; · minimum wage policy; · tax policy; and · other political, diplomatic, social and economic developments in or affecting Brazil. Currently, Brazilian markets are experiencing heightened volatility due to the uncertainties derived from the ongoing “Lava Jato” investigation, being conducted by the Office of the Brazilian Federal Prosecutor, which has impacted the Brazilian economy and political environment. Members of the Brazilian federal government and of the legislative branch, as well as senior officers of large state-owned companies and privately held companies, have faced allegations of political corruption, including allegedly accepting bribes by means of kickbacks on contracts granted by the government. The profits of these kickbacks allegedly financed the political campaigns of political parties of the current federal government coalition that were unaccounted for or not publicly disclosed, and personally enriched the recipients of bribes under this bribery scheme. The potential outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. 19 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 21/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We cannot predict whether such allegations will lead to further political and economic instability or whether new allegations against government officials will arise in the future. In addition, we cannot predict the outcome of any such allegations nor their effect on the Brazilian economy. Further, the President of Brazil has considerable power to determine governmental policies and actions that relate to the Brazilian economy that could consequently affect our business, financial condition and results of operations. Further still, future developments in policies of the Brazilian government and/or the uncertainty of whether and when such policies and regulations may be implemented, all of which are beyond our control, could have a material adverse effect on us. The Brazilian government regularly implements changes to tax policies that may increase our and our clients’ tax burdens. These changes can include modifications in the rate of assessments, non-renewal of existing tax relief, such as the “Plano Brasil Maior” and, on occasion, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. Because we derive a significant portion of our revenue, EBITDA and Adjusted EBITDA from our operations in Brazil, if the “Plano Brasil Maior” is not extended or not made permanent, it would have a significant negative impact on our total costs. Our inability to pass through such increase in costs to our customers would materially and adversely affect our results of operations. Furthermore, increases in our overall tax burden could negatively affect our overall financial performance and profitability. The Brazilian currency has been devalued over the past four decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini devaluations (such as daily adjustments), exchange controls, dual exchange rate markets and a floating exchange rate system. From time to time, there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies. In the past, Brazil’s economy has experienced balance of payment deficits and shortages in foreign exchange reserves, and the government has responded by restricting the ability of persons or entities, Brazilian or foreign, to convert Brazilian currency into any foreign currency. The government may institute a restrictive exchange control policy in the future. Any restrictive exchange control policy could prevent or restrict our access to other currencies to meet our financial obligations and our ability to pay dividends out of our Brazilian activities. In recent years, there has been considerable changes in the tax policy in Brazil, including tax increases that have impacted our business, and further changes have been proposed. Uncertainty over whether possible changes in policies or rules affecting these or other factors may contribute to economic uncertainties in Brazil, which could adversely affect our business, financial condition, results of operations and prospects. Our business depends in part on our capacity to invest in technology and these costs of technology and telecommunications services, which we rely on from third parties, could have a material adverse effect on our business, financial condition, results of operations and prospects. The CRM BPO industry in which we operate is subject to the periodic introduction of new technologies which often can enable us to service our clients more efficiently and cost effectively. Our business success is partly linked to our ability to recognize these new technological innovations from industry-leading providers of such technologies and to apply these technological innovations to our business. If we do not recognize the importance of new technologies to our business in a timely manner or are not committed to investing in and developing such new technologies and applying these to our business, our current products and services may be less attractive to existing and new clients, and we may lose market share to competitors who have recognized these trends and invested in such technologies. There can be no assurance that we will have sufficient capacity or capital to meet these challenges. Any such failure to recognize the importance of such technologies or a decision not to invest and develop such technologies that keeps pace with evolving industry standards and changing client demands could have a material adverse effect on our business, financial condition, results of operations and prospects. 20 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 22/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In addition, any increases in the cost of telecommunications services and products provided by third parties, including telecommunications equipment, software, IT products and related IT services and call center workstations have a direct effect on our operating costs. The cost of telecommunications services is subject to several factors, including changes in regulations and the telecommunications market as well as competitive factors, for example, the concentration and bargaining power of technology and telecommunications suppliers, most of which are beyond our control or which we cannot predict. The increase in the costs of these essential services and products could have a material adverse effect on our business, financial condition, results of operations and prospects. During 2018, Atento implemented in Spain the new obligations of the GDPR – Global Data Protection Regulation - through the review of our main processes relating to employees, clients and providers, working hand-in-hand with Information Security. This implementation has required: · re-definition of certain processes; · updating or drafting of new policies; · renegotiation of many agreements with clients and providers to include the new provisions of the GDPR and to assign certain new responsibilities; and · also, staff training materials have been elaborated and GDRP training sessions have been given throughout different company sites. Brazil has adopted in 2018, a General Data Protection Law (LGPD). The law will come into effect, after an 18-month adaptation period, in early 2020. At the moment, Atento Brazil is dedicated to the analysis and implementation of the new obligations and process that this regulation brings along. The LGPD has transversal and multi-sectoral applications, both in public and private sectors, online and offline. This law deals with the concept of personal data and lists the legal bases that authorize its use, basic rights of the data subject — such as right to access, exclusion of data, and to explanation of use - and the obligations and limits that should be applied to any entity that processes personal data. Damage or disruptions to our key technology systems and facilities either through events beyond or within our control that adversely affect our clients’ businesses, could have a material adverse effect on our business, financial condition, results of operations and prospects. Our key technology systems and facilities may be damaged in natural disasters such as earthquakes or fires or subject to damage or compromise from human error, technical disruptions, power failure, computer glitches and viruses, telecommunications failures, adverse weather conditions and other unforeseen events, all of which are beyond our control, or through bad service or poor performance which are within our control. Such events may cause disruptions to information systems, electrical power and telephone service for sustained periods. Any significant failure, damage or destruction of our equipment or systems, or any major disruptions to basic infrastructure such as power and telecommunications systems in the locations in which we operate, could impede our ability to provide services to our clients and thus adversely affect their businesses, have a negative impact on our reputation and may cause us to incur substantial additional expenses to repair or replace damaged equipment or facilities. While we currently have property damage insurance in force, our insurance coverage may not be sufficient to guarantee costs of repairing the damage caused from such disruptive events and such events may not be covered under our policies. Prolonged disruption of our services, even if due to events beyond our control, could also entitle our clients to terminate their contracts with us, which would have a material adverse effect on our business, financial condition, results of operations and prospects. Tax matters, new legislation and actions by tax authorities may have an adverse effect on our operations, effective tax rate, financial condition, results of operations and prospects. We may not be able to predict our future tax liabilities due to the international nature of our operations, as we are subject to the complex and varying tax laws and rules of several foreign jurisdictions. Our results of operations and financial condition could be adversely affected if tax contingencies are resolved adversely or if we become subject to increased levels of taxation. 21 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 23/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We are subject to income taxes in numerous foreign jurisdictions. Our tax expense and cash tax liability in the future could be adversely affected by numerous factors, including, but not limited to, changes in tax laws, regulations, accounting principles or interpretations and the potential adverse outcome of tax examinations and pending tax related litigation. Changes in the valuation of deferred tax assets and liabilities, which may result from a decline in our profitability or changes in tax rates or legislation, could have a material adverse effect on our tax expense. The governments of foreign jurisdictions from which we deliver services may assert that certain of our clients have a “permanent establishment” in such foreign jurisdictions because of the activities we perform on their behalf, particularly those clients that exercise control over or have substantial dependency on our services. Such an assertion could affect the size and scope of the services requested by such clients in the future. Transfer pricing regulations to which we are subject require that any transaction among us and our subsidiaries be on arm’s length terms. If the applicable tax authorities were to determine that the transactions among us and our subsidiaries do not meet arm’s length criteria, we may incur increased tax liability, including accrued interest and penalties. Such adverse determinations and changes in tax laws or regulations could increase our tax expenses, reducing our profitability and cash flows. If we are unable to accurately predict our future tax liabilities or become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected. Due to the global nature of our operations, we are subject to the complex and varying tax laws and rules of several jurisdictions and have material tax-related contingent liabilities that are difficult to predict or quantify. In preparing our financial statements, we calculate our effective income tax rate based on current tax laws and regulations and our estimated taxable income within each of these jurisdictions. The United States adopted tax reform legislation commonly known as the Tax Cuts and Jobs Act, which will increase our effective income tax rate by imposing a new tax regime impacting our non-U.S. operations. The U.S. tax changes also provide flexibility related to repatriating non-U.S. earnings to the United States without additional U.S. taxation, and as a result, we have changed classification of certain earnings that were previously deemed to be permanently reinvested offshore and recorded deferred tax liabilities for the associated withholding taxes. Other changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the Tax Cuts and Jobs Act or other tax laws are implemented or interpreted, could further increase our effective tax rate, further restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our results of operations and adversely affect our cash flows. We are also subject to tax inspections, including with respect to transfer pricing, and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition. Prompted by Brazil’s current economic and political turmoil, the tax authorities have intensified the number of tax inspections. The judicial and administrative courts, for their part, have been extremely careful in ruling out tax liabilities. As a result, several tax issues are now on their agenda, including goodwill amortization expenses and corporate restructuring and tax planning, to name a few. Given this scenario, there are risks and uncertainties regarding the decisions taken by the Conselho Administrativo de Recursos Fiscais (the Brazilian Tax Appeal Administrative Council, “CARF”), which could negatively impact the Brazil tax environment and consequently us. If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline. The market price of our ordinary shares is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price of our ordinary shares or its trading volume to decline. Moreover, if one or more of the analysts who cover our Company downgrade our ordinary shares or if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline. 22 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 24/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We have significant global operations and face risks related to health epidemics that could impact our sales and operating results. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel strain of coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China. Any outbreak of contagious diseases, and other adverse public health developments, could have a material adverse effect on our business operations. These could include temporary closures of our facilities or the facilities of our customers (which may be mandated by local health or government authorities), a disruption of supply chain for our customers, the temporary suspension of operations by us or our customers, travel restrictions on our employees and other disruptions to our business. Additionally, because our revenues are, in part, tied to the revenues of our customers, any impact on the business or revenues of our customers may result in an impact on our own business or revenues. While the duration of business interruption from this outbreak and related financial impact cannot be reasonably estimated at this time, we expect that any disruption of our operations, or those of our customers, would likely impact our results of operations. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our services and likely impact our operating results and cash flows. Internal Risks Telefónica S.A., certain of its affiliates and a few other major clients account for a significant portion of our revenue and any loss of a large portion of business from these clients could have a material adverse effect on our business, financial condition, results of operations and prospects. We have derived and believe that we will continue to derive a significant portion of our revenue from companies within the Telefónica S.A. and a few other major client groups. For the years ended December 31, 2018, 2019 and 2020, we generated 39.0%, 35.6% and 31.8%, respectively, of our revenue from the services provided to the Telefónica S.A. Our contracts with Telefónica S.A. companies in Brazil and Spain comprised 58.8%, 59.5% and 56.5%, respectively, of our revenue from the Telefónica S.A. for the years ended December 31, 2018, 2019 and 2020. Our 15 largest client groups (including the Telefónica S.A.) on a consolidated basis accounted for a total of 68.3% of our revenue for the year ended December 31, 2020. We are party to a master services agreement (the “MSA”) with Telefónica S.A. for the provision of certain CRM BPO services to Telefónica S.A. companies which governs the services agreements entered with the Telefónica S.A. companies. As of December 31, 2020, 31 companies within the Telefónica S.A. were a party to 106 arm’s length contracts with us. While our service contracts with the Telefónica S.A. companies have traditionally been renewed, there can be no assurance that such contracts will be renewed upon their expiration. Although the MSA is an umbrella agreement which governs our services agreements with the Telefónica S.A. companies, the termination of the MSA on December 31, 2021 (except in Brazil and Spain, where the MSA terminates on December 31, 2023) does not automatically result in a termination of any of the local services agreements in force after those dates. In addition, there can be no assurance that the MSA will be renewed upon its expiration. Furthermore, the MSA or any other agreement with any of the Telefónica S.A. companies may be amended in a manner adverse to us or terminated early. In addition, there can be no assurance that the volume of work to be performed by us for the various Telefónica S.A. companies will not vary significantly from year to year in the aggregate, particularly since we are not the exclusive outsourcing provider for the Telefónica S.A. Consequently, our revenue or margins from the Telefónica S.A. may decrease in the future. A number of factors other than the price and quality of our work and the services we provide could result in the loss or reduction of business from Telefónica S.A. companies, including the impacts of adverse macro-economic conditions on Telefónica S.A.’s business, and we cannot predict the timing or occurrence of any such event. For example, a Telefónica S.A. company may demand price reductions, increased quality standards, change its CRM BPO strategy, or under certain circumstances transfer some or all the work and services we currently provide to Telefónica S.A. in-house. The loss of a significant part of our revenue derived from these clients, particularly the Telefónica S.A., as a result of the occurrence of one or more of the above events would have a material adverse effect on our business, financial condition, results of operations and prospects. 23 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 25/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Our profitability will suffer if we are not able to maintain our pricing and/or control costs. Our profit margins, and therefore our profitability, is largely a function of our level of activity and the rates we are able to charge for our services. If we are unable to maintain the pricing for our services and/or an appropriate seat utilization rate, without corresponding cost reductions, our profitability will decline. The pricing and levels of activity we are able to achieve are affected by a number of factors, including our clients’ perceptions of our ability to add value through our services, the length of time it takes for service volume of new clients to ramp up, competition, the introduction of new services or products by us or our competitors, our ability to accurately estimate, attain and sustain revenue from client contracts, margins and cash flows over increasingly longer contract periods and general economic and political conditions. Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and execute our strategies for growth, we may not be able to manage the significantly larger and more geographically diverse workforce, which could adversely affect our ability to control our costs or improve our efficiency. Further, because there is no certainty that our business will grow at the rate that we anticipate, we may incur expenses for the increased capacity for a significant period without corresponding growth in our revenue. Our success depends on our key employees. Our success depends on the continued service and performance of our executive officers and other key personnel in each of our business units and corporate sites. There is competition for experienced senior management and personnel with expertise in the CRM BPO industry, and we may not be able to retain our key personnel or recruit skilled personnel with appropriate qualifications and experience. Although we have entered into employment contracts with our executive officers, it may not be possible to require specific performance under a contract for personal services, and in any event, these agreements do not ensure the continued service of these executive officers. The loss of key members of our personnel, particularly to competitors, could have a material adverse effect on our business, financial condition, results of operations and prospects. If we experience challenges with respect to labor relations, our overall operating costs and profitability could be adversely affected and our reputation could be harmed. While we believe we have good relations with our employees, any work disruptions or collective labor actions may have an adverse impact on our services. Approximately 74.3% of our workforce is under collective bargaining agreements. Collective bargaining agreements are generally renegotiated every one to three years with the principal labor unions in seven of the countries in which we operate. If these labor negotiations are not successful or we otherwise fail to maintain good relations with employees, we could suffer a strike or other significant work stoppage or other form of industrial action, which could have a material adverse effect on our business, financial condition, results of operations and prospects and reputation. For Atento Argentina, the recent Resolution n° 810 issued by the Ministry of Production and Labor, has extended the application of the Collective Labor Agreement 688/14 (related to the ATACC - Association of Argentine Workers of Contact Centers) to the city of Buenos Aires, Province of Buenos Aires, Buenos Aires, Tucumán, Chaco, San Luis, Mendoza and Salta. Since this administrative action is considered legitimate and taking into account that Atento has not been notified of any measure (administrative or judicial) ordering the suspension of the effects of Resolution n° 810, the staff of Atento Argentina SA will no longer be governed by CCT 130/75 (corresponding to the Commerce Employees Union) and will be governed by CCT 688/14. Rapid growth may make it difficult for us to maintain our internal operational and financial systems. Since our foundation in 1999, and particularly from 2004 onwards, we have experienced rapid growth and significantly expanded our operations in key regions and client industries. Our number of workstations increased from 92,271 as of December 31, 2018 to 92,572 as of December 31, 2019 and increased to 93,308 as of December 31, 2020. The average number of employees (excluding internships) decreased from 153,038 for the year ended December 31, 2018 to 149,129 for the year ended December 31, 2019 and decreased to 139,805 for the year ended December 31, 2020. To manage growth effectively, we must recruit new employees and implement improved operational systems, procedures and internal controls on a timely basis. In addition, we need to update our existing internal accounting, financial and cost control systems to ensure we can access all necessary financial information. If we fail to implement these systems, procedures and controls or update these systems on a timely basis, we may not be able to service our clients’ needs, hire and retain new employees, pursue new business, complete future acquisitions or operate our business effectively. Failure to effectively transfer new client business to our delivery centers, properly budget transfer costs, accurately estimate operational costs associated with new contracts, or access financial, accounting or cost control information in a timely fashion could result in delays in executing client contracts, trigger service level penalties or cause our profit margins not to meet our expectations. Any inability to control such growth or update our systems could materially adversely affect our business, financial condition, results of operations and prospects. 24 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 26/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents If we are unable to fund our working capital requirements and new investments, our business, financial condition, results of operations and prospects could be adversely affected. The CRM BPO industry is characterized by high working capital requirements and the need to make new investments in operating sites and employee resources to meet the evolving requirements of our clients. Similar to our competitors in this industry, we incur significant startup costs related to investments in infrastructure to provide our services and to the hiring and training of employees, such expenses being historically incurred before revenue is generated. In addition, we are exposed to adverse changes in our main clients’ payment policies, which could have a material adverse impact on our ability to fund our working capital needs. During the year ended December 31, 2020, our average days sales outstanding (“DSO”) was approximately 66 days. If our key clients implement policies which extend the payment terms of our invoices, our working capital levels could be adversely affected and our finance costs may increase. As a result, under the service contracts we entered into since that time, the provisions relating to the time by which Telefónica S.A. must satisfy its payment obligations to us was extended. If we are unable to fund our working capital requirements, access financing at competitive prices or make investments to meet the expanding business of our existing and potential new clients, our business, financial condition, results of operations and prospects could be adversely affected. Our ability to provide our services depends in part upon the quality and reliability of the facilities, machinery and equipment provided by our technology and telecommunications providers, our reliance on a limited number of suppliers of such technology and the services and products of our clients. The success of our business depends in part on our ability to provide high quality and reliable services, which in part depends on the proper functioning of facilities, machinery and equipment (including appropriate hardware and software and technological applications) provided by third parties and our reliance on a limited number of suppliers of such technology, and is, therefore, beyond our control. We also depend on the communication services provided by local communication companies in the countries in which we operate, and any significant disruptions in these services would adversely affect our business. If these or other third-party providers fail to maintain their equipment properly or fail to provide proper services in a timely or reliable manner our clients may experience service interruptions. If interruptions adversely affect our services or the perceived quality and reliability of our services, we may lose client relationships or be forced to make significant unplanned investments in the purchase of additional equipment from other providers to ensure that we can continue to provide high quality and reliable services to our clients. In addition, if one or more of the limited number of suppliers of our technology could not deliver or provide us with the requisite technology on a timely basis, our clients could suffer further interruptions. Any such interruptions may have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, in some areas of our business, we depend upon the quality and reliability of the services and products of our clients which we help to sell to their end-customers. If the services and products we provide to our clients experience technical difficulties, we may have a harder time selling these services and products to other clients, which may have an adverse effect on our business, financial condition, results of operations and prospects. Our results of operations could be adversely affected if we are unable to maintain effective internal controls. Any internal and disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by individuals acting alone or in collusion with others to override controls. Accordingly, because of the inherent limitations in the design of a cost- effective control system, misstatements due to error or fraud may occur and may not always be prevented or detected in a timely way. If we are unable to assert that our internal controls over financial reporting are effective now or in the future, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price. 25 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 27/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We are a party to a number of labor disputes related to our operations in Brazil, mainly to the reiterated jurisprudence in the labor courts in the absence of a law for outsourced activity. Nevertheless, a Labor Reform law was approved in the country in July 2017 (effective as from November 2017, 120 days after it was sanctioned), resulting in a new legal environment and which we expect to reduce the number of future labor claims. Despite the probable positive effects of this new legal environment, Atento has been named in numerous labor-related disputes initiated by Atento’s employees or former employees for various reasons, including dismissals or claims concerning employment conditions, in general, our internal structuring, reorganizations and operational shutdowns. In addition, we are regularly party to ongoing disputes with local tax authorities and social security authorities in the jurisdictions in which we operate. In the normal course of business, we are also party to various other lawsuits and regulatory proceedings, including, among other matters, daily and general work routines, overtime rules, health and safety in the workplace, and commercial claims. The estimated amount involved in these claims total $54.7 million, of which $14.4 million have been classified as probable, $33.6 million classified as possible and $6.7 million classified as remote, based on inputs from external and internal advisors as well as historical statistics. In connection with such disputes, Atento Brasil and its affiliates have, in accordance with local laws, deposited $26.8 million with the Brazilian courts as security for claims made by employees or former employees. In addition, considering the levels of litigation in Brazil and our past experience with these types of claims, as of December 31, 2020, we have recognized $14.4 million of provisions. If our provisions for any of our labor claims are insufficient or the claims against us rise significantly in the future, this could have a material adverse effect on our business, financial condition, results of operations and prospects. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information— Legal Proceedings”. Our existing debt may affect our flexibility in operating and developing our business and our ability to satisfy our obligations. As of December 31, 2020, we had total indebtedness of $727.8 million. Our level of indebtedness may have significant negative effects on our future operations, including: · impairing our ability to obtain additional financing in the future (or to obtain such financing on acceptable terms) for working capital, capital expenditure, acquisitions or other important needs; · requiring us to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which could impair our liquidity and reduce the availability of our cash flow to fund working capital, capital expenditure, acquisitions and other important needs; · increasing the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and · limiting our ability to adjust to rapidly changing conditions in the industry, reducing our ability to withstand competitive pressures and making us more vulnerable to a downturn in general economic conditions or business than our competitors with less debt. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. We cannot assure that any such refinancing would be possible or that any additional financing could be obtained. Our inability to obtain such refinancing or financing may have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, several of our financing arrangements contain a number of covenants and restrictions, including limits on our ability and our subsidiaries’ ability to incur additional debt, pay dividends and make certain investments. Complying with these covenants may cause us to take actions that make it more difficult to successfully execute our business strategy and we may face competition from companies not subject to such restrictions. Moreover, our failure to comply with these covenants could result in an event of default or refusal by our creditors to renew certain of our loans. 26 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 28/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The market price of our ordinary shares may be volatile. The stock market can be highly volatile. As a result, the market price of our ordinary shares may be volatile, and investors in our ordinary shares may experience a decrease, which could be substantial, in the value of their ordinary shares, including decreases unrelated to our operating performance or prospects, or a complete loss of their investment. The price of our ordinary shares could be subject to wide fluctuations in response to a number of factors, including those listed elsewhere in this “Risk Factors” section and others, such as: · variations in our operating performance and the performance of our competitors; · actual or anticipated fluctuations in our quarterly or annual operating results; · changes in our revenue or earnings estimates or recommendations by securities analysts; · publication of research reports by securities analysts about us or our competitors or our industry; · our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; · additions or departures of key personnel; · strategic decisions by us or our competitors, such as acquisitions, divestitures, spinoffs, joint ventures, strategic investments or changes in business strategy; · announcement of technological innovations by us or our competitors; · the passage of legislation, changes in interpretations of laws or other regulatory events or developments affecting us; · speculation in the press or investment community; · changes in accounting principles; · terrorist acts, acts of war or periods of widespread civil unrest; · changes in general market and economic conditions; · changes or trends in our industry; · investors’ perception of our prospects; and · adverse resolution of any new or pending litigation against us. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle or defend litigation. Any determination to pay dividends is at the discretion of our board of directors, and we may not pay any dividends. Accordingly, investors may only realize future gains on their investments if the price of their ordinary shares increases, which may never occur. On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividend pay-outs in line with industry peers and practices. The declaration and payment of any interim dividends is subject to approval of Atento’s corporate bodies and will be determined based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and liquidity factors. The Board of Directors intends to review the dividend policy regularly and, accordingly, is subject to change at any time. 27 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 29/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Future equity issuances may dilute the holdings of ordinary shareholders and could materially affect the market price of our ordinary shares. We may in the future decide to offer additional equity to raise capital or for other purposes. Any such offering could reduce the proportionate ownership and voting interests of holders of our ordinary shares, as well as our earnings per ordinary share and net asset value per ordinary share. Future sales of substantial amounts of our ordinary shares in the public market, whether by us or by our existing shareholders, or the perception that sales could occur, may adversely affect the market price of our shares, which could decline significantly. Cyberattacks and operational frauds, including unauthorized disclosure of sensitive or confidential client and customer data, whether through breach of our computer systems or otherwise, could expose us to protracted and costly litigation and cause us to lose clients. There are risks related to losing clients, reputational harm and increases of global insurance policy premiums due operational frauds. Atento delivers its services to its clients through a complex technological platform that integrates many aspects of information technology, including powerful telephonic, hardware and software. The Company ensures that requisite security and insurance coverage are applied in the context of its activities. The Company requests that each subsidiary adhere to internal data security and protection standards, as well as to international security and quality standards, however in our regular course of business Atento operates client systems that might not comply with our Company’s IT Security rules. While we take actions to improve our controls, it is possible that our technology controls over our client’s operations and other practices we follow may not prevent fraud whithin our platforms. If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines and/or criminal prosecution. Failure of security controls related to client or customer information and data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients. We are typically required to collect and store sensitive data in connection with our services, including names, addresses, social security numbers, credit card account numbers, checking and savings account numbers and payment history records, such as account closures and returned checks. As the complexity of information infrastructure continuous to grow, the potential risk of security breaches and cyberattacks increases. Such breaches can lead to shutdowns or system interruptions, and potential unauthorized disclosure of sensitive or confidential information. We are also subject to numerous laws and regulations designed to protect this information. Laws and regulations that impact our business are increasing in complexity, change frequently, and at times conflict among the various jurisdictions where we do business. In addition, many of our service agreements with our clients do not include any limitation on our liability to clients with respect to breaches of our obligation to keep the information we receive confidential. We take precautions to protect confidential client and customer data. However, if any person, including any of our employees, gains unauthorized access or penetrates our network security or otherwise mismanages or misappropriates sensitive data or violates our established data and information security controls, we could be subject to significant liability with our clients or their customers for breaching contractual confidentiality provisions or privacy laws, including legal proceedings, monitory damages, significant remediation costs and regulatory enforcement actions. Penetration of the network security of our data centers could have a negative impact on our reputation, which could have a material adverse effect on our business, results of operations, financial condition and prospects. Continuity and Reputation Risks If our clients decide to enter or further expand their own CRM BPO businesses in the future or current trends towards providing CRM BPO services and/or outsourcing activities slow or are reversed, it may materially adversely affect our business, results of operations, financial condition and prospects. None of our current agreements with our clients prevent them from competing with us in our CRM BPO business and none of our clients have entered into any non-compete agreements with us. Our current clients may seek to provide CRM BPO services similar to those we provide. Some clients conduct CRM BPO services for other parts of their own businesses and for third parties. Any decision by our key clients to enter into or further expand their CRM BPO business activities in the future could cause us to lose valuable clients and suppliers and may materially adversely affect our business, financial condition, results of operations and prospects. 28 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 30/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Moreover, we have based our strategy of future growth on certain assumptions regarding our industry, legal framework, services and future demand in the market for such services. However, the trend to outsource business processes may not continue and could be reversed by factors beyond our control, including negative perceptions of outsourcing activities or government regulations against outsourcing activities. In addition, our business may be adversely affected by potential new laws and regulations prohibiting or limiting outsourcing of certain core business activities of our clients in key jurisdictions in which we conduct our business, such as in Brazil. The introduction of such laws and regulations or a change in interpretation of existing laws and regulations could adversely affect our business, financial condition, results of operations and prospects. We have a long selling cycle for our CRM BPO services that requires significant investments and management resources, and a long implementation cycle that requires significant resource commitments. We have a long selling cycle for our CRM BPO services, which requires significant investment of capital, resources and time by both our clients and us. Before committing to use our services, potential clients require us to expend substantial time and resources educating them as to the value of our services and assessing the feasibility of integrating our systems and processes with theirs. Our clients then evaluate our services before deciding whether to use them. Therefore, our selling cycle, which generally ranges from six to 12 months, is subject to many risks and delays over which we have little or no control, including our clients’ decision to choose alternatives to our services (such as other providers or in-house offshore resources) and the timing of our clients’ budget cycles and approval processes. Implementing our services involves a significant commitment of resources over an extended period of time from both our clients and us. Our clients may also experience delays in obtaining internal approvals or delays associated with technology or system implementations, thereby delaying further the implementation process. Our current and future clients may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potential clients to which we have devoted significant time and resources, which could have a material adverse effect on our business, financial condition, results of operations and prospects. If our services do not comply with the quality standards required by our clients or we are in breach of our obligations under our agreements with our clients, our clients may assert claims for reduced payments to us or substantial damages against us, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Most of our contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services and the timing and quality of responses to the client’s customer inquiries. In some cases, the quality of services that we provide is measured by quality assurance indicators and surveys which are based in part on the results of direct monitoring by our clients of interactions between our employees and their customers. Failure to consistently meet service requirements of a customer or errors made by our employees in the course of delivering services to customers could disrupt our client’s business and result in a reduction in revenue or a claim for substantial damages against us. For example, some of our agreements stipulate standards of service that, if not met by us, would result in lower payments to us. We also enter into variable pricing arrangements with certain clients and the quality of services provided may be a component of the calculation of the total amounts received from such clients under these arrangements. In addition, in connection with our service contracts, certain representations may be made, including representations relating to the quality of our services, the ability of our employees and our project management techniques. A failure or inability to meet these requirements or a breach of such representations could seriously damage our reputation and affect our ability to attract new business or result in a claim for damages against us, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 29 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 31/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Our business operations are subject to various regulations and changes to these regulations or enactment of new regulations could require us to make additional expenditures, restrict our business operations or expose us to significant fines or penalties in the case of noncompliance with such regulations. Our business operations must be conducted in accordance with a number of sometimes conflicting government regulations, including but not limited to, data protection laws and consumer laws, and labor conditions laws, as well as trade restrictions and sanctions, tariffs, taxation, data privacy and labor relations. Under data protection laws, we are typically required to manage, protect, utilize and store sensitive or confidential customer data in connection with the services we provide. Under the terms of our client contracts, we represent that we will keep such information confidential in compliance with regulations. Furthermore, we are subject to local data protection laws, consumer laws and/or “do not call list” regulations in most of the countries in which we operate, all of which may require us to make additional expenditures to ensure compliance with these regulations. We also believe that we will be subject to additional laws and regulations in the future that may be stricter than those currently in force to protect consumers and end users. We seek to implement measures to protect sensitive and confidential customer data in accordance with client contracts and data protection laws and consumer laws. If any person, including any of our employees, penetrates our network security or otherwise mismanages or misappropriates sensitive or confidential customer data, we could be subject to significant fines for breaching privacy or data protection and consumer laws or lawsuits from our clients or their customers for breaching contractual confidentiality provisions which could result in negative publicity, legal liability, loss of clients and damage to our reputation, each of which could have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, our business operations may be impacted if current regulations are made stricter or more broadly applied or if new regulations are adopted. Violations of these regulations could impact our reputation and result in financial liability, criminal prosecution, unfavorable publicity, restrictions on our ability to process information and breach of our contractual commitments. Any broadening of current regulations or the introduction of new regulations may require us to make additional expenditures, restrict our business operations or expose us to significant fines or penalties, even the temporary shut down our facilities. Any such violations or changes in regulations could, as a result, have a material adverse effect on our business, financial condition, results of operations and prospects. Specific Risks The consolidation of the potential users of CRM BPO services may adversely affect our business, financial condition, results of operations and prospects. Consolidation of existing and potential users of CRM BPO services may decrease the number of clients who contract our services. Any significant reduction in or elimination of the use of the services we provide as a result of consolidation would result in reduced net revenue to us and could harm our business. Such consolidation may encourage clients to apply increasing pressure on us to lower the prices we charge for our services, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Our key clients have significant leverage over our business relationships, upon which we are dependent. We are dependent upon the business relationships we have developed with our clients. Our service contracts generally allow our clients to modify such relationships and our commensurate level of work. Typically, the initial term of our service contracts is one to two years. Generally, our specific service contracts provide for early termination, in some cases without cause, by either party, provided 30 to 90 days prior written notice is given. Clients may also unilaterally reduce the use and number of services under our contracts without penalty. The termination or reduction in services by a substantial percentage or a significant reduction in the price of these contracts could adversely affect our business and reduce our margins. The revenue generated from our 15 largest client groups (including Telefónica S.A. companies) for the year ended December 31, 2020 represented 68.3% of our revenue. Excluding revenue generated from the Telefónica S.A., our next 15 largest client groups for the year ended December 31, 2020 represented in aggregate 37.4% of our revenue. In addition, a contract termination or significant reduction in the services contracted with us by a major client could result in a higher-than-expected number of unassigned employees, which would increase our employee benefit expenses associated with terminating employees. We may not be able to replace any major client that elects to terminate or not to renew its contract with us, which would have a material adverse effect on our business, financial condition, results of operations and prospects. 30 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 32/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents We may seek to acquire suitable companies in the future and if we cannot find suitable targets or cannot integrate these companies properly into our business after acquiring them, it could have a material adverse effect on our business, results of operations, financial condition and prospects. While we have grown almost exclusively organically, we may in the future pursue transactions, including acquisitions of complementary businesses, to expand our product offerings and geographic presence as part of our business strategy. These transactions could be material to our financial condition and results of operations. We may not complete future transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the expected benefits of any acquisition or investments. Other companies may compete with us for these strategic opportunities. We also could experience negative effects on our results of operations and financial condition from acquisition related charges, amortization of intangible assets and asset impairment charges, and other issues that could arise in connection with, or as a result of an acquisition. This includes regulatory or compliance issues that could exist for an acquired company or business and potential adverse short-term effects on results of operations through increased costs or otherwise. These effects, individually or in the aggregate, could cause a deterioration of our credit profile and result in reduced availability of credit to us or increased borrowing costs and interest expenses in the future. Additionally, the inability to identify suitable acquisition targets or investments or the inability to complete such transactions may affect our competitiveness. Furthermore, we may not be able to integrate effectively such future acquisitions into our operations and may not obtain the profitability we expect from such acquisitions. Any such risks related to future acquisitions could have a material adverse effect on our business, results of operations, financial condition and prospects. We are a Luxembourg public limited liability company (société anonyme) and it may be difficult for you to obtain or enforce judgments against us or our executive officers and directors in the United States. We are organized under the laws of the Grand Duchy of Luxembourg. Most of our assets are located outside the United States. Furthermore, some of our directors and officers named in this Annual Report reside outside the United States and most of their assets are located outside the United States. As a result, investors may find it difficult to effect service of process within the United States upon us or these persons or to enforce outside the United States judgments obtained against us or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it may also be difficult for an investor to enforce in U.S. courts judgments obtained against us or these persons in courts located in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It may also be difficult for an investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against us or these persons. Luxembourg law, furthermore, does not recognize a shareholder’s right to bring a derivative action on behalf of the Company except where such shareholder or a group of shareholders holds shares representing at least ten percent (10%) of the Company’s share capital at the annual general meeting of shareholders of the Company resolving upon the discharge to be granted to the directors. As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand Duchy of Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S. court. The enforceability in Luxembourg courts of judgments entered by U.S. courts will depend upon the conditions set forth in the Luxembourg procedural code, which may include the following: · the judgment of the U.S. court is enforceable (exécutoire) in the United States; · the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules); · the U.S. court has applied to the dispute the substantive law designated by the Luxembourg conflict of law rules (although one first instance decision rendered in Luxembourg—which had not been appealed—no longer applies this condition); · the judgment was granted following proceedings where the counterparty had the opportunity to appear, and if appeared, there was no violation of the rights of the defendant; · the U.S. court has acted in accordance with its own procedural rules; and 31 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 33/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · the judgment of the U.S. court does not contravene Luxembourg international public policy. Our directors and officers, past and present, are entitled to indemnification from us to the fullest extent permitted by Luxembourg law against liability and all expenses reasonably incurred or paid by him/her in connection with any losses or liabilities, claim, action, suit or proceeding in which he/she is involved by virtue of his/her being or having been a director or officer and against amounts paid or incurred by him in the settlement thereof, subject to limited exceptions. To the extent allowed by law, the rights and obligations among us and any of our current or former directors and officers will be governed exclusively by the laws of Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of their capacities as directors or officers. Although there is doubt as to whether U.S. courts would enforce such a provision in an action brought in the United States under U.S. securities laws, such provision could make enforcing judgments obtained outside Luxembourg more difficult to enforce against our assets in Luxembourg or in jurisdictions that would apply Luxembourg law. Our shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation. Our corporate affairs are governed by our articles of association and by the laws governing public limited liability companies organized under the laws of the Grand Duchy of Luxembourg. The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. Luxembourg law and regulations in respect of corporate governance matters might not be as protective of minority shareholders as state corporation laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests in connection with actions taken by our directors and officers or our principal shareholders than they would as shareholders of a corporation incorporated in the United States. You may not be able to participate in equity offerings, and you may not receive any value for rights that we may grant. Pursuant to Luxembourg law on commercial companies, dated August 10, 1915, as amended (the “Luxembourg Corporate Law”), existing shareholders are generally entitled to preemptive subscription rights in the event of capital increases and issues of shares against cash contributions. However, our articles of association provide that preemptive subscription rights can be limited, waived or cancelled by our board of directors for a period ending on the fifth anniversary of the date of publication of the notarial deed recording the minutes of the extraordinary general shareholders’ meeting which adopted the authorized capital of the Company in the Recueil électronique des sociétés et associations approving an increase of the share capital by the board of directors within the limits of the authorized share capital, which publication has occurred on December 3, 2014. The general meeting of our shareholders may renew, expand or amend such authorization. See Item IOB “Articles of association” for additional detail. Luxembourg insolvency laws may offer our shareholders less protection than they would have under U.S. insolvency laws. As a company organized under the laws of the Grand Duchy of Luxembourg and with our registered office in Luxembourg, we are subject to Luxembourg insolvency laws in the event any insolvency proceedings are initiated against us including, among other things, Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings. Should courts in another European country determine that the insolvency laws of that country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us. Insolvency laws in Luxembourg or the relevant other European country, if any, may offer our shareholders less protection than they would have under U.S. insolvency laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency laws. As a foreign private issuer, we are permitted to, and rely on exemptions from certain corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. This may afford less protection to holders of our ordinary shares. The New York Stock Exchange listing rules require listed companies to have, among other things, a majority of their board members be independent, and to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however, while we intend to comply with these requirements within the permitted phase-in periods, we are permitted to follow home country practice in lieu of the above requirements. Luxembourg law, the law of our home country, does not require that a majority of our board consist of independent directors or the implementation of a nominating and corporate governance committee, and our board may thus in the future not include, or include fewer, independent directors than would be required if we were subject to the New York Stock Exchange listing rules, or they may decide that it is in our interest not to have a Compensation Committee or Nominating and Corporate Governance Committee, or have such committees governed by practices that would not comply with New York Stock Exchange listing rules. Since a majority of our board of directors may not consist of independent directors if we decide to rely on the foreign private issuer exemption to the New York Stock Exchange listing rules, our board’s approach may, therefore, be different from that of a board with a majority of independent directors, and as a result, the management oversight of our Company could, in the future, be more limited than if we were subject to the New York Stock Exchange listing rules. 32 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 34/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as companies that are not foreign private issuers whose securities are registered under the U.S. Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. As a result, our shareholders may not have access to information they deem important, which may result in our shares being less attractive to investors. We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ordinary shares. Based on the composition of our income, assets and operations, we do not expect to be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the current taxable year or in the foreseeable future. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the U.S. Internal Revenue Service will not take a contrary position. Furthermore, this is a factual determination that must be made annually after the close of each taxable year. If we are a PFIC for any taxable year during which a “U.S. Holder” (a beneficial owner of ordinary shares that is for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the U.S.; (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (d) a trust (i) if a court within the U.S. can exercise primary supervision over its administration, and one or more U.S. persons have the authority to control all of the substantial decisions of that trust, or (ii) that was in existence on August 20, 1996 and validly elected under applicable Treasury Regulations to continue to be treated as a domestic trust that holds our ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. Future sales of our ordinary shares, or the perception in the public markets that these sales may or may not occur, could impact our share price. The market price of our ordinary shares could decline as a result of sales of a large number of our ordinary shares in the market, and the perception that these sales could occur may also depress the market price of our ordinary shares. We have 15.0 million ordinary shares outstanding as of December 31, 2020. All of our outstanding ordinary shares may be sold in the public market by existing stockholders subject to applicable volume and other limitations imposed under federal securities laws. Sales of our ordinary shares or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales, or the perception that such sales could occur, also could cause the market price for our ordinary shares to fall and make it more difficult for you to sell our ordinary shares. We may incur non-cash goodwill and deferred tax asset impairment charges in the future. We carry a significant goodwill balance on our balance sheet. We test goodwill for impairment annually as of December 31 and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. Also, the Company regularly reviews its deferred tax assets for recoverability and determines if a portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical pretax and taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and the Company’s tax methods of accounting. 33 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 35/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The result of the impairment test performed for the year ended December 31, 2019 was an impairment charge of $30.9 million of the goodwill related to Argentina subsidiary, triggered by the Macroeconomic crisis and hyperinflation in the country. Although no indications of other goodwill and deferred tax asset impairments have been identified, there can be no assurance that we will not incur impairment charges in the future, particularly in the event of a prolonged economic slowdown. A significant impairment could have a material adverse effect on our results of operations. ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company History and Structure Our legal name is Atento S.A. We are a public limited liability company (“société anonyme”) organized and existing under the laws of the Grand Duchy of Luxembourg on March 5, 2014 and have our registered office at 1, rue Hildegard Von Bingen, L-1282, Luxembourg Grand Duchy of Luxembourg. American Stock Transfer & Trust Company, LLC is our U.S. agent. Our principal executive offices are located at Rua Paul Valery, 255, 4º andar, Condomínio Chácara Santo Antonio, 04719-050, São Paulo, Brazil, telephone number +55 11 3293 5926 / +55 11 3779 8119, and C/ Santiago de Compostela 94, 28035 Madrid, Spain. Our agent for service of process in the United States is American Stock Transfer & Trust Company, LLC. We were founded in 1999 to consolidate the Telefónica S.A.’s CRM services into a single company to take advantage of the expected demand for CRM services and to capture efficiencies of scale, with the start-up of our operations in Brazil, Chile, El Salvador, Guatemala, Peru, Puerto Rico and Spain. By 2000, we had launched our operations in other countries, including Argentina, Colombia, and Morocco, while further expanding our Brazilian operations and in 2001 our operations in Mexico. We then began to increase our focus on consolidation and business profitability. We continued our geographic expansion by launching our Uruguay operations and our commercial offices in France in 2006 and Panama in 2007. From 2003 to 2007, we focused on implementing our differentiation strategy by offering higher-quality services and the development and maintenance of long-term relationships with our clients. This strategy was very successful, driving a significant increase in revenue and operating profit from 2003 to 2007. In 2008, we broadened our strategic goals to include the pursuit and provision of new business opportunities, while continuing to implement our strategy of differentiation by offering higher-quality solutions, superior value-added services and building and maintaining long-term relationships. We also expanded our geographical presence in 2008 in the Czech Republic and in 2009 we began operations in the United States. In December 2012, Atento was acquired by funds affiliated with Bain Capital. In connection with Bain Capital’s acquisition, Atento further reinforcing its partnership with Telefónica. In 2012 we signed a Master Services Agreement (MSA) with Telefónica with a nine-year term through 2021, which includes annual minimum revenue commitments in all jurisdictions (except for Argentina). On November 8, 2016, Atento entered into an Amendment Agreement to the MSA with Telefónica S.A., reinforced and strengthening the Company’s strategic relationship with Telefónica, its largest client. The Amendment provides for the following: a reset of volume targets in Brazil and Spain, as well as a two-year extension of the MSA for those countries until December 31, 2023. In November 2019, the parties agreed on decreasing the minimum revenue thresholds for Spain. In consideration of this reduction, the entity Telefónica de España S.A. (a Subsidiary of Telefónica, “Telefónica España”) and Atento Teleservicios España S.A.U. (an entity fully owned by the provider “Atento España”), entered into an agreement on November 1, 2019, with the purpose to, among other agreements, boost the digitalization of the services delivered to Telefónica España. Additionally, Telefónica España, will, subject to the conditions stated in such agreement, collaborate with certain amount to Atento España. 34 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 36/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In October 2014, Atento became a publicly-listed company on the New York Stock Exchange (NYSE), under the ticker “ATTO”. On September 2, 2016, the Company, through its subsidiary Atento Brasil S.A. (“Atento Brasil”), acquired 81.49% of the shares of RBrasil Soluções S.A. (“RBrasil”), a leading provider of late-stage collection services in Brazil. On June 7, 2019, the Company acquired the minority interest corresponding to 18.51% of the shares of RBrasil and now holds 100% of the company's shares. On June 9, 2017, the Company, through its subsidiary Atento Brasil, acquired 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of Interservicer-Serviços em Crédito Imobiliário Ltda. (jointly, "Interfile"), a leading provider of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil. On May 17, 2019, the Company acquired the minority interests corresponding to 49.99998% of Interfile Serviços de BPO Ltda. and 49.99989% of Interservicer-Serviços em Crédito Imobiliário Ltda. and now holds a 100% interest in both of these companies. On June 29, 2017, we launched a new business unit, Atento Digital, to drive the customer experience in the Age of Digitalization. Atento Digital's mainstream offering encompasses a wide range of digital capabilities that enhance the customer experience and increase efficiency across the customer lifecycle, from acquiring to managing and retaining customers. On June 23, 2019, Contact US Teleservices, Inc. signed with Keepcon a first amendment to a Put&Call option agreement. In addition to this, Atento Brasil also signed an Offer Letter with Keepcon on October 29, 2019, for the provision of certain monitoring and classification services related to processes for social media and other channels for a period of 36 months, commencing on the date of its signature. On May 6, 2020, Atento S.A. (the “Company”) announced the arrangements to facilitate HPS Investment Partners, LLC and certain of its affiliates’ (collectively, “HPS”), GIC’s, and an investment fund affiliated with Farallon Capital Management, L.L.C. (“Farallon”)’s (collectively, the “Institutional Investors”) acquisition of ordinary shares of the Company currently held indirectly by Bain Capital in exchange for senior PIK notes currently held by the Institutional Investors (the “Transaction”). Following the completion of certain regulatory conditions, including antitrust filings in Brazil and Mexico, the Director Nomination Agreements, each dated May 6, 2020, by and between the Company and each of HPS, GIC and Farallon (each, a “Director Nomination Agreement”), and the Registration Rights Agreement, dated May 6, 2020, by and among the Company, HPS, GIC and Farallon (the “Registration Rights Agreement”), have become effective as of June 22, 2020. Atento will also terminate the existing registration rights agreement, dated as of October 6, 2014, by and between the Company and Atalaya Luxco Pikco S.C.A., which has become effective upon completion of the Transaction on June 22, 2020. Capital Expenditure Our business has significant capital expenditure requirements, including for the construction and initial fit-out of our service delivery centers; improvements and refurbishment of leased facilities for our service delivery centers; acquisition of various items of property, plant and equipment, mainly composed of furniture, computer equipment and technology equipment; and acquisition and upgrades of our software or specific customer software. The funding of the majority of our capital expenditure is covered by existing cash and EBITDA generation. The table below shows our capital expenditure by segment for the years ended December 31, 2018, 2019 and 2020: ($ in millions) Brazil Americas EMEA Total capital expenditure For the year ended December 31, 2019 2018 2020 42.2 41.5 6.2 89.9 40.6 22.4 3.3 66.3 23.7 8.9 3.2 35.9 35 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 37/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The capital expenditures for the year ended December 31, 2020 include costs associated with shifting a portion of Atento’s call center employees to the work@home model. Owing to the impact of the COVID-19 pandemic on Atento’s markets, all non-essential capital expenditures remained largely suspended in April and May 2020. B. Business Overview Our Company Atento is the largest provider of CRM BPO services and solutions in Latin America and among the top five providers globally based on revenues. Our business was founded in 1999 as the CRM BPO provider to the Telefónica S.A. Since then, we have significantly diversified our client base, becoming an independent company in December 2012 when we were acquired by funds affiliated with Bain Capital. In October 2014, Atento became a publicly-listed company on the New York Stock Exchange (NYSE), under the ticker “ATTO”. Latin America is one of the most attractive CRM BPO markets globally and we believe Atento is uniquely positioned to capture the region’s long-term growth potential as one of its few scale players. According to Frost & Sullivan, Latin America is one of the fastest growing CRM BPO markets in the world, with a market size of approximately $10.5 billion in 2019. The potential for long-term growth in the markets where we operate is strong and is driven by a number of demographic and business trends, including (i) sustained demand and growth driven by an improving macroeconomic environment over the long-term, a rapidly growing population and an emerging middle class, (ii) further outsourcing of CRM BPO operations, (iii) potential for further penetration in existing markets, (iv) development of new industry vertical expertise, such as with healthcare and born-digital companies, and (v) North America’s continued offshoring trend, as U.S.-based businesses continue to offshore call center services to other geographies. We are the largest provider of CRM BPO services in Latin America, where we had a market share of 15.2% for the year ended December 31, 2019, according to Frost & Sullivan. We hold the number-one market share position in almost all of the countries in Latin America where we operate, including Brazil, the largest market in the region, Mexico (domestic market), Argentina, Chile and Central America/Caribbean (domestic market), based on revenues for the year ended December 31, 2019. We have achieved our regional leadership position over our 20-year history through our dedicated focus on superior client service, scaled and reliable technology and operational platforms, a deep understanding of our clients’ diverse local needs, and our highly-engaged employee base. Given its long-term growth outlook, Latin America continues to be one of the most attractive CRM BPO markets globally and we believe we are distinctly positioned as one of the few scale operators in the region, where we have 4.5 p.p. more market share than the next-largest player. We offer a comprehensive portfolio of CRM BPO services for a company’s customer journey, including sales, customer care, technical support, collections and back office. We have adapted our value proposition to become a market leader and are now setting foundations to lead the next generation of customer experience (CX) services. We deliver end-to-end solutions across the customer lifecycle that generate higher value for client companies and better experiences for their consumers by combining the power of technology and the human touch. We believe our customized end-to-end solutions provide an improved experience for our clients’ customers, create stronger customer relationships that reinforce our clients’ brand recognition and strength, and enhance our clients’ customer loyalty. Our individual services and solutions are delivered across multiple channels, including digital (SMS, email, chats, social media and apps, among others) and voice, and are enabled by process design, technology and intelligence functions. We also enjoy longstanding client relationships across a variety of industries and we work with market leaders in telecommunications, banking, financial services, and multisector, which for us is comprised of the consumer goods, services, public administration, healthcare, transportation, technology and media industries. In 2020, our revenue from clients in telecommunications, financial services and multisector represented 39.0%, 34.6% and 26.4% of our total revenue, respectively. Since our founding in 1999, we have significantly diversified the sectors we serve and our client base has grown to over 400 separate clients. Revenue from non-Telefónica clients accounted for 68.2% of our total revenue in 2020, compared to 10.0% of our total revenue when we were founded in 1999. At the same time, we have also been leveraging Atento’s strong brand and reputation to attract more born-digital clients, as well as other high-growth companies, to establish a stronger and more profitable growth trajectory in 2020 and beyond 36 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 38/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Atento benefits from a highly-engaged employee base. Our over 139,000 employees worldwide are critical to our ability to deliver best-in- class customer service. In 2019, we were recognized by Great Place to Work® as one of the 25 World’s Best Multinational Workplaces. The ranking, derived from the world's largest annual study of workplace excellence, identifies the top 25 best multinationals in terms of workplace culture. Atento remains the only company in its sector to be included in this global ranking. In 2019 we were also recognized for the ninth year in a row as one of the 25 Best Multinational Workplaces in Latin America by Great Place to Work®. We have a strong relationship with Telefónica, underpinned by a long-term Master Services Agreement (the “MSA”). On November 8, 2016, we entered into an Amendment Agreement to the MSA (the “Amendment”) with Telefónica, reinforcing and strengthening the strategic relationship with our largest client. The Amendment provides for the following: a reset of volume targets in Brazil and Spain, as well as a two-year extension of the MSA for those countries until December 31, 2023; revised invoicing and collection processes in all key markets; maintaining at least our current share of Telefónica’s spending in all key contracts; and certain other amendments. We are currently serving 31 companies of the Telefónica S.A. under 106 arm’s length contracts. Although the MSA is an umbrella agreement which governs our services agreements with the Telefónica S.A. companies, the termination of the MSA on December 31, 2021 (except in Brazil and Spain, where the MSA terminates on December 31, 2023) does not automatically result in a termination of any of the local services agreements in force after those dates. On August 4, 2016, we, through our direct subsidiary Atento Teleservicios España, S.A.U., entered into a Share Sale and Purchase Agreement with Intelcia Group, S.A. for the sale of 100% of Atento Morocco S.A., which encompassed Atento’s operations in Morocco and provided services to the Moroccan and French markets (the “Morocco Transaction”). The Morocco Transaction was consummated on September 30, 2016, upon receipt of regulatory approval. Atento’s operations in Morocco that provide services to the Spanish market were excluded from the Morocco Transaction and continue to operate as part of the Atento Teleservicios España, S.A.U. branch in Morocco. The Morocco Transaction allowed the Company to continue strengthening its focus on its core markets of Spain and Latin America. On September 2, 2016, the Company, through its subsidiary Atento Brasil S.A. (“Atento Brasil”), acquired 81.49% of the shares of RBrasil Soluções S.A. (“RBrasil”), a leading provider of late-stage collection services in Brazil. The total amount paid for this acquisition was R$27.1 million (equivalent to $8.6 million). On June 7, 2019, the Company acquired the minority interest corresponding to 18.51% of the shares of RBrasil and now holds 100% of the company's shares. We believe the combination of Atento Brasil and RBrasil: · creates the largest provider of collection services in Brazil, with more than 6,600 professionals with a strong combination of know-how and expertise, optimally positioning Atento to expand its share of the $2.7 billion collections market in Latin America; · provides new and existing clients with a fully-integrated platform and delivers customized collections solutions; · enhances the effectiveness of collections solutions through the extensive use of technology, business intelligence and analytics capabilities; and · drives consolidation in this highly fragmented and compelling market in Latin America. Following the acquisition of RBrasil, we have pursued several opportunities to grow in the late-stage collection services segment, including long-term contracts with relevant clients in key sectors. On May 9, 2017, we announced an arrangement with Itaú Unibanco, a leading financial institution in Brazil, through which we will leverage the industry-leading capabilities of RBrasil and Atento Brasil to serve Itaú Unibanco’s increasing demand for end-to-end collections solutions, customer service and back office services. On June 9, 2017, the Company, through its subsidiary Atento Brasil, acquired 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of Interservicer—Serviços em Crédito Imobiliário Ltda. (jointly, “Interfile”), a leading provider of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil. The total amount paid for this acquisition was $14.7 million, net of cash acquired. On May 17, 2019, the Company acquired the minority interests corresponding to 49.99998% of Interfile Serviços de BPO Ltda. and 49.99989% of Interservicer - Serviços em Crédito Imobiliário Ltda. And now holds a 100% interest in these companies. Through this acquisition, we expect to be able to expand our capabilities in the financial services segment, especially in credit origination; accelerate our penetration of higher value-added solution; strengthen our leadership position in the Brazilian market; and facilitate the expansion of our credit origination segment into other Latin America markets. 37 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 39/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On June 29, 2017, we launched a new business unit, Atento Digital, to drive customer experience in the Age of Digitalization. Atento Digital’s mainstream offering encompasses a wide range of digital capabilities that enhance customer experience and increase efficiency across the customer lifecycle, from acquiring to managing and retaining customers. Atento Digital’s proposal incorporates the use of digital marketing tools, automation, artificial intelligence, cognitive technology based on Keepcon’s semantic engine and analytics to deliver a new level of customer experience and process efficiency for Atento’s core service categories such as sales, customer care, technical support, collections and back office. The business unit is structured to develop and deliver digital solutions and is consistent with our customer-centric vision, based on four pillars: · Data Driven: Integration and use of client’s data and analytics to understand profiles, habits and preferences, in order to develop models of propensity; · User Experience: We understand customer interaction and experience with design, interface, usability and operation diagnostics; · Omnichannel & Social: We understand where and how clients prefer to interact and we act in an integrated, fluid and resilient way, with lean and agile development, Robotic Process Automation (RPA) use and systems integration; · Journey Automation: Based on User Experience (UX), we design new journeys for customers and automate repetitive processes through digital tools, use of artificial intelligence and semantic technology. On June 30, 2017, we announced the signing of a strategic partnership and the acquisition of a minority stake in Keepcon, a leading provider of semantic technology-based automated customer experience management through our subsidiary Contact US Teleservices Inc. The acquisition of a minority stake in Keepcon follows our overall strategy to develop and expand our digital capabilities, grouped under the newly created global digital business unit. Our goal is to integrate all of our digital assets to generate additional value for clients and drive growth across verticals and geographies. We aim to turn the business disruption generated by the digital revolution into differentiated customer experience solutions, generating competitive advantages for customers. We expect that the investment in Keepcon by Atento will expand the artificial intelligence and automatization capabilities of our omnichannel platform. On June 23, 2019, Contact US Teleservices, Inc. signed with Keepcon a first amendment to a Put&Call option agreement. In addition to this, Atento Brasil also signed an Offer Letter with Keepcon on October 29, 2019 for the provision of certain monitoring and classification services related to processes for social media and other channels for a period of 36 months, commencing on the date of its signature. On July 31, 2019, we launched our Three Horizons Plan to improve profitability in existing operations, accelerate the development of Atento’s next-generation services and digital capabilities, and accelerate exposure to services, verticals and geographies with higher growth and margins. This plan is defined as: (a) Implement Operational Improvements: a range of initiatives to accelerate the transformation of Atento’s core operations, from driving sales and operational excellence to optimizing indirect costs; (b) Accelerate Build-out of Next Generation Services Portfolio and Digital Capabilities: a set of strategic initiatives to accelerate the development and expansion of Atento’s value offering, with a focus at the beginning on three next-generation services lines (high-value voice, integrated multichannel and automated back office) and four next-generation digital capabilities (Artificial Intelligence (AI)/Cognitive, Analytics, Automation/ Robotic Process Automation (RPA) and Customer Experience (CX) consulting), combined with the implementation of new methodologies for product development and go-to-market processes; (c) Pursue New Growth Avenues: build upon stronger foundations to unlock and drive new growth by accelerating the Company’s penetration of higher-growth and higher-margin services verticals and by expanding in the US market. Driving this plan will be a culture of innovation and transformation. 38 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 40/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Our revenue for the year ended December 31, 2020, was $1,412.3 million, our EBITDA was $161.2 million and our loss for the year was $46.9 million. For the years ended December 31, 2019 and 2020, our revenue decreased by 6.1% (2018 x 2019), and decreased by 17.3% (2019 x 2020), respectively, and our EBITDA decreased by 17.0% and increased 5.1%, respectively. The following table sets forth a breakdown of revenue based on geographic region for the years ended December 31, 2018, 2019 and 2020: Revenue ($ in millions, except percentage changes) Brazil Americas EMEA Other and eliminations (1) Total (1) Includes holding company level revenues and consolidation adjustments. 2018 For the year ended December 31, 2019 2020 877.7 708.7 240.9 (9.1) 1,818.2 827.3 660.1 232.8 (12.9) 1,707.3 609.4 582.0 234.7 (13.8) 1,412.3 We operate in 13 countries worldwide and organize our business into the following three geographic markets: (i) Brazil, (ii) Americas, excluding Brazil (“Americas”) and (iii) EMEA. For the year ended December 31, 2020, Brazil accounted for 43.2% of our revenue and 50.7% of our Adjusted EBITDA; Americas accounted for 41.2% of our revenue and 41.4% of our Adjusted EBITDA; EMEA accounted for 16.6% of our revenue and 13.2% of our Adjusted EBITDA (in each case, before holding company level revenue and consolidation adjustments). The following table sets forth a breakdown of revenue by country for the years ended December 31, 2018, 2019 and 2020: Revenue by country ($ in millions) Country Spain Other and eliminations (*) EMEA Argentina Chile Colombia El Salvador United States Guatemala Mexico Peru Puerto Rico Uruguay Panama Nicaragua Costa Rica Other and eliminations (*) Americas Brazil Other and eliminations (*) Total revenue For the years ended December 31, 2018 2019 2020 % of Total revenue 240.9 - 240.9 134.6 112.7 71.2 14.3 42.3 16.2 177.6 136.3 9.4 2.9 4.1 4.4 7.4 (24.5) 708.7 877.7 (9.1) 1,818.2 232.7 0.1 232.8 98.2 99.9 72.6 16.9 43.6 11.6 179.8 116.2 12.3 2.3 3.7 3.9 7.5 (8.5) 660.1 827.3 (12.9) 1,707.3 234.7 - 234.7 67.9 82.2 71.0 17.5 62.3 6.2 161.5 85.4 16.7 2.3 3.6 3.3 8.0 (5.8) 582.0 609.4 (13.8) 1,412.3 16.6 - 16.6 4.8 5.8 5.0 1.2 4.4 0.4 11.4 6.0 1.2 0.2 0.3 0.2 0.6 (0.4) 41.2 43.2 (1.0) 100.0 (*) Includes holding company level revenues and consolidation adjustments. 39 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 41/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The amounts of revenue by country reported are impacted by foreign exchange effects, which can be significant between the years in some countries. For additional information, see Item 5. Operating and Financial Review and Prospects–A. Operating Results–Management’s Discussion and Analysis of Financial Condition and Results of Operations. Seasonality Our performance is subject to seasonal fluctuations. For each of the years presented herein, our performance was lower in the first quarter of the year than in the remaining three quarters of the year. This is primarily due to (i) our clients generally spending less in the first quarter of the year after the year-end holiday season, (ii) the initial costs to train and hire new employees at new service delivery centers to provide additional services to our clients which are usually incurred in the first quarter of the year, and (iii) statutorily mandated minimum wage and salary increases of operators, supervisors and coordinators in many of the countries in which we operate which are generally implemented at the beginning of the first quarter of each year, whereas revenue increases related to inflationary adjustments and contracts negotiations generally take effect after the first quarter. We have also found that growth in our revenue increases in the last quarter of the year, especially in November and December, as the year-end holiday season begins and we have an increase in business activity resulting from the handling of holiday season promotions offered by our clients. These seasonal effects also cause differences in revenue and expenses among the various quarters of any year, which means that the individual quarters of a year should not be directly compared with each other or used to predict annual operating results. Our Strategy Our mission is to be the number-one customer experience solutions provider in the markets we serve by being a truly multi-client business. Atento’s tailored CRM BPO solutions are designed to enable our clients to create a best-in-class experience for their customers, enabling our clients to focus on operating their core businesses. Atento utilizes its industry expertise, commitment to customer care and consultative approach to offer superior and scalable solutions across the entire value chain and customer life cycle, customizing each solution to the individual client’s needs. Our goal is to significantly outperform expected market growth by being our clients’ service-provider-of-choice for customer experience while driving margin efficiencies. We are focused on our clients’ needs and, therefore, developing and delivering value-added, multi-channel services and solutions is an absolute priority for us. We believe our offer is a strong component of our growth equation as well as our ability to generate value for our clients in an environment impacted by digital technologies. We will continue evolving our service offering to best serve our clients, consistent with our Three Horizons Plan, and driving a culture of innovation and transformation, that despite the situation of the pandemic (COVID-19) we have continued with our transformation plan according to the established agenda: • Operational Improvements - transforming the core. Improve the way we operate our business and address the factors that affect the profitability of our operations. The operational improvements we have been implementing, in addition to forming a new leadership team, are establishing a stronger footing to accelerate the development and expansion of innovative digital solutions that significantly enhance Atento’s growing portfolio of high-value voice, integrated multichannel and back office services. At the same time, we have also been leveraging Atento’s strong brand and reputation to attract more born-digital clients, as well as other high-growth companies, to establish a stronger and more profitable growth trajectory. This area of our Three Horizons strategy can be divided in four sub-areas: · · Sales Excellence: We have transformed our sales model to accelerate profitable growth under a “sell more, sell better, sell what we want” approach. We are highly focused on the relationships we have with our client base and consider it to be a key competitive advantage. We are implementing a new sales model that helps us manage global customer accounts and further penetrate the born-digital area of the market. Our commercial team is responsible for End-to-End client lifecycle, namely new sales to new clients, account development, scope changes, renewals and IPT (insert full term) negotiations, driving increases in sales through a War Room model and a compensation model focused on profitable growth. Also, prioritizing strategic product sales among current and future clients will be main focus for Atento in 2020, to ensure the right product portfolio at each of our customers, a key lever to drive healthy growth in future. Operational Excellence: We are executing a series of initiatives to achieve operational excellence, such as operational KPIs management, Shared Services optimization, etc. These initiatives are expected to generate savings and eliminate redundant activities in operating areas such as quality, workforce management, reporting and training, and client value programs, in addition to other specific operating improvement actions being implemented at regional levels, all with a focus on increasing our contribution margins and improving the experience of our clients’ customers. 40 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 42/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · · Optimization initiatives to reduce SG&A and other costs: We are transforming our business support areas, generating savings that can reduce our Indirect Costs. We have analyzed the major cost components of our business in the human resources, technology, facilities and infrastructure areas, and we have developed specific solutions to lower the cost to serve in each category. One of the actions we are taking is the digitalization of HR processes. For example, our HR team uses digital tools for recruiting and retaining the best talent in the market to support our clients operations. We are innovators in massive HR processes related to the contact center, using Predictive Agent Recruitment processes across geographies, increasing skills suitability for the role while reducing screening costs up to 40%. Setting up an enhanced governance model and new organization to drive improved business performance: We have implemented an operating model for greater simplification and alignment of commercial and operational/delivery roles and responsibilities. We believe that this new organizational structure will foster agility and simplicity while ensuring that leaders are focused on coordinating, communicating and pursuing new solutions and innovation. Next-Gen Services and Digital Acceleration. We are accelerating our move into next generation services to ensure Atento remains competitive in an evolving digital world. We are focusing on three key service offerings with significant current and future market potential. · · · High Value Voice: We maximize our clients high-value processes by providing highly skilled agents, assisted by AI and analytics technologies that optimize decision making or complex problem solving. As a result, we provide memorable experiences to end- customers. Integrated multichannel: Is a full range of orchestrated and integrated digital channels (Automated and Agent-Led) that deliver a unique and seamless customer experience. Integrated multichannel provides a far richer experience than the one delivered by each channel in isolation. Automated Back Office: We go beyond front-end customer processes to automate our clients back office. By shortening the time it takes to manage all those tasks behind the scenes, we boost our clients efficiency and ensure an exceptional end-to-end customer experience. We are also focusing on four next-generation digital capabilities: · · Artificial Intelligence and Cognitive Technologies: We are using Artificial Intelligence and cognitive technologies to deliver sentiment analysis and more humanized customer interactions. For example, we are providing journey mapping, planning, and design, development and implementation of front- and back-office Robotic Process Automation (RPA), intelligent Interactive Voice Response (IVR) and virtual assistants, chatbots and voice bots, document management automation and orchestration, Optical Character Recognition (OCR)/ Intelligent Character Recognition (ICR), Natural Language Processing (NLP)/ Natural Language Understanding (NLU) and sentiment analytics, Machine Learning (ML) and Artificial Intelligence (AI), and function-specific automation in marketing, collections, and credit management. We also offer conversation design and communication persona creation. Analytics: As experts in end-to-end customer relationships management, we use Data Science to improve business efficiency by generating value through Data, developing predictive analyses that generate insights that maximize clients’ businesses, mitigate risks, increase retention in self-service channels, minimize recall and complaints, increasing First Call Resolution (FRC). Our Analytica value proposition is focused on business performance (e.g. propension models and people analytics), cost reduction per interaction, and machine learning to empower AI platforms. 41 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 43/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · · Automation: We automate the redundant work of back- and front-office activities to improve efficiency and customer experience. Our value proposition for BPA (Business Process Automation), through our wholly-owned company Interfile, includes business process management (document capture, verification, analysis, fraud prevention, etc.), process control and productivity, agility and efficiency, and assertive demand sizing. We also have entered into a partnership with UiPath to enhance our automation capabilities and train traditional contact center agents as Blueprism programmers. Customer Experience Process Consulting: We optimize customer journeys and business processes to provide differentiated CX. As a third-party provider, we perform a complete mapping of the end-customer journey, processes that generate a better and more optimized brand experience, maximizing customer retention, resolution effectiveness, conversion (in terms of sales) and a complete vision of the service users of a brand. We develop the Language User Interfaces, considering a value proposition based on Traditional IVR for Humanized IVR and VDA as well as bots to achieve higher retention levels. We create language for conversational interfaces based on a brand´s persona, dynamic and progressive navigation, propensity analysis, NLP and applied AI. • New Growth Avenues. Building upon stronger foundations to unlock and accelerate new growth. Our third horizon for change is to advance in new growth avenues that relate to the way we expand our business in the highly attractive markets, such as the US and other potential geographies. We will also accelerate our penetration of high growth/margin verticals and segments, such as retail/e-commerce, high-tech/new economy or healthcare, and improve the way we make use of strategic partnerships and initiatives to accelerate our growth strategy (selective carve-outs in high-growth verticals and capability building via acquisitions). A key sector to drive growth is born-digital companies. These companies are not only a key target in the short-term, they will also lead Atento’s future growth, as they are focused on driving their own growth. • Culture Transformation. People are our key asset. We believe that our people are a key enabler of the success of our business model and a strategic pillar of our competitive advantage. We have created, and constantly reinforce, a culture that we believe is unique in the industry. We have developed processes to identify talent (both internally and externally), created individualized development plans, and designed incentive programs that, together with permanent motivation initiatives, foster a work environment that aligns our professional development with our clients’ objectives and business goals. Our Clients Over the years, we have steadily grown our client base, resulting in what we believe is a world-class roster of clients. Our longstanding, blue-chip client base spans a variety of industries and includes the Telefónica S.A., Banco Bradesco, Banco Santander, HSBC, Samsung and Whirlpool, among others. Our clients are leaders in their respective industries and require best-in-class service from their outsourcing partners. We serve clients primarily in telecommunications, financial services and multisector, which includes consumer goods, retail, public administration, healthcare, travel, transportation and logistics, and technology and media. For the year ended December 31, 2020, our revenue from clients in telecommunications, financial services and multisector represented 39.0%, 34.6% and 26.4% of total revenue. At December 31, 2020, our top 15 clients accounted for 68.3% of our revenue and, excluding the Telefónica Group companies, our next 15 clients accounted for 37.4% of our revenue. With each of these clients we have worked closely over many years across multiple countries, building strong partnerships and commercial relationships. We have also grown in born-digital clients in the last year We are strategic partners of companies that have the consumer at the center of their strategy and demand differentiated relationships with their customers. We have a team of consultants and specialists in Customer Experience, who design the ideal moments for interactions between customers and brands, each customized to the needs of individual clients. Through our Data Science area and our Customer Engagement HUB, we integrate and monitor events from multiple data sources, systems, as well as digital and human channels, maximizing results and generating new knowledge. Development of Client Base As of December 31, 2020, our client base consisted of over 400 separate clients. Since 1999, when our former parent company, Telefónica, and its subsidiaries contributed approximately 90.0% of our revenue, we have diversified our client base by sources of revenue. For the years ended December 31, 2018, 2019 and 2020, we generated 39.0%, 35.6% and 31.8% of our revenue, respectively, from Telefónica Group companies. 42 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 44/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents As of December 31, 2020, 31 companies within the Telefónica S.A. were party to 106 arm’s length contracts with Atento. Our service agreements with Telefónica S.A. companies remained in effect following the consummation of the Acquisition. Additionally, we entered into a Master Service Agreement (MSA), a framework agreement that replaced our prior framework agreement with Telefónica and which is intended to govern our relationship with Telefónica through 2021, with the exception of Brazil and Spain, through 2023. Telefónica S.A. Master Service Agreement Our service agreements with Telefónica remained in effect following the consummation of the Acquisition, and we entered into the MSA, a framework agreement that replaced the framework agreement with Telefónica that was in place prior to the Acquisition. The term of the MSA expires on December 31, 2021, with the exception of Brazil and Spain ending on December 31, 2023 according to the agreement. The MSA requires the Telefónica S.A. companies to meet the minimum annual revenue commitments to us in each jurisdiction where we currently conduct business (other than Argentina). The MSA commitment is meant to be a minimum commitment, or floor, rather than a target or budget. If the Telefónica S.A. companies fail to meet country specific revenue commitments, which are measured on an annual basis, Telefónica S.A. will be required to compensate us in cash for any shortfalls. If the Telefónica S.A. companies fail to meet the annual aggregate minimum revenue commitments for all jurisdictions covered by the MSA, Telefónica, S.A. will be required to compensate us in the same manner. Any such compensation payments will be in amounts calculated as a percentage of the revenue shortfalls, ranging from 8% to 20% of the shortfall depending on the scope of such shortfall and the relevant calendar year. In May 2014, we and Telefónica amended the MSA to adjust the minimum revenue commitments in Spain and Morocco by an average of €46.0 million ($62.6 million, based on the May 31, 2014 month-end close foreign exchange rates) per year to reflect the lower level of activities in these geographies and a corresponding €25.4 million ($34.6 million, based on the May 31, 2014 month-end close foreign exchange rates) payment was made by Telefónica representing the discounted value of the reduction in minimum revenue commitments, which was subsequently applied to repay the Vendor Loan Note. In November 2016, we entered into an amendment that decreased the annual targets (MRT) for the remaining years of the MSA, with a one- off reset/reduction, starting in 2017, of €100.0 million for Brazil and €20.0 million for Spain. In return, Atento obtained an extension of the Brazil and Spain MSA targets for an additional 2 years (2022 and 2023) and an adjustment of Payment Terms. This change was the implementation of 30- day payment terms in Brazil, Spain, Peru, Mexico, Chile, Colombia and Argentina and the elimination of the Argentine CVI contract. Although the MSA is an umbrella agreement that governs our services agreements with the Telefónica S.A. companies, the eventual termination of the MSA does not automatically result in a termination of any of the local services agreements already in force. The MSA contemplates a right of termination before the end of the MSA in the different countries, in the event of a change of control of the Company occurring as a result of a sale to a Telefónica competitor. In November 2016, we entered into another three-year contract in Brazil with Vivo (Telefónica’s subsidiary), maintaining volume levels through the expansion of our business and improved profitability supported by changes in our operating model. The Company also amended the MSA with Telefónica to include: · Brazil and Spain extended to 2023 (previously 2021), aligning revenue targets to current operating conditions and retaining total level of commitment; · Atento’s guaranteed to maintain at least current share of wallet, remaining the largest service provider to Telefónica; · Improvements in payment terms and invoicing process in all key markets; · Elimination of an Argentine $24.0 million Contingent Value Obligation, or CVI, further strengthening our balance sheet. 43 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 45/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In November 2019, the parties agreed to decreasing the minimum revenue thresholds in Spain. In consideration of this reduction, the entity Telefónica de España S.A. (a subsidiary of Telefónica, “Telefónica España”) and Atento Teleservicios España S.A.U. (entity fully owned by the provider “Atento España”), entered into an agreement dated November 1, 2019, with the purpose to, among other agreements, boost the digitalization of the services rendered to Telefónica España. Additionally, Telefónica España, will, subject to the conditions stated in such agreement, collaborate with Atento España. CRM/BPO industry recognitions Over the years, the quality and innovation of Atento’s solutions to enhance the customer experience of our clients have been consistently recognized with the most prestigious awards within the CRM/BPO industry. Our Company takes great pride in these recognitions. They are a direct result of our eagerness to meet clients' expectations and to create customer experience solutions that become a source of competitive advantage. Listed below some of the most relevant recognitions achieved in 2020: · Gartner On February 16, 2021, we announced that we have been positioned among the top 4 leading global players in Gartner’s Magic Quadrant for BPO Customer Management. The Gartner Magic Quadrant assesses, among other things, key service providers for customer management business process outsourcing · Everest In 2020, the Everest Group has selected Atento as one of the leading companies in Customer Experience Management (CXM) in its annual PEAK Matrix Assessment 2020 report. This recognition is based on the companies' ability to improve and evolve. · Frost & Sullivan In 2020, Frost & Sullivan confirmed the Company’s leading position in Latin América customer experience outsourcing services market, based on the research and consulting firm’s annual analysis of this $10.5 billion market. · ISO 56002 certification In 2020, we were recognized with the ISO certification for innovation management. This is the first time at a global scale that a company in the customer relationship sector has received this seal of approval. We were also the fourth company in Brazil to achieve this certification. · Top Employer In 2020, Atento received the Top Employer certificate, awarded by the CRF institute (Corporate Research Foundation) in Spain and Brazil. · Grupo Fleury award Atento was the winner in the ‘Services’ category, which recognized the main suppliers of Grupo Fleury, one of the main providers of medical services in Brazil. Atento achieved the best results in five dimensions: Quality, Terms & Conditions, Sustainability, Compliance and Creativity & Innovation, surpassing nine other companies. · ABEMD Awards - Best Direct Marketing Practices in Brazil The ABEMD awards recognize the best solutions in Brazil’s direct marketing industry. They analyze the strategy, planning, creativity and results of each solution. In 2020, Atento was recognized as company of the year specialized in Contact Center Category. 44 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 46/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · ESR Distinction The Socially Responsible Company Distinction (Empresa Socialmente Responsable ESR) is one of the most important recognitions in the field of corporate social responsibility in Latin America. Atento received this distinction for the 1th time in Mexico. · Ranking Valor Inovação Atento was recognized as the 3rd most innovative company in Brazil's service sector in Valor Inovação’s ranking. The study is prepared by Valor Econômico, one of the country's most renowned business publications, in partnership with the strategic consultancy firm of the PwC Network. · Premio Cliente SA Atento was recognized as Outsourcing Company of the Year by the Aloic organization, the Latin American Alliance of Organizations for Customer Interaction, which aims to recognize the best practices in the management of customer culture in Latin America. Competitive Landscape Global Competitive Landscape Atento is the largest provider of CRM BPO services and solutions in Latin America and among the top five providers globally, based on revenues. Relative to CRM BPO market share in Latin America, we hold the number one regional position with 15.2% of the market, 5.4 p.p. ahead of our closest competitor. Atento also holds number-one positions in almost all countries in which we operate, including Brazil, the largest market, México (domestic market), Chile, Argentina and Central America/Caribbean (domestic market), based on revenues for the year ended December 31, 2019. In 2020, the Everest Group has selected Atento as one of the leading companies in Customer Experience Management (CXM) in its annual PEAK Matrix Assessment 2020 report. This recognition is based on the companies' ability to improve and evolve. Atento has been at the forefront among the main international competitors as Major Contender and Star Performer. As one of the leading companies in this field, Atento was distinguished both for its impact in the market and for its evolution, vision, and capabilities displayed in 2019. The company was recognized for increasing its US and European footprint, and for its proactive search for new deals with rapidly evolving industries, such as e-commerce and the healthcare sector. In turn, as a Star Performer, Atento has stood out for promoting a culture of co-innovation, offering integrated multi-channel capabilities based on programming, Artificial Intelligence, IoT (Internet of Things) and RPA (Robotic Process automation), as well as advisory services such as process consulting and building an increasingly satisfying customer experience. Recently, we have been positioned among the top 4 leading global players in Gartner’s Magic Quadrant for BPO Customer Management. The Gartner Magic Quadrant assesses, among other things, key service providers for customer management business process outsourcing. In order to do so, it has evaluated 19 suppliers, taking into account their implementation capacity and the integrity of their vision. Gartner's opinions are a reference for companies around the world when both considering and selecting BPO providers for contact center customer management. The companies analyzed in this research in the Magic Quadrant provide application and management services that encompass global operations, industry expertise in multiple areas, digital services, agent-assisted services, technology expertise, customer and project management expertise, business process management, innovation and thought leadership. 45 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 47/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents C. Organizational Structure At December 31, 2020, none of the Group’s subsidiaries was listed on a stock exchange, except for Atento Luxco 1 S.A., which has debt securities listed on the International Stock Exchange (TISE) in Guernsey. All subsidiaries use year-end December 31 as their reporting date. D. Property, Plants and Equipment Property We perform our business in service delivery centers leased from third parties, and we did not own any real estate as of December 31, 2020, except for one plot of land in Morocco and part of a building in Peru. Additionally, in April 2006, we obtained a grant of use by the Consorcio para el Desarrollo (development consortium) of the province of Jaen in Spain, of a 2,400 square meter field for 30 years, extendable for 15-year periods, up to a maximum of 75 years. In 2006, we built a service delivery center at this site. As of December 31, 2020, the rest of our service delivery centers around the world were under lease agreements. Our lease agreements are generally long-term, between one to ten years, some of which provide for extensions. Our infrastructure is designed according to our clients’ needs. Our technology systems possess the flexibility to integrate with our clients’ existing infrastructure. This approach enables us to deliver the optimal infrastructure mix through on-shoring, off-shoring or near-shoring, as required. Our deployment team is trained to accomplish timely implementation to minimize our clients’ time-to-market. We address client capacity needs by providing solutions such as software-based platforms, high-level infrastructure mobility, process centralization and high concentration of delivery centers. As of December 31, 2020, we had 93,308 workstations globally, with 49,294 in Brazil, 38,761 in the Americas (excluding Brazil) and 5,253 in EMEA. As of December 31, 2020, we had 94 delivery centers globally, 31 in Brazil, 49 in the Americas (excluding Brazil) and 14 in EMEA. 46 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 48/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The following table shows the number of workstations and delivery centers in each of the jurisdictions in which we operated as of December 31, 2018, 2019, 2020. Brazil Americas Argentina (2) Central America (3) Chile Colombia Mexico Peru United States (4) EMEA Spain Total Number of Workstations 2019 2020 2018 Number of Service Delivery Centers (1) 2020 2019 2018 49,185 37,610 4,455 2,424 2,948 8,477 9,384 8,569 1,353 5,476 5,476 92,271 49,486 37,765 4,363 2,319 2,595 9,006 9,800 8,479 1,203 5,321 5,321 92,572 49,294 38,761 4,025 2,842 2,310 9,184 10,179 8,918 1,303 5,253 5,253 93,308 34 52 12 4 4 10 15 4 3 15 15 101 33 48 12 3 4 9 14 3 3 15 15 96 31 49 12 3 4 9 15 3 3 14 14 94 (1) Includes service delivery centers at facilities operated by us and those owned by our clients where we provide operations personnel and workstations. (2) Includes Uruguay. (3) Includes Guatemala and El Salvador. (4) Includes Puerto Rico. 47 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 49/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The following is a list of our principal workstations as of December 31, 2018, 2019, 2020: Brazil São Bernando do Campo Bra-Uruguay São Paulo (Nova São Paulo) São Paulo (Belenzinho I) São Paulo (São Bento I) Salvador (Cabula) São Jose dos Campos São Paulo (Santana) Rio de Janeiro (Madureira) São Paulo (Santo Antonio) Americas Peru-LaMolina Peru-Maquinarias Colombia-Telares Colombia-Bucaramanga Sal-El Salvador Colombia-Royal EMEA Spain-Glorias Spain-Ilustración Spain Madrid Rivas Spain-Coruña Number of Workstations 2019 2020 2018 3,134 2,106 2,229 2,351 2,204 1,771 2,088 2,227 2,151 1,980 5,275 2,209 2,169 1,553 1,165 1,222 875 931 - 350 3,002 2,180 2,506 2,015 2,187 1,785 2,087 2,101 2,089 1,980 5,351 2,216 2,156 1,838 1,251 1,249 867 910 426 310 3,061 2,608 2,336 2,331 2,240 2,093 2,088 2,063 2,052 1,985 5,682 2,308 2,177 1,848 1,477 1,324 864 697 661 355 Telecommunications Infrastructure. We work with the main telephone carriers at the local and international levels. We have recently implemented a network to interconnect the main countries in which we operate, allowing us to offer new options of connectivity and to run new applications for videoconferencing. Since almost all our voice platform is based on IP technology, we have implemented a solid and flexible telecommunications infrastructure, which provides business continuity through redundant architectures and interconnection schemes in most of our facilities. ITEM 4A. UNRESOLVED STAFF COMMENTS The Company has no unresolved comments from the staff of the U.S. Securities and Exchange Commission with respect to its periodic reports under the Securities Exchange Act. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS Critical accounting estimates and assumptions The preparation of consolidated financial statements under IFRS, as issued by the IASB, requires the use of certain assumptions and estimates that affect the carrying amount of assets and liabilities within the next financial year. Some of the accounting policies applied in preparing the accompanying consolidated financial statements required Management to apply significant judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities would be adjusted accordingly. 48 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 50/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related consolidated income statements. An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities is as follows: Useful lives of property, plant and equipment and intangible assets The accounting treatment of items of property, plant and equipment and intangible assets entails the use of estimates to determine their useful lives for depreciation and amortization purposes. In determining the useful life, it is necessary to estimate the level of use of assets as well as forecast technological trends in the assets. Assumptions regarding the level of use, the technological framework and the future development require a significant degree of judgment, bearing in mind that these aspects are rather difficult to foresee. Changes in the level of use of assets or in their technological development could result in a modification of their useful lives and, consequently, in the associated depreciation or amortization. Estimated impairment of goodwill The Atento Group tests goodwill for impairment annually, in accordance with the accounting principle described in Note 3h. Goodwill is subject to impairment testing as part of the cash-generating unit to which it has been allocated. The recoverable amounts of cash-generating units defined in order to identify potential impairment in goodwill are determined on the basis of value in use, applying five-year financial forecasts based on the Company’s strategic plans, approved and reviewed by Management. These calculations entail the use of assumptions and estimates and require a significant degree of judgment. The main variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business variables. Deferred taxes The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts depends ultimately on the Company’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections and are continuously updated to reflect the latest trends. The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Company as a result of changes in tax legislation or unforeseen transactions that could affect the tax balances. The Company has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will generate future taxable profits against which they may be utilized. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Provisions and contingencies Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from, inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Company will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal counsel or consultants. 49 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 51/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the consolidated financial statements. Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized originally on the basis of these estimates. Fair value of derivatives The Company uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in exchange rates. Derivatives are recognized at the inception of the contract at fair value. The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of future cash flows associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied. Update On COVID-19 The estimates and assumptions included in the financial statements include our assessment of potential impacts arising from the COVID-19 pandemic that may affect the amounts reported and the accompanying notes. To-date, no significant impacts on our collection experience and expected credit losses have been noted and we do not currently anticipate any material impairments of our long-lived assets or of our indefinite-lived intangible assets as a result of the COVID-19 pandemic. We will continue to monitor the impacts and will prospectively revise our estimates as appropriate. Refer to Notes 3u of our consolidated financial statements, included elsewhere in this document for details regarding new amendments standards and interpretations. A. Operating Results MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s discussion and analysis of our financial condition and results of operations should be read for the years ended December 31, 2018, 2019 and 2020 and the related notes there-to, and with the financial information presented under the section entitled “Item 3. Key Information —A. Selected Financial Data” included elsewhere in this Annual Report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated as a result of various factors that affect our business, including, among others, those mentioned in the sections “Cautionary Statement with respect to Forward Looking Statements” and “Item 3. Key Information—D. Risk Factors”, and other factors discussed elsewhere in this Annual Report. The consolidated financial statements for the years ended December 31, 2018, 2019 and 2020, prepared in accordance with IFRS, as issued by the IASB, are included in “Item 18. Financial Statements”. The following discussion includes forward-looking statements. Our actual results could differ materially from those that are discussed in these forward-looking statements. Overview Atento is the largest provider of customer-relationship management and business-process outsourcing (“CRM BPO”) services and solutions in Latin America, and among the top five providers globally, each based on revenue. Our business was founded in 1999 as the CRM BPO provider to Telefónica and its subsidiaries (together, the “Telefónica Group”). Since then, we have significantly diversified our client base, and we became an independent company in December 2012, when we were acquired by funds affiliated with Bain Capital Partners, LLC. In October 2014, Atento became a publicly listed company on the New York Stock Exchange under the ticker symbol “ATTO.” In May 2020, Bain Capital transferred substantially all of its remaining shares to HPS Investment Partners, LLC, GIC and an investment fund affiliated with Farallon Capital Management, L.L.C. 50 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 52/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The potential for long-term growth in the markets where we operate is strong and is driven by a number of demographic and business trends, including (i) sustained demand and growth driven by an improving macroeconomic environment over the long term, a rapidly growing population and an emerging middle class, (ii) further outsourcing of CRM BPO operations, (iii) potential for further penetration in existing markets, (iv) development of new industry vertical expertise, such as with healthcare and born-digital companies (i.e., companies that have relied on digital products/services since inception, such as social networks and Fintechs), and (v) North America’s continued offshoring trend as U.S.-based businesses continue to offshore call center services to other geographies. We operate in 13 countries worldwide, including Brazil, Spain, Mexico, Peru, Argentina, Chile, Colombia, the United States, El Salvador, Guatemala, Puerto Rico, Panama and Uruguay. We organize our business into three geographic markets: (i) Brazil, (ii) Americas, excluding Brazil (“Americas”) and (iii) EMEA. For the year ended December 31, 2020, Brazil accounted for 43.2% of our revenue, Americas accounted for 41.2% of our revenue and EMEA accounted for 16.6% of our revenue (in each case, before holding company level revenue and consolidation adjustments). Our number of workstations increased from 92,572 as of December 31, 2019 to 93,308 as of December 31, 2020 due to volatility within our operations. Our number of service delivery centers decreased slightly over the same period. For a table showing the number of delivery centers and workstations in each of the jurisdictions in which we operated as of December 31, 2018, 2019 and 2020, see “Item 4. Information on the Company—D. Property, Plant and Equipment”. For the years ended December 31, 2018, 2019 and 2020, revenue generated from our 15 largest client groups represented 75.2%, 73.8% and 68.3% of our revenue, respectively. Excluding revenue generated from the Telefónica S.A., for the years ended December 31, 2018, 2019 and 2020, our next 15 largest client groups represented 38.1%, 39.3% and 37.4% of our revenue, respectively. The decrease in client concentration reflects our strategy to improve our revenue mix, one of the pillars of our Three Horizon Plan, which we announced in the second quarter of 2019 to improve the profitability of our existing operations, accelerate the development of our next generation services and digital capabilities and strengthen our position in segments and geographies which we believe have the potential for higher growth margins. Our vertical industry expertise in telecommunications, banking and financial services, and more recently, with born-digital companies allows us to tailor our services and solutions for our customers, further embedding us into their value chain while delivering meaningful business results. In 2019, as part of our Three Horizon Plan, we initiated the build-out of Next Generation Services Portfolio and Digital Capabilities, a set of strategic initiatives designed to accelerate the development and expansion of our value offering, with a focus on three next generation services lines (namely, high value voice, integrated multichannel and automated back office) and four next generation capabilities (namely, AI/Cognitive, Analytics, Automation/RPA and CX consulting). During the years ended December 31, 2018, 2019 and 2020, telecommunications represented 45.8%, 41.1% and 39.0% of our revenue, respectively, and financial services represented 34.8%, 35.9% and 34.6% of our revenue, respectively. Additionally, during the years ended December 31, 2018, 2019 and 2020 the sales by service were: Customer Service Sales Collection Back Office Technical Support Others Total For the years ended December 31, 2019 2018 2020 50.7% 17.7% 8.2% 12.9% 6.9% 3.6% 100.0% 52.8% 16.6% 7.5% 12.7% 6.4% 4.0% 100.0% 58.5% 12.3% 6.9% 12.7% 5.8% 3.8% 100.0% 51 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 53/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Average headcount The average headcount in the Company in 2018, 2019 and 2020 and the breakdown by country is presented as follow: Brazil Central America Chile Colombia Spain Mexico Peru Puerto Rico United States Argentina and Uruguay Corporate Total 2018 December 31, 2019 2020 81,158 5,020 5,902 8,742 11,345 17,128 14,550 455 512 8,154 72 79,430 4,916 5,524 8,843 12,267 17,323 12,303 620 408 7,420 75 153,038 149,129 71,234 5,290 5,246 9,011 12,457 17,656 11,084 743 355 6,636 93 139,805 The reduction in our average headcount reflects the implementation of two pillars of our Three Horizon Plan, namely: · · operational excellence: we have taken a number of steps to improve our operations, such as management of key operational performance indicators and shared services optimization. These initiatives are expected to generate savings and eliminate redundant activities in operating areas such as quality, workforce management, reporting and training, and customer value programs, in addition to other specific operating improvement actions being implemented at regional levels. The focus of these initiatives is on increasing our contribution margins and improving the experience of our customers’ customers; and optimization initiatives to reduce selling, general and administrative expenses and other costs: we are transforming our business support areas in order to generate savings and reduce costs. We have analyzed the major cost components of our business in the human resources, technology, facilities and infrastructure areas, and we have developed specific solutions to lower the cost of services in each category. One of the actions we are taking is the ongoing digitalization of human resources processes. For example, our human resources team has recently implemented the use of digital tools for recruiting and retaining the best talent in the market to support our customers’ operations. Impact of COVID-19 Outbreak Since December 2019, a novel strain of coronavirus, or COVID-19, spread from China to other countries throughout the world leading to a global pandemic. The COVID-19 pandemic prompted a global health crisis and led to a number of government actions at the federal, state and local level across several countries in an effort to address the viral outbreak. Government measures included, among other things, stay-at-home orders and the closure of businesses not deemed essential to the provision of the basic welfare of society. The COVID-19 pandemic and government measures taken in response to it have disrupted regional and global economic activity, which initially reduced the need for and our ability to deliver our services and, therefore, directly and adversely affected our business operations, financial condition and results of operations for the first nine months of 2020 as a result of lower volumes during April and May. The services offered by us or by our customers to the end-customers have been declared, in different countries, to be essential, as many of our services allow citizens to remain in their homes while maintaining access to crucial services, such as healthcare, emergency services and banking. One relevant example is Praxair in Mexico, for which we provide a service that helps both hospitals and patients request oxygen supplies. Similarly, since March 24, 2020, Atento Guatemala has been providing physical, technology infrastructure and logistical support services for the government of Guatemala’s COVID-19 services. 52 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 54/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents To address the needs of our customers, employees and society in light of the government measures to address the COVID-19 pandemic, we are focused on maintaining a good level of service for our customers. To this end, our technology and operations teams are working to provide remote work options to more of our employees throughout our operations. These teams are committed to continuing to optimize our operations during the COVID-19 pandemic by overcoming technical and logistical limitations so we can fulfill our commitments to our employees, customers and society. We endeavor to continue serving many of the more than 500 million people of Latin America, the United States and Spain. Traditionally, we have endeavored to guarantee our services and to safeguard the health and safety of our employees. We have implemented a series of measures intended to maintain this guarantee and safeguards during the COVID-19 pandemic, such as higher grade cleaning and disinfection of our facilities, social distancing, limiting access to common areas, offering flexible work shifts to facilitate the care of families, and the cancellation of all business travel and in-person meetings. By December 31, 2020, we had over 59,000 work-at-home agents, or approximately 56% of our operations’ employees. For agents still working at our facilities, distances between workstations have been increased and personal work equipment (individual headset, keyboard, mouse, etc.) made available. With operating capacity at approximately 97%, we have a broad capacity to meet the needs of all customers. The transition to our work@home model by our employees has been facilitated by the digital transformation process underway since 2019, under our Three Horizons Plan, which has included re-skilling as well as digital recruiting, onboarding and training. This model as well as other enhanced digital capabilities are allowing us to capture medium- and long-term CRM and BPO opportunities arising from dramatic shifts in consumer behaviors and related changes being implemented by emerging and established companies seeking to attract and retain more customers in Latin America, the United States and Europe. The growing strength of our digital capabilities, evolving portfolio of next generation services and journey orchestration, coupled with accelerated operational improvements that are resulting in a more competitive cost structure, are allowing us to continue leading next generation customer experience in the future. While we believe we are now past the most severe impacts to our operations of the COVID-19 pandemic, the extent to which COVID-19 will impact our business, financial condition, results of operations and prospects will depend on future developments which are uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 or the actions of governments and other entities to contain COVID-19 in Brazil and the other countries in which we operate. Therefore, it is not possible to reasonably estimate the extent of potential impacts to our business, financial condition, results of operations and prospects. We are continuously monitoring the situation as closely as possible and are actively evaluating potential impacts to our business and implementing measures to help mitigate existing and potential risks. 53 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 55/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Consolidated Statements of Operations for the Year Ended December 31, 2018, 2019 and 2020 ($ in millions, except percentage changes) 2018 2019 Change (%) For the year ended December 31, For the year ended December 31, 2020 Change (%) Change excluding FX (%) (*) Change excluding FX (%) Revenue Other operating income Other gains and own work capitalized Operating expenses: Supplies 1,818.2 1,707.3 19.4 0.2 4.5 10.5 (70.8) (66.4) Employee benefit expenses (1,365.2) (1,301.0) (6.1) (76.6) N.M. (6.2) (4.7) 2.1 1,412.3 (76.3) N.M. 5.6 0.1 (0.6) 3.8 (72.3) (1,060.4) - (100.0) (100.0) (16.2) (118.7) 6.2 (1,377.6) (17.3) 22.8 (99.1) 8.8 (18.5) (11.5) (17.9) 41.9 (2.8) 31.0 (99.1) 27.5 (4.6) 4.7 (4.3) 65.3 (28.8) (19.4) N.M. (21.8) 3.2 N.M. 44.3 (5.3) (86.8) (41.9) (17.0) (5.5) N.M. 7.2 14.3 N.M. 81.1 22.8 (87.5) (35.5) (73.9) (47.0) (5.3) 40.3 15.7 (70.3) (27.8) (82.4) (42.1) (4.8) (46.9) (46.9) (42.3) (35.9) - (100.0) (100.0) (46.9) (41.9) (35.5) 161.2 161.2 5.1 5.1 23.1 23.1 Depreciation Amortization Changes in trade provisions Impairment charges (36.6) (58.7) (1.0) - (83.6) (57.2) (3.7) (30.9) Other operating expenses (215.9) (166.8) Total operating expenses (1,748.2) (1,709.7) Operating profit Finance income Finance costs Net foreign exchange loss Net finance expense Profit/(loss) before income tax Income tax expense Profit/(loss) for the year Profit/(loss) attributable to: Owners of the parent Non-controlling interest Profit/(loss) for the year Other financial data: EBITDA (1) (unaudited) Adjusted EBITDA (1) (unaudited) 89.5 18.8 (45.6) (28.8) (55.6) 33.9 (13.4) 20.5 18.5 1.9 20.5 184.8 184.8 12.6 20.0 (68.1) (9.1) (57.1) (44.5) (36.2) (80.7) (81.3) 0.6 (80.7) 153.4 153.4 54 128.5 143.6 (2.5) N.M. N.M. (22.7) (2.2) (85.9) 6.4 49.3 4.7 N.M. N.M. (84.5) 46.1 56.4 (68.5) (58.1) 2.7 N.M. N.M. N.M. N.M. (68.5) N.M. (17.0) (17.0) 10.9 N.M. N.M. N.M. N.M. N.M. N.M. (9.9) (9.9) https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 56/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents (*) Uses the current currency FX for the variation of 2019 versus 2020. (1) In considering the financial performance of the business, our management analyzes the financial performance measure of EBITDA at a company and operating segment level, to facilitate decision-making. EBITDA is defined as profit/(loss) for the period from continuing operations before net finance expense, income taxes and depreciation and amortization. EBITDA is not a measure defined by IFRS. The most directly comparable IFRS measure to EBITDA is profit/(loss) for the year/period. We believe that EBITDA is a useful metric for investors to understand our results of continuing operations and profitability because it permits investors to evaluate our recurring profitability from underlying operating activities. We also use this measure internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as to evaluate our underlying historical performance. We believe that EBITDA facilitates comparisons of operating performance between periods and among other companies in industries similar to ours because it removes the effect of variances in capital structures, taxation, and non-cash depreciation and amortization charges, which may differ between companies for reasons unrelated to operating performance. EBITDA is a measure that is frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present EBITDA-related performance measures when reporting their results. EBITDA has its limitations as an analytical tool. This measure is not a presentation made in accordance with IFRS, is not a measure of financial condition or liquidity and should not be considered in isolation or as alternatives to profit or loss for the period from continuing operations or other measures determined in accordance with IFRS. EBITDA is not necessarily comparable to similarly titled measures used by other companies. This non-GAAP measure should be considered supplemental in nature and should not be construed as being more important than comparable GAAP measures. The application of IFRS 16 from January 1, 2019 means EBITDA for the year ended December 31, 2019 and 2020 is positively impacted by a decrease in operating expenses relating to rental payments for leases recorded under IFRS 16 that would not otherwise have been recorded prior to the application of IFRS 16. EBITDA reported are presented applying the accounting and disclosure standard in highly inflationary economies for our operations in Argentina. N.M. means not meaningful 55 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 57/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Consolidated Statements of Operations by Segment for the Year Ended December 31, 2018, 2019 and 2020 ($ in millions, except percentage changes) For the year ended December 31, 2018 2019 Change (%) Change Excluding FX (%) For the year ended December 31, 2020 Change (%) Change Excluding FX (%) (*) Revenue: Brazil Americas EMEA Other and eliminations (1) Total revenue Operating expenses: Brazil Americas EMEA Other and eliminations (1) Total operating expenses Operating profit/(loss): Brazil Americas EMEA Other and eliminations (1) Total operating profit Net finance expense: Brazil Americas EMEA Other and eliminations (1) Total net finance expense Income tax benefit/(expense): Brazil Americas EMEA Other and eliminations (1) Total income tax expense Profit/(loss) for the year: 877.7 708.7 240.9 827.3 660.1 232.8 (5.7) (6.9) (3.3) 2.1 2.8 2.0 609.4 582.0 234.7 (9.1) (12.9) 42.5 49.7 (13.8) (26.3) (11.8) 0.8 6.9 1,818.2 1,707.3 (6.1) 2.1 1,412.3 (17.3) (847.6) (701.4) (240.2) (807.4) (679.5) (244.1) (4.7) (3.1) 1.6 3.2 6.6 7.5 (594.5) (576.7) (235.1) 41.0 21.4 (47.8) (42.2) 28.7 (26.4) (15.1) (3.7) 34.1 (1,748.2) (1,709.7) (2.2) 6.2 (1,377.6) (19.4) 33.1 21.5 2.5 32.3 21.1 (18.2) 1.2 8.6 (36.3) N.M. (52.8) (73.5) (31.7) N.M. (49.3) (70.9) 15.0 7.7 2.8 14.8 89.5 12.6 (85.9) (84.5) 40.3 (30.3) (46.5) (5.5) (1.6) (18.1) (5.6) (1.4) (3.6) 53.4 1.4 (12.7) (80.2) 66.4 35.8 (6.6) (42.5) (9.6) (1.3) (80.0) (29.1) (29.0) (142.5) 133.9 72.9 N.M. (8.6) 71.2 (10.9) N.M. (55.6) (57.1) 2.7 10.9 (82.4) 44.3 (1.4) (2.1) (0.9) (9.0) 7.4 (2.0) (22.0) (19.6) (13.4) (36.2) N.M. (0.3) N.M. 116.7 N.M. N.M. (7.1) N.M. 129.0 N.M. 5.8 (8.1) 3.6 (6.2) (21.4) N.M. (116.6) (68.6) (4.8) (86.8) (4.4) (1.5) (0.9) 14.7 (2.8) (4.5) (4.2) (5.7) 68.0 (5.5) (5.0) N.M. N.M. N.M. N.M. 19.1 88.3 (10.9) N.M. 81.1 0.7 N.M. (115.4) (65.2) (87.5) Brazil 1.4 (18.0) N.M. N.M. (21.7) 20.5 53.4 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 58/185 22/03/2021 Americas EMEA Other and eliminations (1) Profit/(loss) for the year Profit/(loss) attributable to: Owners of the parent Non-controlling interest Other financial data: https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 13.9 - 5.1 (25.9) (22.2) (14.6) 20.5 (80.7) 18.5 1.9 (81.3) 0.6 N.M. N.M. N.M. N.M. N.M. (68.5) 56 N.M. N.M. N.M. N.M. N.M. N.M. (9.9) 5.2 (61.6) (123.4) (20.4) 39.6 (46.9) (41.9) (46.9) (42.3) - (100.0) (45.4) (121.2) 28.6 (35.5) (35.9) (100.0) https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 59/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents EBITDA (2): Brazil Americas EMEA Other and eliminaons (1) Total EBITDA (unaudited) Adjusted EBITDA (2): Brazil Americas EMEA Other and eliminaons (1) Total Adjusted EBITDA (unaudited) 83.5 56.2 12.3 32.8 96.9 30.7 17.0 8.8 16.0 (45.3) 38.5 (73.1) 25.2 (40.5) 46.7 (70.4) 78.2 52.6 15.3 15.1 (19.3) 71.1 (9.6) 71.0 184.8 153.4 (17.0) (9.9) 161.2 5.1 99.4 73.5 19.5 (7.6) 184.8 111.7 32.4 21.8 (12.6) 153.4 12.4 (55.9) 11.9 65.5 (17.0) 21.1 (51.9) 18.3 61.5 (9.9) 81.8 66.8 21.3 (8.6) 161.2 (26.8) 105.8 (2.3) (31.2) 5.1 5.2 53.6 (9.6) N.M. 23.1 (4.8) 35.2 (2.8) (67.1) 23.1 (*) Uses the current currency FX for the variation of 2019 versus 2020. (1) Included revenue and expenses at the holding-company level (such as corporate expenses and acquisition related expenses), as applicable, as well as consolidation adjustments. (2) Adjusted EBITDA is defined as EBITDA adjusted to exclude restructuring costs, site relocation costs and other items not related to our core results of operations. We believe that Adjusted EBITDA better reflects our underlying operating performance because it excludes the impact of items which are not related to our core results of continuing operations. Adjusted EBITDA is a measure that is frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present EBITDA-related performance measures when reporting their results. N.M. means not meaningful 57 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 60/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Year Ended December 31, 2019 Compared to Year Ended December 31, 2020 Revenue Revenue decreased by $295.0 million, or 17.3%, from $1,707.3 million for the year ended December 31, 2019 to $1,412.3 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, revenue decreased 2.8%, primarily due to lower revenues from Telefónica, partially offset by a 4.9% increase in revenue from multisector clients. Revenue from Telefónica decreased by $152.7 million, or 25.4%, contributing $449.5 million in revenue for the year ended December 31, 2020, against $602.1 million in the year ended December 31, 2019. Excluding the impact of foreign exchange, revenue from Telefónica decreased by 15.9%, due to (i) the discontinuation of unprofitable programs in Brazil since the fourth quarter of 2019 and (ii) lower volumes due to COVID-19’s impact in all regions mainly during the second half of March, April and May. However, we sold more next generation services to Telefónica in the year ended December 31, 2020 compared to the year ended December 31, 2019, which is reshaping our relationship with our largest client. Multisector clients presented a revenue decrease of $142.3 million, or 12.9%, from $1,105.2 million for the year ended December 31, 2019 to $962.8 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, revenue from multisector clients increased 4.9%, supported by multisector growth across all regions. The increase in multisector customers despite the challenges raised by the COVID-19 crisis reflects the effectiveness of the “sales excellence” pillar of our Three Horizon Plan. Under the “sales excellence” pillar, we have transformed our sales model to accelerate profitable growth under a “sell more, sell better, sell what we want” approach. We are highly focused on the relationships we have with our customer base and consider these to be a key competitive advantage. We are implementing a new sales model that helps us manage global customer accounts and strengthen our position in the born-digital area of the market. Our commercial team is responsible for end-to-end customer life cycle, namely new sales to new customers, account development, changes in the scope of service we provide, renewals and inflation pass-through negotiations, driving increases in sales through a War Room model and a compensation model focused on profitable growth. We have also been prioritizing strategic product sales among current and future customers, to ensure the right product portfolio at each of our customers, which we believe to be a key lever to drive healthy growth in future. For the year ended December 31, 2020, revenue from multisector clients was 68.2% of total revenue, compared to 64.7% for the year ended December 31, 2019, an increase of 3.4 percentage points. The following chart sets forth a breakdown of revenue by geographical region for the years ended December 31, 2019 and 2020 including as a percentage of revenue and the percentage change between those periods (both with and excluding the effect of foreign exchange). ($ in millions, except percentage changes) Brazil Americas EMEA Other and eliminations (1) Total For the year ended December 31, 2019 (%) 2020 (%) Change (%) 827.3 660.1 232.8 (12.9) 1,707.3 48.5 38.7 13.6 (0.8) 100.0 609.4 582.0 234.7 (13.8) 1,412.3 43.2 41.2 16.6 (1.0) 100.0 (26.3) (11.8) 0.8 6.9 (17.3) Change excluding FX (%) (*) (4.4) (1.5) (0.9) 14.7 (2.8) (*) Uses the current currency FX for the variation of 2019 versus 2020. (1) Includes holding company level revenues and consolidation adjustments. Brazil Revenue in Brazil for the year ended December 31, 2019 and 2020 was $827.3 million and $609.4 million, respectively, a decrease of $217.9 million, or 26.3%. Excluding the impact of foreign exchange, revenue in Brazil decreased by 4.4% due to a 24.6% decrease in revenue from Telefónica, partially offset by a 3.4% increase in revenue from multisector clients. The increase in revenue from multisector clients was primarily due to the Company focus in continuing to sell Next Generation Services and further penetrating fast-growing verticals, such as born-digital, tech and media. The decrease in revenue from Telefónica was mainly due to (i) the discontinuation of unprofitable programs since the fourth quarter of 2019 and (ii) the COVID-19 pandemic’s impact on volumes, mostly during April and May, as Atento focused its delivery capacity on multisector clients. 58 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 61/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Americas Revenue in Americas for the year ended December 31, 2019 and 2020 was $660.1 million and $582.0 million, respectively, a decrease of $78.1 million, or 11.8%. Excluding the impact of foreign exchange, revenue in Americas decreased by 1.5% due to a 13.0% decrease in revenue from Telefónica, partially offset by a 5.7% increase in revenue from multisector clients, mainly in the United States and Colombia. The decrease in revenue from Telefónica in the region was primarily due to lower volumes resulting from the COVID-19 pandemic, mainly in Peru where the lockdown effects were more severe in this country. The increase in multisector sales was attributable to higher volumes in tech and born-digital companies and by the 17% expansion of US revenues in the year of 2020. EMEA Revenue in EMEA for the year ended December 31, 2019 and 2020 was $232.8 million and $234.7 million, respectively, an increase of $1.9 million, or 0.8%. Excluding the impact of foreign exchange, revenue in EMEA decreased by 0.9%. The decrease in revenue was primarily due to a 9.3% decrease in revenue from Telefónica due to the impact of COVID-19 in the region, mainly in April and May, offset by a 9.7% increase in revenue from multisector clients, mainly from higher volumes in telco, utilities and public services verticals. Other operating income Other operating income totaled $4.5 million and $5.6 million for the year ended December 31, 2019 and 2020, respectively. Other gains and own work capitalized Other gains and own work capitalized totaled $10.5 million for the year ended December 31, 2019 and $0.1 million for the year ended December 31, 2020. This decrease was due to one-off non-operational revenue in the year ended December 31, 2019. Total operating expenses Total operating expenses decreased by $332.0 million, or 19.4%, from $1,709.7 million for the year ended December 31, 2019 to $1,377.6 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, operating expenses decreased by 5.5%, mainly due to the acceleration of operational improvements under our improved efficiencies program, which seeks to further optimize our cost structure through right- sizing of operations as well as implementation of shared services, a zero-based budgeting system and the work@home model. As a percentage of revenue, operating expenses represented 100.1% and 97.5% for the years ended December 31, 2019 and 2020, respectively. Supplies: Supplies expenses increased by $5.8 million, or 8.8%, from $66.4 million for the year ended December 31, 2019 to $72.3 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, supplies expenses increased by 27.5%, mainly due to Brazil and EMEA regions. As a percentage of revenue, supplies represented 3.9% and 5.1% for the year ended December 31, 2019 and 2020, respectively. Employee benefit expenses: Employee benefit expenses decreased by $240.6 million, or 18.5%, from $1,301.0 million for the year ended December 31, 2019 to $1,060.4 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, employee benefit expenses decreased by 4.6%, mainly due to the impact of the operational improvements made as a result of our improved efficiencies program, including lower headcount, mainly in Brazil. As a percentage of revenue, employee benefit expenses represented 76.2% and 75.1% for the years ended December 31, 2019 and 2020, respectively. Depreciation and amortization: Depreciation and amortization expenses decreased by $19.9 million, or 14.1%, from $140.8 million for the year ended December 31, 2019 to $120.9 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, depreciation and amortization expense increased by 1.0%, mainly due to Brazil region. Changes in trade provisions: Changes in trade provisions amounted to a loss of $3.7 million and a loss of $5.3 million for the years ended December 31, 2019 and 2020, respectively. 59 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 62/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Impairment charges: The year ended December 31, 2019 was impacted by a goodwill impairment of $30.9 million related to Argentina subsidiary and as a consequence of the Macroeconomic crisis and hyperinflation in the country. Other operating expenses: Other operating expenses decreased by $48.1 million, or 28.8%, from $166.8 million for the year ended December 31, 2019 to $118.7 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, other operating expenses decreased by 17.0%, mainly due to the impact of the operational improvements made as a result of our improved efficiencies program. As a percentage of revenue, other operating expenses totaled 9.8% and 8.4% for the years ended December 31, 2019 and 2020, respectively. Brazil Total operating expenses in Brazil decreased by $212.9 million, or 26.4%, from $807.4 million for the year ended December 31, 2019 to $594.5 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, operating expenses in Brazil decreased by 4.5%, reflecting the impact of the operational improvements made as a result of our improved efficiencies program to offset lower revenues from the pandemic. Operating expenses as a percentage of revenue in Brazil was stable 97.6% for the years ended December 31, 2019 and 2020. Americas Total operating expenses in Americas decreased by $102.8 million, or 15.1%, from $679.5 million for the year ended December 31, 2019 to $576.7 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, operating expenses in Americas decreased by 4.2%, reflecting the impact of the operational improvements made as a result of our improved efficiencies program, more than offsetting lower revenues from the pandemic. Operating expenses as a percentage of revenue in Americas decreased from 102.9% for the year ended December 31, 2019 to 99.1% for the year ended December 31, 2020. EMEA Total operating expenses in EMEA decreased by $9.0 million, or 3.7%, from $244.1 million for the year ended December 31, 2019 to $235.1 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, operating expenses in EMEA decreased by 5.7%, reflecting the impact of the operational improvements made as a result of our improved efficiencies program, more than offsetting lower revenues from the pandemic. Operating expenses as a percentage of revenue in EMEA decreased from 104.9% for the year ended December 31, 2019 to 100.2% for the year ended December 31, 2020. Operating profit/(loss) Operating profit increased by $27.7 million, from $12.6 million for the year ended December 31, 2019 to $40.3 million for the year ended December 31, 2020, an increase due to the reasons mentioned above. Operating profit margin increased from 0.7% for the year ended December 31, 2019 to 2.9% for the year ended December 31, 2020. Brazil Operating profit in Brazil decreased by $6.1 million, or 29.0%, from $21.1 million for the year ended December 31, 2019 to $15.0 million for the year ended December 31, 2020 due to the reasons mentioned above. Excluding the impact of foreign exchange, operating profit decreased by 5.0%. Operating profit margin in Brazil decreased from 2.6% for the year ended December 31, 2019 to 2.5% for the year ended December 31, 2020. Americas Operating profit/(loss) in Americas changed by $26.0 million, from a loss of $18.2 million for the year ended December 31, 2019 to a profit of $7.7 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, operating profit/(loss) increased by $18.1 million, for the reasons mentioned above. Operating profit margin in Americas increased from negative 2.8% for the year ended December 31, 2019 to 1.3% for the year ended December 31, 2020. 60 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 63/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents EMEA Operating profit in EMEA increased by $1.6 million, from $1.2 million for the year ended December 31, 2019 to $2.8 million for the year ended December 31, 2020, due to the reasons mentioned above. Operating profit margin in EMEA increased from 0.5% for the year ended December 31, 2019 to 1.2% for the year ended December 31, 2020. Finance income Finance income was $20.0 million for the year ended December 31, 2019 as compared to $15.7 million for the year ended December 31, 2020. The decrease in finance income was mainly due to a lower effect from Argentina hyperinflation in the year ended in 2020, compared to year ended 2019. Finance costs Finance costs increased by $2.2 million, or 3.2%, from $68.1 million for the year ended December 31, 2019 to $70.3 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, finance costs increased by 14.3% during the year ended December 31, 2020. The increase in finance costs was driven by (i) higher interest costs from the higher use of credit lines to ensure adequate liquidity during the COVID-19 pandemic and (ii) higher average debt with third parties as we issued an additional $100 million under our 2022 Senior Secured Notes in April 2019. Net foreign exchange gain/(loss) Net foreign exchange loss increased by $18.7 million, from a loss of $9.1 million for the year ended December 31, 2019 to a loss of $27.8 million for the year ended December 31, 2020, primarily due to Brazilian Reais and Mexican Peso depreciations against the U.S. dollar that impacted our intercompany balances, but with no significant cash effect. Income tax expense Income tax expense for the year ended December 31, 2019 totaled $36.2 million as compared to $4.8 million for the year ended December 31, 2020. Income tax expense for the year ended December 31, 2019 contained a negative one-off tax impact of $37.8 million due to a settlement with the Spanish Tax Authority in the first quarter of 2019 in connection with a claim against us for certain differences in historical tax payments. Profit/(loss) for the year As a result of the foregoing, loss for the year ended December 31, 2019 and 2020 was $80.7 million and $46.9 million, respectively. EBITDA and Adjusted EBITDA EBITDA increased by $7.8 million, or 5.1%, from $153.4 million for the year ended December 31, 2019 to $161.2 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, EBITDA increased by 23.1%, primarily due to a better revenue mix of Multisector clients and Next Generation services as well as improved operational efficiencies and stricter cost control, especially in Brazil region. EBITDA margin, defined as EBITDA over revenue, increased from 9.0% for the year ended December 31, 2019 to 11.4% for the year ended December 31, 2020, despite the global pandemic and approximately 30% BRL devaluation in the period. This demonstrates positive results of our Three Horizon Plan strategic plan implemented during 2019. Brazil Adjusted EBITDA in Brazil decreased by $30.0 million, or 26.8%, from $111.7 million for the year ended December 31, 2019 to $81.8 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, Adjusted EBITDA decreased by 4.8%. The decrease in Adjusted EBITDA in Brazil was mainly due to the impact of COVID-19 during April and May, partially offset by the better revenue mix combined with higher efficiencies. 61 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 64/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Adjusted EBITDA margin in Brazil for the year ended December 31, 2020 decreased slightly to 13.4% from 13.5% for the year ended December 31, 2019. Americas Adjusted EBITDA in Americas increased by $34.3 million, or 105.8%, from $32.4 million for the year ended December 31, 2019 to $66.8 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, Adjusted EBITDA increased by 35.2% primarily due to an improved revenue mix, higher efficiencies and a low comparison base due to the $30.9 million impact from the Argentina impairment on Q4 2019. Adjusted EBITDA margin in Americas for the year ended December 31, 2020 increased to 11.5% from 4.9% for the year ended December 31, 2019. EMEA Adjusted EBITDA in EMEA decreased by $0.5 million, or 2.3%, from $21.8 million for the year ended December 31, 2019 to $21.3 million for the year ended December 31, 2020. Excluding the impact of foreign exchange, Adjusted EBITDA decreased by 2.8%. Adjusted EBITDA margin in EMEA for the year ended December 31, 2020 decreased to 9.1% from 9.4% for the year ended December 31, 2019, mainly due to the impact of COVID-19 during the second half of March, April and May, partially offset by better revenue mix, including Next Generation services, combined with higher operating efficiencies. Year Ended December 31, 2018 Compared to Year Ended December 31, 2019 For this discussion, see our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 filed with the SEC on April 16, 2020. 62 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 65/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents B. Liquidity and Capital Resources As of December 31, 2020, we had cash and cash equivalents of $209.0 million. We fund our ongoing capital and working capital requirements through a combination of cash flow from operations and financing activities. Based on our current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand and cash flow from our operating, investing and financing activities, including funds available under the Revolving Credit Facility, will enable us to meet our working capital, capital expenditure, debt service and other funding requirements for the foreseeable future. We have ample liquidity: as of December 31, 2020, the total amount of credit available to us was $88.1 million under our Revolving Credit Facility, out of which $61.8 million was drawn as of December 31, 2020. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants under our debt agreements, depends on our future operating performance and cash flow, which are subject to prevailing economic conditions, and other factors, many of which are beyond our control. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital and such capital may not be available to us on acceptable terms, if at all. As of December 31, 2020, our outstanding debt was $727.8 million, which includes $505.6 million of our 6.125% Senior Secured Notes due 2022, $30.0 million of financing under a super senior revolving credit facility, $0.6 million of financing provided by BNDES, $152.7 million of lease liabilities and $38.9 million of other bank borrowings, especially short-term financing for working capital needs. For the year ended December 31, 2020, our cash flow from operating activities was $127.0 million, which includes interest paid of $46.2 million. Our cash flow from operating activities, before giving effect to the payment of interest, was $173.2 million. Cash Flows As of December 31, 2020, we had cash and cash equivalents of $209.0 million. We believe that our current cash flow used in operating activities and financing arrangements will provide us with sufficient liquidity to meet our working capital needs. ($ in millions) Cash flows from operating activities Cash flows used in investing activities Cash flows (used in)/provided by financing activities Net increase/(decrease) in cash and cash equivalents Effect of changes in exchange rates For the year ended December 31, 2019 2018 2020 81.2 (41.2) (33.7) 6.3 (14.5) 46.5 (55.9) 5.0 (4.4) (4.5) 127.0 (38.2) 1.0 89.8 (5.5) For a discussion on the cash flow for the year ended December 31, 2019 compared to the year ended December 31, 2018, see on Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC on April 16, 2020. Cash Flows from Operating Activities Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 For the year ended December 31, 2020, cash from operating activities was $127.0 million compared to cash from operating activities of $46.5 million in the same period of prior year. The increase is mainly due to the positive changes of $49.8 million in working capital resulting from the implementation of stricter treasury policies with the reduction of our overdue receivables. Cash Flows used in Investing Activities Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 63 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 66/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents For the year ended December 31, 2020, cash used in investing activities was $38.2 million compared to cash used in investing activities of $55.9 million in the same period of prior year, mainly due to the acquisitions of minority interests in Interfile and RBrasil in 2019. Cash Flows from/(used in) Financing Activities Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 For the year ended December 31, 2020 cash provided by financing activities was $1.0 million compared to cash provided by financing activities of $5.0 million in the same period of prior year. Financing Arrangements Certain of our debt agreements contain financial ratios as instruments to monitor the Company’s financial condition and as preconditions to certain transactions (e.g. the incurrence of new debt, permitted payments). The following is a brief description of the financial ratios. 1. Fixed Charge Coverage Ratio (applies to Atento S.A.) – measures the Company’s ability to pay interest expenses and dividends (fixed charges) in relation to EBITDA, as described in the debt agreements. The contractual ratio indicates that the EBITDA for the last twelve months should represent at least 2.0 times the fixed charge of the same period. As of December 31, 2020, the ratio was 3.4 times. This financial covenant applies only as a restriction for certain actions (e.g. issuance a new debt) and, if breached, will not trigger a default or an event of default. The Company regularly monitors all financial ratios under the debt agreements. As of December 31, 2020, we were in compliance with the terms of our covenants. Description Senior Secured Notes Super Senior Credit Facility BNDES Lease Liabilities Other Borrowings Total Debt Senior Secured Notes Currency USD USD BRL BRL, USD BRL, USD Interest rate As of December 31, 2020 ($ in millions) Maturity 2022 2021 6.125% Libor + 4.25 2022 2025 2021 Energy Efficiency Project: TJLP + 2% 7.0%-12.0% 4.5%-8.9% 505.6 30.0 0.6 152.7 38.9 727.8 On August 10, 2017, Atento Luxco 1 S.A. closed an offering of a $400.0 million aggregate principal amount of 6.125% Senior Secured Notes due 2022 in a private placement transaction. The notes are due on August 2022. The 2022 Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s wholly owned subsidiaries. The issuance costs of $12.0 million related to this new issuance were recorded at amortized cost using the effective interest method. On April 4, 2019, Atento Luxco 1 S.A. closed an offering of an additional $100.0 million in aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Additional Notes"). The Additional Notes were offered as additional notes under the indenture, dated as of August 10, 2017, pursuant to which the Issuer previously issued a $400.0 million aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Existing Notes"). The Additional Notes and the Existing Notes are treated as the same series for all purposes under the indenture and collateral agreements, each as amended and supplemented, that govern the Existing Notes and the Additional Notes. 64 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 67/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The terms of the Indenture governing the 2022 Senior Secured Notes, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell property or assets to another person; incur additional liens; guarantee additional debt; and enter into transactions with affiliates. As of December 31, 2020, we were in compliance with these covenants. The outstanding amount on December 31, 2020 is $505.6 million. All interest payments are made on a half-yearly basis. The fair value of the Senior Secured Notes, calculated on the basis of their quoted price at December 31, 2020, is $500.2 million. The fair value hierarchy of the Senior Secured Notes is Level 1, as the fair value is based on the quoted market price at the reporting date. On February 10, 2021, Atento Luxco 1 S.A., closed an offering of a $500.0 million aggregate principal amount of 8.0% Senior Secured Notes due February 10, 2026 in a private placement transaction. Atento Luxco 1 used the net proceeds to repurchase and redeemed all of its 6.125% Senior Secured Notes due 2022. The terms of the Indenture governing the 2026 Senior Secured Notes, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell property or assets to another person; incur additional liens; guarantee additional debt; and enter into transactions with affiliates. On February 10, 2021, Atento Luxco 1 S.A., closed an offering of 500,000 thousand U.S. dollars aggregate principal amount of 8.0% Senior Secured Notes due February 10, 2026 in a private placement transaction. During February 2021, Atento Luxco I S.A. used the net proceeds to fully redeem all of its 6.125% Senior Secured Notes due 2022, completing the refinancing and extending the Company’s average life to 4.5 years from 1.5 years. For more details, please see “Item 27 – Subsequent Events”. Other Financial Instruments On April 25, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Santander (Brasil) S.A. in an aggregate principal amount of up to 80.0 million Brazilian reais (the “2017 Santander Bank Credit Certificate”), equivalent to approximately $25.0 million as of April 30, 2017. The interest rate of the 2017 Santander Bank Credit Certificate equals the average daily rate of the One Day “over extra-group” – DI – Interbank Deposits (this rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 2.70% per annum. The 2017 Santander Bank Credit Certificate matures every 180 days and has been renewed on a regular basis. On April 7, 2020, we paid the full outstanding balance, and the “2017 Santander Bank Credit Certificate” was terminated by mutual agreement between the parties. On October 16, 2017, Atento El Salvador S.A. de C.V. entered into an overdraft credit line agreement with Banco de America Central, S.A. - BAC for an amount of $1.600 million, maturing on one year, extendable with simple exchange of letters with an annual interest rate of 8.0% per annum. As of December 31, 2020, the outstanding balance was $0.002 million. On August 13, 2019, Atento Brasil S.A. entered into an overdraft credit line agreement with Banco do Brasil for an amount of 30.0 million Brazilian Reais, with maturity every six months, with an annual interest rate of CDI plus 2.127% per annum. On February 27, 2020, the amount of the agreement was increased up to 40.0 million Brazilian Reais, with an annual interest rate of CDI plus 5.54% per annum, with maturity date on July 27, 2020. On July 22, 2020, the amount of the agreement was maintained at up to 40.0 million Brazilian Reais, with an annual interest rate of CDI plus 5.54% per annum, with next maturity date on October 20, 2020. On October 14, 2020, Atento Brasil paid the full outstanding balance. On August 20, 2019, Atento Brasil S.A. entered into an agreement with Banco ABC Brasil for an amount of 7.8 million Euros, maturing on February 18, 2020, with an annual interest rate of 1.25%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in Euros, in the same amount of the loan agreement, and pays a variable interest rate at a rate per annum equal to the average daily rate of the One Day “over extragroup” – DI – Interbank Deposits (this rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.80% over 35.0 million Brazilian Reais. The total outstanding balance was paid on the due date. On February 14, 2020, Atento Brasil S.A. entered into a loan agreement with Banco ABC Brasil for an amount of 7.4 million Euros maturing on August 13, 2020 with an annual interest rate of 1.49%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in EURO, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over extragroup” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.95% over 35.0 million Brazilian Reais. The total outstanding balance was paid on the due date. 65 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 68/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On February 20, 2020, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Itaú for an amount of 35.2 million Brazilian Reais, maturing on May 20, 2020 with an annual interest rate of CDI plus 1.95% per annum. The total outstanding balance was paid on the due date. On March 13, 2020, Atento Brasil S.A. entered into a financing agreement with Banco Itaú (“Risco Sacado”) for the annual Microsoft software licenses, for an amount of 24.5 million Brazilian Reais, maturing on April 1, 2021, with an annual interest rate of 7.2%. As of December 31, 2020, the outstanding balance was $4.7 million. On April 06, 2020, Atento Brasil S.A. entered into a loan agreement with Banco Santander for an amount of 110.0 million Brazilian Reais, maturing on April 06, 2021 with an annual interest rate of CDI plus 4.96% per annum. On July 13, Atento Brasil S.A. amortized the principal amount of 60.0 million Brazilian Reais plus accrued interest. As of December 31, 2020, the outstanding balance was $9.9 million. On May 12, 2020, Atento Peru entered a loan agreement with Scotiabank Peru, under the government financing program related to Covid-19 (Reactiva Peru), for an aggregate principal amount of 10.0 million Peruvian Soles, with an annual interest rate of 1.0% per annum. This facility should be repaid in 36 months. The first payment would be due on May 12, 2021 and the last payment would be due on May 12, 2023. On November 13, Atento Peru prepaid the total outstanding balance. On June 12, 2020, Atento Brasil entered into a financing agreement with Banco De Lage Landen for an amount of 10.0 million Brazilian Reais to finance the purchase of Microsoft software licenses, maturing on June 30, 2023 with an annual interest rate of 9.0% per annum. Atento Brasil drew down on the financing agreement on July 1, 2020. The outstanding balance as of December 31, 2020 was $1.9 million On August 26, 2020, Atento Brasil entered into a bank credit certificate with Banco ABC Brasil for an amount 50.0 million Brazilian Reais, maturing on February 22, 2021 with an annual interest rate of CDI plus 2.70% per annum. The balance under the loan agreement as of December 31, 2020 was $9.8 million. On October 14, 2020, Atento Brasil entered into a bank credit certificate with Banco do Brasil for an amount of 30.0 million Brazilian Reais, maturing on February 28, 2021 with an annual interest rate of CDI plus 2,127%. As of December 31, 2020, the outstanding balance was $5.8 million. On December 15, 2020, Atento Brasil entered into a bank credit certificate with Banco ABC Brasil for an amount 35.0 million Brazilian Reais, maturing on June 14, 2021 with an annual interest rate of CDI plus 2.50% per annum. The balance under the loan agreement as of December 31, 2020 was $6.7million. Revolving Credit Facility On August 10, 2017, Atento Luxco 1 S.A. entered into a new Super Senior Revolving Credit Facility (the “Super Senior Revolving Credit Facility”), which provides borrowings capacity of up to $50.0 million and will mature on February 10, 2022. Banco Bilbao Vizcaya Argentaria, S.A., as the Collateral Agent, and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Morgan Stanley Bank N.A. and Goldman Sachs Bank USA are acting as arrangers and lenders under the Super Senior Revolving Credit Facility. The Super Senior Revolving Credit Facility may be utilized in the form of multi-currency advances for terms of one, two, three or six months. The Super Senior Revolving Credit Facility bears interest at a rate per annum equal to LIBOR or, for borrowings in Euros, EURIBOR or, for borrowings in Mexican Pesos, TIIE plus an opening margin of 4.25% per annum. The margin may be reduced under a margin ratchet to 3.75% per annum by reference to the consolidated senior secured net leverage ratio and the satisfaction of certain other conditions. The terms of the Super Senior Revolving Credit Facility Agreement limit, among other things, the ability of the Issuer and its restricted subsidiaries to (i) incur additional indebtedness or guarantee indebtedness; (ii) create liens or use assets as security in other transactions; (iii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iv) make investments; (v) merge, amalgamate or consolidate, or sell, transfer, lease or dispose of substantially all of the assets of the Issuer and its restricted subsidiaries; (vi) enter into transactions with affiliates; (vii) sell or transfer certain assets; and (viii) agree to certain restrictions on the ability of restricted subsidiaries to make payments to the Issuer and its restricted subsidiaries. These covenants are subject to a number of important conditions, qualifications, exceptions and limitations that are described in the Super Senior Revolving Credit Facility Agreement. 66 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 69/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The Super Senior Revolving Credit Facility Agreement includes a financial covenant requiring the drawn super senior leverage ratio not to exceed 0.35:1.00 (the “SSRCF Financial Covenant”). The SSRCF Financial Covenant is calculated as the ratio of consolidated drawn super senior facilities debt to consolidated pro forma EBITDA for the twelve-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Super Senior Revolving Credit Facility being at least 35% drawn (excluding letters of credit (or bank guarantees), ancillary facilities and any related fees or expenses) on the relevant test date. The SSRCF Financial Covenant only acts as a draw stop to new drawings under the Revolving Credit Facility and, if breached, will not trigger a default or an event of default under the Super Senior Revolving Credit Facility Agreement. The Issuer has four equity cure rights in respect of the SSRCF Financial Covenant prior to the termination date of the Super Senior Revolving Credit Facility Agreement, and no more than two cure rights may be exercised in any four consecutive financial quarters. On March 25, 2020, Atento Luxco 1 S.A. withdrew the full amount of $50.0 million maturing on September 21, 2020 with an annual interest rate of Libor + 4.25%. On September 21, 2020, the full amount of $50.0 million was rolled over until December 20, 2020, at the same interest rate. On December 20, 2020, Atento Luxco 1 S.A. repaid $20.0 million and the outstanding $30.0 million as of such date was rolled over and matures on March 22, 2021. As of December 31, 2020, we were in compliance with this covenant and the outstanding amount under this facility was $30.0 million. On September 14, 2017, Atento Luxco 1 S.A. and Atento Brasil S.A. entered into an Agreement for a Common Revolving Credit Facility Line with Santander Brasil, Estabelecimento Financeiro de Crédito S.A. in respect of bi-lateral, multi-currency revolving credit facilities. Up to $20.0 million of commitments are available for the drawing of cash loans in Euros and Mexican Pesos (MXN). The original borrowers under this facility are Atento Teleservicios España, S.A.U and Atento Servicios, S.A. de C.V. This facility is guaranteed by Atento Luxco 1 S.A. and Atento Brasil S.A. on a joint and several basis and matures one year after the date of the Agreement. As of December 31, 2019, the outstanding amount under this facility was zero. On April 7, 2020, the “2017 Santander Bank Credit Certificate” was terminated by mutual agreement between the parties. Brazil BNDES Credit Facility On February 3, 2014, Atento Brasil S.A. entered into a credit agreement with Banco Nacional de Desenvolvimento Econômico e Social - BNDES (“BNDES”) for an aggregate principal amount of BRL300.0 million (the “BNDES Credit Facility”), equivalent to $109.7 million as of each disbursement date. The total amount of the BNDES Credit Facility is divided into five tranches subject to the following interest rates: Tranche Tranche A Tranche B Tranche C Tranche D Tranche E Interest Rate Long-Term Interest Rate (Taxa de Juros de Longo Prazo -TJLP) plus 2.5% per annum SELIC Rate plus 2.5% per annum 4.0% per year 6.0% per year Long-Term Interest Rate (Taxa de Juros de Longo Prazo -TJLP) Each tranche intends to finance different purposes, as described below: · Tranche A and B: investments in workstations, infrastructure, technology, services and software development, marketing and commercialization, within the scope of BNDES program – BNDES Prosoft. 67 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 70/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · Tranche C: IT equipment acquisition, covered by law 8.248/91, with national technology, necessary to execute the project described for tranches “A” and “B”. · Tranche D: acquisitions of domestic machinery and equipment, within the criteria of FINAME, necessary to execute the project described for tranches “A” and “B”. · Tranche E: investments in social projects to be executed by Atento Brasil S.A. BNDES releases amounts under the credit facility once the debtor meets certain requirements in the contract, including delivering the guarantee (stand-by letter) and demonstrating the expenditure related to the project. Since the beginning of the credit facility, the following amounts were released: ($ in millions) Date March 27, 2014 April 16, 2014 July 16, 2014 August 13, 2014 Subtotal 2014 March 26, 2015 April 17, 2015 December 21, 2015 Subtotal 2015 October 27, 2016 Subtotal 2016 Total Tranche A Tranche B Tranche C Tranche D Tranche E Total 11.1 4.7 - 27.6 43.4 5.8 12.0 7.2 25.0 - - 68.4 5.5 2.4 - 3.0 10.9 1.4 3.0 1.8 6.3 - - 17.2 7.7 3.3 - 4.4 15.4 2.0 4.3 - 6.3 - - 21.7 0.5 0.2 - 0.5 1.2 0.2 0.3 - 0.5 - - 1.7 - - 0.3 - 0.3 - - 0.2 0.2 0.2 0.2 0.7 24.8 10.6 0.3 35.5 71.2 9.4 19.6 9.2 38.3 0.2 0.2 109.7 This facility should be repaid in 48 monthly installments. The first payment was made on March 15, 2016 and the last payment would be due on February 15, 2020, however Atento Brasil S.A. repaid in advance on April 30, 2019 all the outstanding amount. The amount repaid was BRL61.7 million (equivalent to $15.6 million) plus interest accrued and a penalty of BRL 0.7 million (equivalent to $0.2 million). The BNDES Credit Facility contains covenants that restrict Atento Brasil S.A.’s ability to transfer, assign, change or sell the intellectual property rights related to technology and products developed by Atento Brasil S.A., with the proceeds from the BNDES Credit Facility. As of December 31, 2020, Atento Brasil S.A. was in compliance with these covenants. The BNDES Credit Facility does not contain any other financial maintenance covenant. The BNDES Credit Facility contains customary events of default including the following: (i) reduction of the number of employees without providing program support for outplacement, such as training, job search assistance and obtaining pre-approval of BNDES; (ii) existence of an unfavorable court decision against the Company for the use of children as workforce, slavery or any environmental crimes and (iii) inclusion in the by-laws of Atento Brasil S.A. of any provision that restricts Atento Brasil S.A’s ability to comply with its financial obligations under the BNDES Credit Facility. On September 26, 2016, Atento Brasil S.A. entered into a new credit agreement with BNDES in an aggregate principal amount of 22,100 million Brazilian Reais, equivalent to $5.7 million as of December 31, 2018. The interest rate of this facility is the Long-Term Interest Rate (Taxa de Juros de Longo Prazo - TJLP) plus 2.0% per annum. The facility should be repaid in 48 monthly installments. The first payment was due on November 15, 2018 and the last payment will be due on October 15, 2022. This facility is intended to finance an energy efficiency project to reduce power consumption by implementing new lightening, air conditioning and automation technology. On November 24, 2017, 6.5 million Brazilian Reais (equivalent to $1.7 in million) were released under this facility. As of December 31, 2020, the outstanding amount under BNDES Credit Facility was $0.6 million. 68 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 71/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Lease liabilities The present value of future lease liabilities is as follow: ($ in millions) Up to 1 year Between 1 and 5 years Total As of December 31, 2019 2020 Net carrying amount of asset 52.0 142.7 194.8 53.2 99.5 152.7 C. Research and Development, Patents and Licenses, etc. We believe the “Atento” trademark is a recognized and trusted brand in the CRM BPO services industry in each of the markets where we operate. We believe we have a strong corporate brand that gives credibility to our products and may offer and facilitate our entrance and growth in future markets. This also allows us to attract and retain the best talent, to generate a sense of pride in our staff and to develop a relationship of commitment, confidence and trust with our clients. In December 2012 Atento Spain Holdco S.L.U. purchased all trademarks and domain names relevant for its business. In relation to copyrights, under the Berne Convention for the Protection of Literary and Artistic Works, copyrights are recognized in all countries that are signatories to the convention and no other registration or license is required for its use. As of December 2016, all the countries in which we operate have signed the Berne Convention. We do not have any other material intellectual property such as patents or licenses. In 2017, Atento launched its digital business unit under the brand “Atento Digital”. Atento Digital’s mainstream offering encompasses a wide range of digital capabilities that enhance customer experience and increase efficiency across the customer lifecycle, from acquiring to managing and retaining customers. Atento Digital’s offer also includes consultancy services and solutions for advancing digital transformation processes while fully leveraging existing systems. Atento Digital is a trademark registered by Atento. In 2020, Atento launches its Startup accelerator named “Atento Next”. In line with the objective of having innovation at the center of its business strategies, Atento Next, will put the company close to the selected startups, to bring even more innovation to the company and its customers. D. Trend Information We believe that the following significant market trends are the most important trends affecting our results of operations, and we believe these will continue to have a material impact on our results of operations in the future. Trend for Further Outsourcing for CRM BPO Services In recent years, companies have increasingly sought to outsource certain non-core business activities, such as customer care services and sales functions, especially in the regions in which we have significant business operations, including Latin America. This trend towards outsourcing non-core business activities has, in our view, principally been driven by rising costs, competitive pressures and increased operational complexity, resulting in the need for our clients to outsource these non-core business activities so they can focus on their core competencies. The penetration of individual clients in the market for CRM BPO services has increased significantly in recent years. We believe there are three main drivers of this increase: first, existing users of CRM BPO are outsourcing more of their CRM operations to specialist third-party BPO providers; secondly, new clients are adopting third party solutions for these services versus using in-house solutions, largely to take advantage of lower labor costs, specialist knowledge and cost efficiencies. Finally, we believe the digital transformation processes that our clients face provide opportunities for Atento to go deeper in the value chain of our clients and expand the range of services and solutions that we can deliver to these clients, thanks to our expanded digital and business process automatization capabilities. 69 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 72/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Growth in Our Business Directly Linked to Growth in the Businesses of Key Clients We structure our contracts with our clients such that, while the price of our services is agreed, the volume of CRM BPO services we deliver during a particular period is dependent on the performance of our clients’ business. We have significant exposure to the telecommunications and banking and financial services sectors and our business is dependent upon the continued growth of our clients’ business in these sectors. If the business of one of our key clients increases and generates more customer activity, our business with that client also increases. Conversely, if the business of one of our key clients decreases and there is a reduction of customer activity, our business with that client also decreases. Development of CRM BPO Solutions This industry is in transition as more complex multi-channel, end-to-end and digital solutions are being outsourced, thus creating an opportunity for CRM BPO providers, including us, to up-sell and cross-sell our services as well as expand the range of services we provide by leveraging our digital capabilities. Our vertical industry expertise in telecommunications, banking and financial services and other customer-intensive industry verticals, allows us to develop tailored solutions for our clients, embedding us further into their value chain while we deliver impactful business results and increase the portion of our client’s CRM BPO services that we provide. We have proactively diversified and expanded our solutions offering, increasing their sophistication and developing customized solutions such as means of payment, credit management, trade marketing, insurance services management and other CRM BPO processes. We expect the share of revenue from CRM BPO solutions to increase going forward. Most recently we have expanded our digital, business process automatization and business process consulting capabilities to increase the value we can generate for our clients and to develop a wide range of innovative customer experience solutions adapted to the digital era. Growth in technologies related to automation Front-office customer management (CM), or customer experience management, business process outsourcing (BPO) services are rapidly evolving. This is due to increasing functional and process complexity; prolific use of digital channels (such as mobile applications, social and chat); and self-service channels. In addition, service innovation is being delivered through key technologies related to automation, such as robotic process automation (RPA), virtual customer assistants (VCAs), artificial intelligence (AI), advanced analytics and a growing number of interaction channels. This evolution is taking place while traditional voice-based agent services are going through their own redesign or quasi-evolution, with a keen focus on customer experience (CX). CM BPO services through technologies that help enable digital services — such as mobile applications, chat and social CRM — continue to expand, with adoption rates gradually expected to peak through 2019. New opportunities in visual- and video-based services, enabled through various technologies such as virtual assistants, natural-language processing (NLP), speech analytics and facial recognition, will gain traction over the next two to three years. The catalysts for the adoption of visual- and video-based services will be technological advancements and social acceptance driven by millennials and Gen Y. Hybrid models between human agents and Artificial Intelligence (AI). Call centers have become a hybrid of customer contact channels, and the future of call centers will see an increased hybrid setting - a mix of human agents and Artificial Intelligence (AI). As Artificial Intelligence (AI) becomes increasingly sophisticated, more efficient and more accurate, bringing many advantages to call centers in terms of productivity and cost. This means that the future of call centers requires a mix of AI and human interaction. The hybrid model will see automation and self-service rise to improve efficiency, with technology like AI chatbots dealing with FAQs and simple customer questions. Meanwhile, human agents will answer more complicated queries and problem-solving, still providing the personalized and human centered customer service when needed. In that sense, automation and AI-based tools are currently transforming the CX outsourcing services landscape and their relevance in the market is only expected to increase in the coming years. The consolidation of the mix between face-to-face and remote work is expected. Remote work grew exponentially during the pandemic. The incidence of COVID-19 led many companies to adopt teleworking as a contingency strategy and this model is currently maintained in organizations. The benefits have gone beyond survival, allowing employees to optimize their time and improve the balance between their personal and work lives. It has also enabled companies to expand their networks and work with the most talented people, regardless of where they are; improve infrastructure costs by being able to save on working space; reduce worker absenteeism and improve productivity, among others. This has allowed the need to have 100% digital processes, as recruitment, selection and training remotely that allow recruiting and managing resources anywhere. The future is likely to be hybrid, in which part of the operations will be carried out in contact centers and another part in remote work, allowing providers to take advantage of the best of both worlds. 70 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 73/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Highly skilled and trained agents All these changes to the future of call centers will naturally mean a change in the role of agents too. As AI takes over the customer service for the more simple queries, agents will focus on dealing with complex issues. As a result, they will need to have more advanced problem-solving skills and greater knowledge of the product/service, which means they will require more advanced and detailed training. With data becoming an increasing part of customer service, agents will also need to have good analytical skills in order to make the most of all of the data they can access in the CRM. New Pricing Models for Our CRM BPO Services We operate in a competitive industry which, from time to time, exhibits pressure on pricing for CRM BPO services. We believe we have a strong track record in successful pricing negotiations with our clients by offering flexible pricing models with fixed pricing, variable pricing, and outcome-based pricing if certain performance indicators are achieved, depending on the type of CRM BPO services our clients purchase from us and their business objectives. We also believe that new contracts will increasingly be based on more outcome-based pricing and hybrid pricing models as means of making services more transparent, further driving demand for our CRM BPO services. In addition, our service contracts with most of our key clients include inflation-based adjustments to offset adverse inflationary effects which (depending on the movements in the applicable consumer price indices (“CPIs”) of the countries in which our clients operate) will have the effect of increasing, if the CPI of an applicable jurisdiction increases, or decreasing, if the CPI decreases, the employee benefit expenses which we can pass onto our clients. We believe that our flexible pricing models allow us to maximize our revenue in a price competitive environment while maintaining the high quality of our CRM BPO services. Potential Customers May be Reluctant to Change Their CRM BPO Service Provider As companies begin to use the services of CRM BPO services providers more extensively as their businesses grow, they become more reliant on the CRM BPO services provider because the companies often expand the range and scope of the CRM BPO services which they use. For example, for the year ended December 31, 2020, 45.8% of our revenue from client groups other than the Telefónica S.A. came from clients that had relationships with us for ten or more years. Furthermore, for the years ended December 31, 2018, 2019 and 2020, our retention rates (calculated based on prior year revenue of clients retained in current year, as a percentage of total prior year revenues) were 98.3%, 94.5% and 98.6%, respectively. We believe it is difficult for clients to switch a large number of workstations to competitors principally because of the following factors: (i) the extensive training required for the service provider’s employees; (ii) the level of process integration with the provider, which can be time consuming and costly; and (iii) the potential disruption caused to the client’s customers by introducing a new end-service provider. As a result, absent a compelling reason to change CRM BPO service provider, such as significant differences in quality or price, companies generally tend to stay with their CRM BPO services provider, making it difficult for another CRM BPO services provider to acquire the client’s work. E. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements other than short-term or low-value leases and guarantees. The following table shows the decrease in the number of the customer performance guarantees we have provided to third parties for the indicated periods, in connection with agreements under which we provide our services and as part of our ordinary course of business. Of these guarantees, as of December 2020 the majority relate to commercial purposes, financial and rental activities, the bulk of the remaining guarantees relates to tax and labor related procedures. The Company’s directors consider that no contingencies will arise from these guarantees in addition to those already recognized. There has not been any material instance of a guarantee, outside of the ordinary course of the business, being drawn upon for the periods indicated, nor does management anticipate any liability as a result of a draw upon a guarantee in the future. 71 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 74/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ($ in millions) Guarantees Financial, labor-related, tax and rental transactions Other Total F. Tabular Disclosure of Contractual Obligations 2018 As of December 31, 2019 2020 125.4 257.8 383.3 152.3 198.3 350.6 119.4 188.0 307.4 The following table presents our expected future cash outflows resulting from debt obligations, lease liabilities, operating lease obligations and other long-term liabilities as of December 31, 2020. ($ in millions) Debt obligations Lease liabilities Derivative financial instrument Trade and other payables Total As of December 31, Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years 561.3 179.1 5.2 140.1 885.6 30.6 52.7 - 135.8 219.1 530.6 97.5 5.2 4.3 637.7 - 12.1 - - 12.1 - 16.7 - - 16.7 Debt obligations are comprised of bonds and bank loans (as of December 31, 2020; see Note 17 to the Atento’s consolidated financial statements). The bonds consist of Senior Secured Notes, and bank loans are mainly comprised of the Super Senior Revolving Credit Facility, Banco Nacional de Desenvolvimento Economico e Social (BNDES), Banco ABC, Banco Santander, Banco do Brasil, Banco De Lage Landen and overdraft lines. We enter into lease arrangements related to properties, furniture, tools and other tangible assets. Our assets acquired under finance leases are located in Brasil and Peru. G. Safe Harbor See the disclaimer with respect to Forward-Looking Statements. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Senior Management Below is a list of the names and ages of Atento’s executive officers and directors and a brief account of the business experience of each of them. 72 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 75/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Name Carlos López-Abadía José Azevedo (1) Virginia Beltramini Trapero Gustavo Tasner (3) Cathrine Jooste (2) Dimitrius de Oliveira José María Pérez Melber (1) Joined as of November 11th, 2019. (2) Joined as of January 2nd, 2020. (3) Joined as of November 4th, 2019. Name Carlos López-Abadía Antonio Viana-Baptista John Madden (1) Thomas Iannotti Roberto Rittes (2) Antenor Camargo (3) David Garner Robert W. Payne (4) (1) Joined as of June 24th, 2020. (2) Joined as of June 24th, 2020. (3) Joined as of June 24th, 2020. (4) Joined as of October 16th, 2020. Our Executive Officers Age Position 58 Chief Executive Officer and Director 47 Chief Financial Officer 48 Chief Legal Officer 52 Chief Operations Officer and South America Regional Director 46 Commercial Director and US Nearshore Regional Director 48 Brazil Regional Director 49 Spain Director Age Position 58 Director 63 Director 47 Director 63 Director 46 Director 35 Director 63 Director 62 Director Carlos López-Abadía, Chief Executive Officer and Director. Mr. López-Abadía boasts a long-standing international professional career in the technology, consulting and digital transformation sectors at the global level. His successful professional career spans over thrity years. Prior to his appointment as Atento’s Chief Executive Officer, he served as DXC Technology’s Vice President and General Manager Consulting, responsible for digital transformation advisory services, including strategic partnerships in the consulting domain. Previously he served as Vice President Global Services for Misys where he led the transformation of the services and software support business and managed a global service delivery network based in major global financial centers and offshore locations. Prior experience also includes, Managing Partner at Accenture and leadership positions at Level 3, McKinsey&Co and AT&T. He holds an MS in electrical engineering from Purdue University and an MBA from Washington University, where he was a Charles F. Knight Scholar. He has recently been named to the Hispanic IT Executive Council’s HITEC Top 100, Class of 2017-2018, for his career achievements in information technology. José Azevedo, Chief Financial Officer. José Azevedo joins Atento with 15 years of experience managing global financial operations from C- suite and Board positions. He has steered major financial turnarounds and corporate mergers at high-profile organizations while implementing financial and business development strategies that drove value for all stakeholders of these companies. Before joining Atento, Mr. Azevedo served as Chief Financial Officer and Investor Relations Officer at Unidas, Brazil’s largest fleet management provider and the country’s second-largest car rental company. From 2016 to 2017, he served as Country Manager Brazil for Softline Group, a leading global IT solutions and services provider focused on emerging markets. Prior to that role, Mr. Azevedo was Chief Executive Officer at Globalweb Data Services in 2015 and Chief Financial Officer at this company from 2014 to 2015. He also served as Chief Financial Officer of Estre Ambiental from 2013 to 2014 and held several leadership positions at Latam Airlines from 2008 to 2013.Mr. Azevedo holds an MBA from Hamburg University, a BBA from the Automous University of Lisbon, and has CBA training in finance and management from Harvard University. 73 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 76/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Virginia Beltramini Trapero, Chief Legal Officer. Virginia has more than thirteen years of experience in management positions in the legal field, in large companies from different sectors. Prior to joining Atento, she held the position of Director of Legal Advice, at Oesia, a multinational consultancy specialized in technology, present in Spain and Latin America, where she was responsible for the legal and corporate governance of the group. Previously, she held management positions at Grupo Lar and Metrovacesa, and worked as a lawyer for 5 years at the firm EY, at its offices in Madrid and New York. She joined Atento in July 2011 and from that date until March 2017 she held the position of Corporate Legal Director. As of March 2017, she was named General Counsel and Secretary of the Board. Virginia has a degree in Law and Legal Practice and a holds a Master's Degree in Legal Business Consulting from the IE Business School. Gustavo Tasner, Chief Operations Officer and South America Regional Director, Has +25 years career leading business service operations in the North and Latin America regions. Before joining Atento, Mr. Tasner served 14 years at Capgemini, where he drove significant operational transformations, developed digital capabilities and held key positions, such as Head of Business Services Operations for the Americas overseeing 10 delivery centers in the US, Canada, Brazil and Guatemala and servicing 22 countries. Prior to that he was Head of LatAm Operations for Capgemini Business Services and lead Delivery Operations for Capgemini Latin America BPO division among others. Prior to Capgemini, Mr. Tasner spent 17 years in management roles in the financial services and automotive industries mainly, where he was actively involved in the development of high- profile finance and HR projects as well as company start-ups. Mr. Tasner holds a BA in Economics from Universidad Argentina de la Empresa (UADE), a Masters in Industrial Business Administration from Universidad Católica Argentina (UCA) & EOI (Madrid), and an Advanced Management Program certification from IAE Business School in Argentina. Cathrine Jooste, Chief Commercial Officer and USNS Director, has a successful career spanning over 20 years in the technology and consultancy industries. Before joining Atento, she worked as the Microsoft Offering General Manager at DXC Technology. Prior to that, she worked at companies such as Computer Sciences Corporation (CSC), Cognizant Technology Solutions, Systems West Computer Resources, Avanade and Accenture, always working to build and grow her teams successfully within the different global commitments with the clients. Cathrine holds a Bachelor's of Science in Business Administration and Information System Management from the University of Florida. Dimitrius de Oliveira, Brazil Regional Director. Dimitrius has more than 20 years’ experience in the technology and business services sectors leading sales, after-sales and operations functions for multinational companies such as Atento, Avaya, Ericsson, Nokia, Siemens, Genesys and Contax. Most recently he has served as Vice President of Operations for Mutant, former Genesys Prime, a leading provider of digital customer experience solutions in Brazil. Before joining Mutant, de Oliveira served as Atento Global Commercial Director and Brazil Multisector Director from 2015 to 2017. Dimitrius de Oliveira has a degree in engineering, with a specialization in building and leading customer centric organizations, from Harvard Business School, as well as an MBA in Marketing from ESPM School of Advertising and Marketing, a specialization in Leadership from the São Paulo Business School and an electrical engineering degree from Universidade de Mogi das Cruzes in Brazil. José María Pérez Melber, Spain Director. José María is a renowned professional with over twelve years’ general management experience in the services industry and the CRM/BPO sector in particular. He joined Atento in 2014 as Director of EMEA to lead all company activities in the region. Prior to joining Atento, Jose María Pérez worked as General Director of Operations and was a member of the Management Committee of Orange Spain, leading customer service, customer loyalty and retention, as well as billing and credit management at the company. José María was previously General Manager for Southern Europe, Latin America and North Africa for Transcom, a BPO/CRM sector company at which he worked for most of his career. Before joining Transcom, José María led marketing and customer relationships departments in the insurance sector for Mapfre and Hannover International. José María holds a degree in Business Administration from the Pontifical University of Salamanca. Our Directors We believe that our board of directors is, and we intend that it continue to be, composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe that all of our current board members possess the professional and personal qualifications necessary for board service, and have highlighted the specific experience, qualifications, attributes, and skills that led to the conclusion that each board member should serve as a director in the individual biographies below (information with respect to Mr. López-Abadía, our Chief Executive Officer and a member of our board of directors, is set forth above). 74 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 77/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Antonio Viana-Baptista, Director. Mr. Viana-Baptista boasts a long-standing and distinguished career in the telecommunications, technology and investment banking sectors as well as in strategic consultancy. He has been over the years an active investor and advisor in technology companies. Most recently, he held the role of Credit Suisse Senior Advisor for Portugal and from 2011 to 2015, Chief Executive Officer for Spain and Portugal. Before joining Credit Suisse, he spent over a decade in a number of chief executive roles at Telefonica, including CEO of Telefonica International, Telefonica Spain and Chairman and CEO of Telefonica Moviles among others. Prior to this, he spent seven years at Banco Portugues de Investimento (BPI) as an Executive Board member and was a Partner in the Iberia office of McKinsey & Co. He is currently a Non-Executive Board member at Semapa and Jeronimo Martins. Mr. Viana-Baptista holds a degree in Economics and a Master’s in European Economics from Universidad Catolica Portuguesa and an M.B.A. from INSEAD. Roberto Rittes, Director.Mr. Rittes is the CEO of Nextel Telecom. Prior to joining Nextel, Mr. Rittes was a principal at H.I.G. Capital, a leading global private equity firm. He also served as COO of Boa Vista Serviços, a Brazilian credit bureau managed by TMG Capital, as CFO of Estre Ambiental, an environmental services group managed by BTG and Angra, and as key officer for Brazilian telecom companies Brasil Telecom and Oi. Mr. Rittes has a Master’s degree in Business Administration from Harvard Business School and a Bachelor degree s in Business Administration (BBA) with a focus in Public Administration from Fundação Getulio Vargas in Sao Paulo, Brazil (FGV). Thomas Iannotti, Director. Mr. Iannotti has served as a member of our board of directors since November 2014. Mr. Iannotti has extensive international experience, including direct leadership of HP’s services business in Latin America. Prior to his retirement in 2011, Mr. Iannotti served as Senior Vice President and General Manager of HP Enterprise Services which provides applications, business process and infrastructure technology outsourcing services, consulting and support to business and government clients around the world. During his last two roles at HP, he was directly responsible for, and had significant exposure to, Latin America, focused on Brazil, Argentina, Chile, Columbia and Costa Rica. Earlier in his career, Mr. Iannotti served as the Vice President and General Manager of Customer Service for the EMEA region at Compaq Computers. Mr. Iannotti holds a BA from Rhode Island College. He also pursued a management development program from Harvard Business School in 1993. Robert W. Payne, Director. Bill Payne has over 30 years of executive and management experience in both small, entrepreneurial, and large corporate environments and cultures, having also served in several non-executive, mentoring, advisory and consulting roles. In addition to his current roles at several global start-up companies, such as Room Rocket, Usable Media and Excello, he is a board mentor at Critical Eye, a venture capitalist with UK-based Octopus Investments. He is an experienced Non-Executive Director and Chair as well as a visiting Professor at several business schools, including Lancaster University, Henley Management School, Lyon Business School and the University of Surrey, where he was President of the Surrey Business School MBA program. Earlier in his career, Mr. Payne was a senior executive at IBM, where he held leadership roles in consulting, strategy and process outsourcing in Europe and other geographies, including as General manager of the Global Customer Experience (CRM) Outsourcing Group. Mr. Payne also leads his own strategic consultancy Acadameus, which advises start-ups, mid-caps and high-growth companies. John Madden, Director. Mr. Madden is a Managing Director at HPS Investment Partners. Mr. Madden built his career in global financial institutions in the US and UK. He spent 16 years at Arcapita, a private equity firm, where he worked in both the US and London offices. Mr. Madden holds a BA in Political Economy from Williams College. David Garner, Director. From 2013 through March 2016, Mr. Garner served as executive Chairman and a member of the board of directors of BellSystem24. From 2010 through 2013, he served as Chairman and Chief Executive Officer of Sitel Worldwide. From 1998 through 2003, Mr. Garner was President and Chief Executive Officer of SHPS, Inc. Mr. Garner currently serves as a member of the board of directors of National Directory Assistance, LLC. He holds a B.A. in Technical Communications from Louisiana Tech University. Antenor Camargo, Director. Mr. Camargo is Co-Founder of Farallon Capital Latin America, part of Farallon Capital Management. Prior to joining Farallon, Antenor was co-founding partner at FKG Capital, a hedge fund focused on Latin America and founded in 2011 in partnership with Farallon and Daniel Goldberg (former CEO of Morgan Stanley in Brazil). Antenor earned his Bachelor’s in Business Administration (BBA) with a focus in Business Administration, Management and Finance from Fundação Getulio Vargas in Sao Paulo, Brazil (FGV). 75 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 78/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents B. Compensation Long-Term Incentive Plan Effective as of October 2014, Atento adopted the 2014 Omnibus Incentive Plan (the “2014 Incentive Plan” or “the Plan”). The plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of Atento and its subsidiaries, are eligible for grants under the Plan. On July 3, 2017, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries (a total of 886,187 RSUs) in a one-time award with a three-year vesting period. On July 2, 2018, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries (a total of 1,065,220 RSUs) in a one-time award with a three-year vesting period. On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant (a total of 109,785 and 704,057 RSUs, respectively) for a total in a one-time award with a one-year vesting period. On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors (a total of 238,663 RSUs) in a one-time award with a five-year vesting period of 20% each year. On June 3, 2019, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries (a total of 2,560,666 RSUs) in a one-time award with a three-year vesting period. As of January 2, 2020, a total of 1,305,065 TRSUs vested, which is composed of 443,490 RSUs of the 2017 Plan, 109,785 RSUs of the Board of directors Plan, 704,057 RSUs of the Board and Extraordinary Plan and 47,733 RSUs of the 20% of the 5 Years Plan. On March 2, 2020, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant (a total of 153,846 and 16,722 RSUs, respectively) for a total in a one-time award with a one-year vesting period. On July 28, 2020, a Reverse Share Split occurred according to the Company’s Extraordinary General Meeting of Shareholders. The Company’s shareholders have approved a conversion of the Company’s entire share capital of 75,406,357 ordinary shares into 15,000,000 ordinary shares, without nominal value, using a ratio of conversion of 5.027090466672970, impacting in the number of RSUs agreed in the signed contract on the Grant date of the plans in force until that time. On August 3, 2020, Atento granted a new share-based payment arrangement composed by Stock Options and a Long-Term Performance Award to directors, officers and other employees, for the Company and its subsidiaries a total of 1,524,065 SOPs with a 1/3 per year vesting conditions and a Performance Award of USD 4,305,100 linked to the degree of achievement of the objective – 3-year average EBITDA margin (external view / as reported) and the possibility to opt to receive part of this incentive in shares – at least 50% in a one-time award respectively. On August 3, 2020, Atento granted a new share-based payment arrangement composed by Stock Options to directors as an Extraordinary Grant (a total of 195,000 SOPs) for a total in a one-time award with a three-year vesting period. As of December 31, 2020, there are 105,728 Time RSUs outstanding related to 2018 Grant, 37,981 Time RSUs outstanding related to 2019 – Plan 5Y Grant, 424,373 Time RSUs outstanding related to 2019 Grant and 30,604 and 3,327 Time RSUs outstanding related to 2020 Board and Extraordinary Grant. Holders of RSUs will receive the equivalent in shares of Atento S.A. without cash settlement of stock values when the RSUs vest. 76 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 79/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Compensation of Atento’s Board Directors, Chief Executive and Other Executive Officers Atento has established a Compensation Committee that is responsible for the administration of the compensation policies, plans and programs in alignment with the Company’s compensation strategy. This committee is also responsible for reviewing and approving: the compensation package for Atento’s Board Directors, Chief Executive and Other Executive Officers; any employment agreements and other similar arrangements between Atento and the executive officers; and the administration of stock option plans and other incentive compensation plans. Atento’s Compensation Committee consists of John Madden and Thomas Iannotti. Our board of directors adopted a written charter for the Compensation Committee, which is available on our corporate website at www.atento.com. The approximate aggregated annual total cash received by all executive Board Director and Executive Officers for the year ended December 31, 2020, was $4.3 million. C. Board Practices Board of Directors Composition Our board of directors is divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Our board of directors consists of eight members and it is composed by Thomas Iannotti and David Garner, as class I directors; Antenor Camargo, Carlos López-Abadía and Roberto W. Payne as class II directors and Antonio Viana, John Madden and Roberto Rittes as class III directors. Unless revoked in accordance with the Articles of Association, the term of office of the class I directors shall expire at the first annual meeting of shareholders occurring after the date of publication of the general meeting of shareholders taken on September 29, 2014 (the “Filing Date”); the term of office of the class II directors shall expire at the second annual meeting of shareholders occurring after the Filing Date; and the term of office of the class III directors shall expire at the third annual meeting of shareholders occurring after the Filing Date. At each annual meeting after the first annual meeting of shareholders occurring after the Filing Date, each director appointed to the class of directors expiring at such annual meeting shall be appointed to hold office until the third succeeding annual meeting and until his or her successor shall have been duly elected and qualified, or until his or her earlier death, resignation, removal or retirement. Foreign Private Issuer We are exempt from certain corporate governance requirements, including the requirements: 77 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 80/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · that a majority of our board of directors consists of “independent directors,” as defined under the rules of the New York Stock Exchange; · that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; · that we have a Compensation Committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and · for an annual performance evaluation of the nominating and governance committees and Compensation Committee. These exemptions do not modify the independence requirements for our Audit Committee requiring it to be comprised exclusively of independent directors, and we comply with the applicable requirements of the Sarbanes-Oxley Act and rules with respect to our Audit Committee within the applicable time frames. These rules require that our Audit Committee be composed of at least three members. As a foreign private issuer, under the corporate governance standards of the New York Stock Exchange, foreign private issuers are permitted to follow home country corporate governance practices instead of the corporate governance practices of the New York Stock Exchange. Accordingly, we follow certain corporate governance practices of our home country, Luxembourg in lieu of certain of the corporate governance requirements of the New York Stock Exchange. Specifically, we do not have a board of directors composed of a majority of independent directors or a Compensation Committee or Nominating and Corporate Governance Committee composed entirely of independent directors. As a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act. Board Committees Our board of directors established an Audit Committee and a Compensation Committee. The composition, duties and responsibilities of these committees is as set forth below. In the future, our board may establish other committees, as it deems appropriate, to assist it with its responsibilities. Audit Committee. The Audit Committee is responsible for, among other matters: (1) appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm; (2) discussing with our independent registered public accounting firm their independence from management; (3) reviewing with our independent registered public accounting firm the scope and results of their audit; (4) approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; (5) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (6) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (7) overseeing our legal compliance process; (8) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and (9) reviewing and approving related party transactions. Our Audit Committee consists of Antonio Viana, David Garner and Thomas Iannotti. Our board of directors has determined that Antonio Viana qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our board of directors adopted a written charter for the Audit Committee, which is available on our corporate website at www.atento.com. Compensation Committee. The Compensation Committee is responsible for, among other matters: (1) reviewing key associate compensation goals, policies, plans and programs; (2) reviewing and approving the compensation of our directors, chief executive officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (4) the administration of stock plans and other incentive compensation plans. 78 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 81/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Our Compensation Committee consists of John Madden and Thomas Iannotti. Our board of directors adopts a charter for the Compensation Committee, which is available on our corporate website at www.atento.com. Compensation Committee Interlocks and Insider Participation No interlocking relationships exist between the members of our board of directors and the board of directors or Compensation Committee of any other company. Code of Ethics We have adopted a Code of Ethic (the “Code”) applicable to all of our directors, officers and employees, including our principal executive officer, principal financial officer and accounting officers, and all persons performing similar functions. A copy of the Code is available on our corporate website at www.atento.com. We will provide any person, without charge, upon request, a copy of our Code. Such requests should be made in writing to the attention of our Legal Global Director at the following address: C/ Santiago de Compostela, 94, 9th Floor, 28035, Madrid, Spain. D. Employees For the year ended December 31, 2020, our average and period end numbers of employees, excluding internships, were 139,805 and 145,166, respectively. The following table sets forth the average number of employees, excluding internships, we had on a geographical basis for 2018, 2019 and 2020. Brazil Americas EMEA Corporate Total 2018 Yearly Average 2019 2020 81,158 60,463 11,345 72 153,038 79,430 57,357 12,267 75 149,129 71,234 56,021 12,457 93 139,805 For the year ended December 31, 2020, an average of 88.5% of our staff had permanent employment contracts as compared to an average of 87.2% as of December 31, 2019 and 88.1% as of December 31, 2018. We believe that our people are key enablers to our business model and a strategic pillar to our competitive advantage. We focus on reinforcing our culture named “One Atento” and it defines our way of doing business: as a global company, with the strength of a united team, to leverage our leading position in the market. Our culture is sustained by five values: (i) Integrity, (ii) Accountability, (iii) Agility, (iv) Customer Orientation and (v) One Team. These values guide our actions in order to make our Change Agenda a reality and help us deliver our mission. The critical success factor is to ensure that our entire leadership is aligned with the drivers of our culture that best fit into our business strategy and vision. As a result of that, we received different certifications in 2020 such as Top Employers in Brazil and Spain, and Best Place to Work in Spain by Forbes. Incentive Model Atento has established an incentive model in alignment with the Company’s strategy using as the key drivers (i) the creation of shareholder value, (ii) increased growth in our business (especially with new clients), (iii) business profitability. To pursue the delivery of our strategic goals, we periodically evaluate the contribution and development of our employees. The evaluation of our employees is performed in our annual management review, which impacts many performance management processes, including compensation reviews, training and development initiatives and mobility moves. The management review process is based on reviewing an employee’s performance, competencies and potential assessment (i.e., director, managers and leaders). 79 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 82/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Our compensation model is principally driven by our vision and mission, organizational culture, external and internal environment, business strategy and our organizational model. These considerations are translated into a “Total Compensation Model,” under which we consider compensation, benefits, work/life balance, performance and recognition, development and career opportunities to attract, retain, engage and motivate our current and future employees. The main pillars of the model, particularly in relation to structure personnel, are job grading methodology, base salary, bonus scheme, long-term incentives, international mobility and other benefits. Talent Attraction and Development A specialized team ensures value generation through the incorporation of the required talent to realize the strategy of our company. Our methodology consists in a global selection process with common phases for each profile and a consistent methodology, as well as integrated selection tools and systems with well- defined criteria in identifying desired employee profiles. This integrated approach allows us to create a consistent selection process across geographies, promoting adherence of new employees to our core values, with the ultimate goal of improving business performance. We develop a high performance workforce that drives organizational goals, promoting and facilitating individual and organizational effectiveness through the design and implementation of programs that reinforce Atento’s commitment to employee development and company enrichment. We also work to enhance Atento’s employee experience in order to count on the best and most engaged team, that guarantees business results and an excellent customer experience. Employee Satisfaction Employee’s satisfaction and engagement level is important to us. Thus, we have deployed the Internal Engagement Survey. This survey measures perceptions of employees about the work environment. In 2020, 113,388 people answered it. The Employee Net Promote Score (eNPS) is a method of measuring how willing your employees to recommend their workplace to their family or friends. An eNPS score can range from -100 to 100. Generally, a score of 50 is excellent. In Atento, the 2020 eNPS was 58%. Labor/Collective Negotiation We closely monitor the management of labor relations and it is an important element for the success of our business and results of operations. As of December 31, 2020, we had in place collective bargaining agreements in six countries, including Argentina, Brazil, Chile, Uruguay, Mexico and Spain, which govern our relationships with most of the employees in those countries. As of December 31, 2020, 74.3% of our employees were under collective bargaining agreements. See “Item 3. Key Information—D. Risk Factors—Internal Risks—If we experience challenges with respect to labor relations, our overall operating costs and profitability could be adversely affected and our reputation could be harmed”. Our collective bargaining agreements are generally renegotiated on every one-to-three years with the principal labor unions in the countries where we have such agreements. In general, the collective bargaining agreements include terms that regulate remuneration, minimum salary, salary complements, overtime, benefits, bonuses and partial disability. In Brazil, our most important collective bargaining agreement is in São Paulo, and it is re-negotiated every year. In 2020, due to the pandemic, there was no raise salaries. In Mexico, our most significant collective bargaining agreement, in terms of number of employees, is in Mexico City and it is re-negotiated every year. In 2020, a 3.5% salary increase was agreed for all employees under the collective bargaining agreement, compared to a 4.7% increase in 2019 and a 5% increase in 2018. In Spain, there is a collective bargaining agreement for all contact center companies in the country, which is negotiated through the “Asociación de Contact Center Española,” a committee comprised of representatives from five of the six largest contact center companies in Spain, of which we are one. The current collective bargaining agreement is automatically renewed unless a union opposes it, requesting a change in any of the current terms. 80 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 83/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Termination benefits Termination benefits are paid to employees when the Atento Group decides to terminate their employment contracts prior to the usual retirement age or when the employee agrees to voluntarily resign in exchange for these benefits. The Atento Group recognizes these benefits as an expense for the year, at the earliest of the following dates: (a) when the Atento Group is no longer able to withdraw the offer for these benefits; or (b) when the Atento Group company recognizes the costs of a restructuring effort as per IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, and when this restructuring entails the payment of termination benefits. When benefits are offered in order to encourage the voluntary resignation of employees, termination benefits are measured on the basis of the number of employees expected to accept the offer. Benefits to be paid in more than twelve months from the reporting date are discounted to their present value. E. Share Ownership In July 2013, the Shareholders of Atento Group implemented a Management Incentive Plan (the “MIP”) pursuant to which certain of the Group’s senior management are granted the opportunity to invest in the Group. The eligibility of managers to participate is determined by the Compensation Committee of the Company. In June 27, 2019, the Management Incentive Plan was dissolved by its shareholders, being the shares pertaining to each of the eligible managers also liquidated. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders Beneficial ownership for the purposes of the following tables is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Shares subject to options that are currently exercisable or exercisable within 60 days of December 31, 2020 are deemed to be outstanding and beneficially owned by the person holding the options. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership of our ordinary shares is based on ordinary shares outstanding as of December 31, 2020. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all ordinary shares shown as beneficially owned by the shareholder. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is C/ Santiago de Compostela, 94, 9th floor, 28035, Madrid, Spain. As of December 31, 2020, Atento had 15,000,000 ordinary shares. The table below presents certain information of December 31, 2020, regarding (i) any person known to us as the owner of more than 5% of our outstanding ordinary shares, (ii) the total amount of ordinary shares owned by the members of our Board of Directors and Executive Officers, and (iii) any person that were Executive Officer during 2020: 81 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 84/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Name Principal Shareholder (1): HPS Investment Partners, LLC GIC Asset Management Pte., LTD Farallon Capital Mangement, LLC Santa Lucia Asset Management, SGIIC, SA Executive Officers and Directors (2): Virginia Beltramini Trapero Carlos Lopez-Abadía Dimitrius de Oliveira José María Pérez Melber Antonio Viana-Baptista Thomas Iannotti David Garner Shares Beneficially Owned Number of Shares Percentage 3,804,729 3,278,035 2,230,357 851,721 - 2,091 76,513 - 5,466 4,173 54,606 80,685 25.36% 21.85% 14.87% 5.68% - 0.01% 0.51% - 0.04% 0.03% 0.36% 0.54% (1) (2) Addresses on main shareholders are reported by the principal shareholders through 13G/A and SC13D. Addresses on Executive Officers and Directors are: 1, rue Hildegard Von Bingen, 1282, Luxembourg, C/ Santiago de Compostela 94, 28035, Madrid and Rua Paul Valery, 255, 8º andar, CEP 04719-050 | São Paulo/SP | Brasil B. Related Party Transactions 2014 Incentive Plan We adopted the 2014 Omnibus Incentive Plan (the “2014 Incentive Plan”). The 2014 Incentive Plan provided for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of us and our subsidiaries, as well as others performing consulting or advisory services for us, are eligible for grants under the 2014 Incentive Plan. The purpose of the 2014 Incentive Plan is to provide incentives that will attract, retain and motivate high performing officers, directors, employees and consultants by providing them with appropriate incentives and rewards either through a proprietary interest in our long-term success or compensation based on their performance in fulfilling their personal responsibilities. Limitations of Liability and Indemnification Matters We have entered into indemnification agreements with each of our current directors and executive officers. These agreements will require us to indemnify these individuals to the fullest extent permitted under Luxembourg law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers. Policies and Procedures with Respect to Related Party Transactions We have adopted policies and procedures whereby our Audit Committee and Compliance Committee is responsible for reviewing and approving related party transactions. In addition, our Code of Ethics requires that all of our employees and directors inform the Company of any material transaction or relationship that comes to their attention that could reasonably be expected to create a conflict of interest. Further, at least annually, each director and executive officer is required to report any business relationship that may give rise to a conflict of interest and all transactions in which we are involved and in which the executive officer, a director or a related person has a direct or indirect material interest. 82 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 85/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents C. Interests of Experts and Counsel Not applicable. ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and Other Financial Information Consolidated Financial Statements See “Item 18. Financial Statements”, which contains our audited consolidated financial statements prepared in accordance with IFRS as issued by IASB. Legal Proceedings In March 2018, Atento Brasil S.A. an indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax amortization of goodwill the deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the withholding taxes on payments made to certain of our former shareholders. The amount of the tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was approximately $105.3 million, and was assessed by the Company’s outside legal counsel as possible loss. We disagree with the proposed tax assessment and we are defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies. On September 26, 2018, the Federal Tax Office issued a decision accepting the application of the statute of limitation on the withholding tax discussion. We and the Public Attorney appealed to the Administrative Tribunal (CARF). On February 11, 2020, CARF issued a partially favorable decision, ruling in favor of Atento, recognizing the application of the statute of limitation on the withholding tax discussion and reducing the penalty imposed. On September 18, 2020, the decision issued by CARF become final. Thus, the amount at stake, not including interest and penalties was reduced from $105.3 million to $69.3 million. Based on our interpretation of the relevant law and based on the advice of our legal and tax advisors, we believe the position we have taken is sustainable. Consequently, no provisions are recognized regarding these proceedings. Afterward of the issuance of the tax notice in March 2018, the Brazilian tax administration started a procedure to audit the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) of Atento Brasil S.A. for the period from 2016 to 2017. This tax audit was concluded on July 10, 2020 with the notification of a tax assessment that reject the deductibility of the above-mentioned financing expenses and the deductibility of the tax amortization of goodwill. The tax assessment notified by the Brazilian Federal Revenue Service was approximately $60.0 million, including penalties and interest. Company’s external legal advisors considered $45.7 million as possible loss while the remaining $14.2 million was assessed as remote loss. We disagree with the proposed tax assessment and we are defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies. Tax Litigation As of December 31, 2020, Atento Brasil is party to 42 disputes ongoing with the tax authorities and social security authorities for various reasons relating to infraction proceedings filed (29 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of these claims is $38.2 million ($36.5 million on December 31, 2019). 83 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 86/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Labor Litigation Brazil At December 31, 2020, Atento Brasil was involved in 9,208 labor-related disputes (9,408 labor as of December 31, 2019), being 9,054 of labor massive and 41 of outliers and others, filed by Atento’s employees or ex-employees for various reasons, such as dismissals or claims over employment conditions in general. The total amount of the main claims classified as possible was $33.6 million ($62.5 million on December 31, 2019), of which $18.9 million Labor Massive-related, $1.6 million Labor Outliers-related and $13.1 million Special Labor cases related. Civil Litigation As of December 31, 2020, Atento Brasil S.A. is party to 10 civil lawsuits ongoing for various reasons (5 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of the claims is $3.5 million ($2.4 million on December 31, 2019). Dividend Distributions Although we are well capitalized and have sufficient liquidity, our ability to pay dividends on our ordinary shares is limited in the near-term by the indenture governing our Senior Secured Notes (6% of the Company’s market value), and may be further restricted by the terms of any of our future debt or preferred securities. In addition, under Luxembourg law, at least 5% of our net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of our issued share capital. If the legal reserve subsequently falls below the 10% threshold, 5% of net profits again must be allocated toward the reserve until such reserve returns to the 10% threshold. If the legal reserve exceeds 10% of our issued share capital, the legal reserve may be reduced. The legal reserve is not available for distribution. Additionally, because we are a holding company, our ability to pay dividends on our ordinary shares is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness. Pursuant to our articles of incorporation, our board of directors has the power to distribute interim dividends in accordance with applicable Luxembourg law. The amount to be distributed by the board of directors may not exceed the total profits made since the end of the last financial year for which the accounts have been approved, plus any profits carried forward and sums drawn from reserves available for this purpose, less losses carried forward and any sums to be placed to reserve pursuant to the requirements of Luxembourg law or of our articles of incorporation. Notwithstanding the foregoing, dividends may also be declared by a simple majority vote of our shareholders at an annual general shareholders meeting, typically but not necessarily, based on the recommendation of our board of directors. All shares of our capital stock grant pari passu rights with respect to the payment of dividends. Any future determination to pay dividends will be subject to compliance with covenants in current and future agreements governing our indebtedness, and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant. On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividends pay-out in line with industry peers and practices. The declaration and payment of any interim dividends will be subject to approval of Atento’s corporate bodies and will be determined based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and liquidity factors. The Board of Directors intends to review the dividend policy regularly and so accordingly is subject to change at any time. On October 31, 2017, our Board of Directors declared a cash interim dividend with respect to the ordinary shares of $0.3384 per share paid on November 28, 2017 to shareholders of record as of the close on November 10, 2017. B. Significant Changes Except as otherwise disclosed in our consolidated financial statements and in this Annual Report, there have been no significant changes in our business, financial conditions or results since December 31, 2020. 84 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 87/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ITEM 9. THE OFFER AND LISTING A. Offer and Listing Details Price Information Ordinary Stock The following table presents high and low market prices in U.S. dollars for Atento S.A. ordinary stock (ATTO) listed on the New York Security Exchange for the periods shown below. As of July 28, 2020, Atento S.A. announced a reverse share split that converted the Company’s entire share capital of 75,406,357 into 15,000,000 shares. In this sense we adjusted the stock prices to consider the reverse share split. Closing Price ATTO - Annual Basis Year 2020 2019 2018 2017 2016 Closing Price ATTO - Quarterly Basis 2020 Fourth Quarter Third Quarter Second Quarter First Quarter Closing Price ATTO - Monthly Basis Month March (until March 16, 2021) February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 B. Plan of Distribution Not applicable. C. Markets The Company’s ordinary shares trade on the NYSE under the symbol “ATTO”. 85 U.S. dollars per Share Low 3.71 10.56 17.85 38.96 34.69 Closing 13.60 14.48 20.16 51.02 38.46 High 18.59 24.33 52.53 63.34 50.77 U.S. dollars per Share Low 8.10 5.52 3.71 4.82 Closing 13.60 9.21 5.93 5.53 High 13.78 18.59 7.89 17.29 U.S. dollars per Share Low 20.50 16.72 13.14 9.87 8.16 8.10 8.75 Closing 22.02 22.52 16.42 13.60 10.26 8.47 9.21 High 23.93 25.26 18.56 13.78 12.21 9.54 10.54 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 88/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. ITEM 10. ADDITIONAL INFORMATION A. Share Capital Not applicable. B. Memorandum and Articles of Association The following is a summary of some of the terms of our ordinary shares, based on our articles of association and the Luxembourg Corporate Law. In this section we refer to our articles of association as amended and in effect as our “articles of association”. The following summary is subject to, and is qualified in its entirety by reference to, the provisions of our articles of association, the form of which has been filed as an exhibit to the registration statement of which this Annual Report is a part. General Atento is a Luxembourg public limited liability company (société anonyme). The Company’s legal name is “Atento S.A.” and was incorporated on March 5, 2014 as a Luxembourg public limited liability company (société anonyme). Atento is registered with the Luxembourg Registry of Trade and Companies under number B.185.761. Atento has its registered office at 1, rue Hildegard Von Bingen, 1282 Luxembourg, Grand Duchy of Luxembourg. The corporate purpose of Atento, as stated in Article 2 of our articles of association (Purpose), may be summarized as follow: The object of Atento, is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies and in any other form of investment, the acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of securities of any kind and the administration, management, control and development of its portfolio. Atento may further guarantee, grant security, grant loans or otherwise assist the companies in which it holds a direct or indirect participation or right of any kind or which form part of the same group of companies as Atento. Atento may raise funds especially through borrowing in any form or by issuing any kind of notes, securities or debt instruments, bonds and debentures and generally issue any debt, equity and/or hybrid or other securities of any type in accordance with Luxembourg law. Finally, Atento may carry out any commercial, industrial, financial, real estate or intellectual property or other activities which it considers useful for the accomplishment of these purposes. Share Capital As of December 31, 2020, our issued share capital amounts to €33,978.85, represented by 15,000,000 shares, after the reverse split adopted by the EGM on July 28th, 2020. The extraordinary general meeting of shareholders resolved to approve to convert the seventy-five million four hundred and six thousand three hundred and fifty-seven (75,406,357) ordinary shares without nominal value, representing the then current entire share capital of the Company, into fifteen million (15,000,000) ordinary shares without nominal value using a ratio of conversion of 5.027090466672970 (the “Conversion”) and subsequently to amend article 5.1 of the articles of association of the Company to read as follows: 86 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 89/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents “5.1 The Company’s share capital is set at thirty-three thousand nine hundred and seventy-eight euro eighty-five cents (EUR 33,978.85), represented by fifteen million (15,000,000) shares without nominal value.” The extraordinary general meeting of shareholders subsequently resolved to approve to authorize the board of directors of the Company to amend accordingly the shares register of the Company whereby in case the new amount of shares to be held by a shareholder as a result of the Conversion would lead to such shareholder holding a fractional number of shares, since as per the article 7.2 of the articles of association of the Company, the Company could not issue fractional shares, such new amount of new shares to be held by such shareholder would be rounded up to the nearest whole number of shares and the number of shares held by the Company in treasury would be adjusted accordingly. All issued shares were fully paid. A shareholder in a Luxembourg société anonyme holding fully paid shares is not liable, solely because of his or her or its shareholder status, for additional payments to the Company or the Company’s creditors. Our articles of association authorize our board of directors to issue ordinary shares within the limits of the authorized share capital at such times and on such terms as our board or its delegates may decide for a period ending five years after the date on which the minutes of the shareholders’ meeting approving such authorization are published in the then in force Luxembourg official gazette Mémorial C, Recueil des Sociétés et Associations (unless such period is extended, amended or renewed). Accordingly, our board is authorized to issue ordinary shares up to the authorized share capital until such date. We currently intend to seek renewals and/or extensions as required from time to time. Our authorized share capital is determined by our articles of association and is set at €999,997,023.15, as amended from time to time, and may be increased, reduced or extended by amending the articles of association by approval of the extraordinary general shareholders’ meeting subject to the necessary quorum and majority requirements (see “—General Meeting of Shareholders” and “—Amendment to the Articles of Association”). Under Luxembourg law, existing shareholders benefit from a pre-emptive subscription right on the issuance of shares for cash consideration. However, our shareholders have, in accordance with Luxembourg law, authorized the board of directors to suppress, waive or limit any pre-emptive subscription rights of shareholders provided by law to the extent the board deems such suppression, waiver or limitation advisable for any issuance or issuances of shares within the scope of our authorized share capital. Such shares may be issued above, at or below market value but in any event not below the accounting par value per ordinary share as well as by way of incorporation of available reserves (including premium), except in limited cases provided for by Luxembourg law. Form and Transfer of Shares Our ordinary shares are issued in registered form only and are freely transferable under Luxembourg law and our articles of association. Our board of directors may however impose transfer restrictions for shares that are registered, listed, quoted, dealt in, or that have been placed in certain jurisdictions in compliance with the requirements applicable therein. Luxembourg law does not impose any limitations on the rights of Luxembourg or non-Luxembourg residents to hold or vote our ordinary shares. Under Luxembourg law, the ownership of registered shares is prima facie established by the inscription of the name of the shareholder and the number of shares held by him or her in the shareholders register. Without prejudice to the conditions for transfer by book entry where shares are recorded in the shareholder register on behalf of one or more persons in the name of a depository, each transfer of shares shall be affected by written declaration of transfer to be recorded in the shareholder register, such declaration to be dated and signed by the transferor and the transferee or by their duly appointed agents. We may accept and enter into the shareholder register any transfer affected pursuant to an agreement or agreements between the transferor and the transferee, true and complete copies of which have been delivered to us. Our articles of association provide that we may appoint registrars in different jurisdictions, each of whom may maintain a separate register for the shares entered in such register and the holders of shares shall be entered into one of the registers. Shareholders may elect to be entered into one of these registers and to transfer their shares to another register so maintained. Entries in these registers are reflected in the shareholders’ register maintained at our registered office. 87 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 90/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In addition, our articles of association also provide that our ordinary shares may be held through a securities settlement system or a professional depository of securities. Ordinary shares held in such manner have the same rights and obligations as ordinary shares recorded in our shareholders’ register. Furthermore, ordinary shares held through a securities settlement system or a professional depository of securities may be transferred in accordance with customary procedures for the transfer of securities in book-entry form. Issuance of Shares Pursuant to the Luxembourg Corporate Law, the issuance of ordinary shares requires the approval by the general meeting of shareholders at the quorum and majority provided for the amendment of articles (see “—General Meeting of Shareholders” and “—Amendment to the Articles of Association”). The general meeting may approve an authorized share capital and authorize the board of directors to issue ordinary shares up to the maximum amount of such authorized share capital for a maximum period of five years as from the date of publication in the then in force Luxembourg official gazette (Mémorial, Recueil des Sociétés et Associations) of the minutes of the relevant general meeting. The general meeting may amend, renew or extend such authorized share capital and such authorization to the board of directors to issue shares. Our articles of association provide that no fractional shares shall be issued. Our ordinary shares have no conversion rights and there are no redemption or sinking fund provisions applicable to our ordinary shares. Pre-Emptive Rights Unless limited, waived or cancelled by our board of directors (see “—Share Capital”), holders of our ordinary shares have a pro rata pre- emptive right to subscribe for any new shares issued for cash consideration. Our articles of association provide that pre-emptive rights can be limited, waived or cancelled by our board of directors for a period ending on the fifth anniversary of the date of publication of the notarial deed recording the minutes of the extraordinary general shareholders’ meeting which adopted the authorized capital of the Company in the Recueil électronique des sociétés et associations in the event of an increase of the share capital by the board of directors within the limits of the authorized share capital. The general meeting of shareholders duly convened to consider an amendment to the articles of association may by majority vote also limit, waive or cancel such pre-emptive rights or to renew, amend or extend them, each time for a period not to exceed five years. Repurchase of Shares We cannot subscribe for our own ordinary shares. We may, however, repurchase issued ordinary shares or have another person repurchase issued ordinary shares for our account, subject to the following conditions: · prior authorization by a simple majority vote at an ordinary general meeting of shareholders, which authorization sets forth the terms and conditions of the proposed repurchase and in particular the maximum number of ordinary shares to be repurchased, the duration of the period for which the authorization is given (which may not exceed five years) and, in the case of repurchase for consideration, the minimum and maximum consideration per share; · the repurchase may not reduce our net assets on a non-consolidated basis to a level below the aggregate of the issued and subscribed share capital and the reserves that we must maintain pursuant to Luxembourg law or our articles of association; and · only fully paid up shares may be repurchased. On July 26, 2018, our Board of Directors approved a share buyback program in the total amount of $30 million to be concluded in up to 12 months. The buyback program was communicated to the market in the Second Quarter Earnings Release, dated July 30, 2018. During 2018, the Company repurchased 1,106,158 shares at the total cost of $8.2 million. These shares are being held in treasury. During 2019, the Company repurchased 4,425,499 shares at the total cost of $11.1 million. On February 26, 2020, our Board of Directors approved a share buyback program in the total amount of $30.0 million to be concluded in up to 12 months. During 2020, the Company repurchased 169,739 shares at the total cost of $1.3 million. 88 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 91/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In addition, pursuant to Luxembourg law, Atento, may directly or indirectly repurchase ordinary shares by decision of our board of directors without the prior approval of the general meeting of shareholders if such repurchase is deemed by the board of directors to be necessary to prevent serious and imminent harm to us or if the acquisition of shares has been made in view of the distribution thereof to employees. Capital Reduction Our articles of association provide that our issued share capital may be reduced, subject to the approval by the general meeting of shareholders at the quorum and majority provided for the amendment of the articles of association (See “—Voting Rights—Extraordinary General Meeting”). General Meeting of Shareholders Any regularly constituted general meeting of shareholders of Atento represents the entire body of shareholders of the Company. Each of our ordinary shares entitles the holder thereof to attend our general meeting of shareholders, either in person or by proxy, to address the general meeting of shareholders and to exercise voting rights, subject to the provisions of our articles of association. Each ordinary share entitles the holder to one vote at a general meeting of shareholders. Our articles of association provide that our board of directors shall adopt all other regulations and rules concerning the attendance to the general meeting, availability of access cards and proxy forms in order to enable shareholders to exercise their right to vote as it deems fit. When convening a general meeting of shareholders, we will publish two notices (which must be published at least eight days apart and, in the case of the second notice, at least eight days before the meeting) in the current Luxembourg official gazette, (Recueil électronique des sociétés et associations, the central electronic platform of the Grand Duchy of Luxembourg), and in a Luxembourg newspaper. One or several shareholders holding together at least ten percent (10%) of the share capital or the voting rights may submit questions in writing to the board of directors relating to transactions in connection with the management of the Company as well as companies controlled by the Company; with respect to the latter, such questions shall be assessed in consideration of the relevant entities’ corporate interest. In the absence of a response within one (1) month, the relevant shareholders may request the president of the chamber of the district court of Luxembourg dealing with commercial matters and sitting as in summary proceedings to appoint one or several experts in charge of drawing up a report on such related transactions. Our articles of association provide that if our shares are listed on a regulated market, the general meeting will also be convened in accordance with the publicity requirements of such regulated market applicable to us. A shareholder may participate in general meetings of shareholders by appointing another person as his proxy, the appointment of which shall be in writing. Our articles of association also provide that, in the case of shares held through the operator of a securities settlement system or depository, a holder of such shares wishing to attend a general meeting of shareholders should receive from such operator or depository a certificate certifying the number of shares recorded in the relevant account on the record date. Such certificates as well as any proxy forms should be submitted to us no later than three (3) business days before the date of the general meeting unless our board of directors fixes a different period. The annual ordinary general meeting of shareholders shall be held in Luxembourg at the registered office of the Company or at such other place in Luxembourg as may be specified in the convening notice of such meeting or by any telecommunications means as authorized by Luxemburg legislation pursuant the Covid-19 declaration of State of Emergency. If such day is a legal or banking holiday, the annual general meeting shall be held on the next following business day. Other meetings of shareholders may be held at such place and time as may be specified in the respective convening notices. Luxembourg law provides that the board of directors is obliged to convene a general meeting of shareholders if shareholders representing, in the aggregate, 10% of the issued share capital so request in writing with an indication of the meeting agenda. In such case, the general meeting of shareholders must be held within one-month of the request. If the requested general meeting of shareholders is not held within one-month, shareholders representing, in the aggregate, 10% of the issued share capital may petition the competent president of the district court in Luxembourg to have a court appointee convene the meeting. Luxembourg law provides that shareholders representing, in the aggregate, 10% of the issued share capital may request that additional items be added to the agenda of a general meeting of shareholders. That request must be made by registered mail sent to the registered office of the Company at least five days before the general meeting of shareholders. 89 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 92/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Voting Rights Each share entitles the holder thereof to one vote at a general meeting of shareholders. Luxembourg law distinguishes general meetings of shareholders and extraordinary general meetings of shareholders. Extraordinary general meetings of shareholders relate to proposed amendments to the articles of association and certain other limited matters. Ordinary General Meeting At an ordinary general meeting there is no quorum requirement and resolutions are adopted by a simple majority of votes validly cast on such resolution is sufficient. Abstentions are not considered votes. Extraordinary General Meeting Extraordinary resolutions are required for any of the following matters, among others: (a) an increase or decrease of the authorized or issued capital, (b) a limitation or exclusion of preemptive rights, (c) approval of a statutory merger or de-merger (scission), (d) dissolution and liquidation of Atento, and (e) any and all amendments to our articles of association. Pursuant to our articles of association, for any resolutions to be considered at an extraordinary general meeting of shareholders the quorum shall be at least one half (50%) of the issued share capital of the Company unless otherwise mandatorily required by law. If the said quorum is not present, a second meeting may be convened at which Luxembourg Corporate Law does not prescribe a quorum. Any extraordinary resolution shall be adopted at a quorate general meeting (save as otherwise provided by mandatory law) by at least two thirds (2/3) majority of the votes validly cast on such resolution. Abstentions are not considered votes. Appointment and Removal of Directors Members of our board of directors may be elected by simple majority of the votes cast at a general meeting of shareholders. Our articles of association provide that the directors shall be elected on a staggered basis, with one third (1/3) of the directors being elected each year, and each director elected for a period of three years. Any director may be removed with or without cause by resolution at a general meeting of shareholders adopted by a simple majority of votes validly cast at the meeting. Our articles of association provide that in case of a vacancy the board of directors may fill such vacancy. Neither Luxembourg law nor our articles of association contain any restrictions as to the voting of our shares by non-Luxembourg residents. Amendment to the Articles of Association Shareholder Approval Requirements Luxembourg law requires an extraordinary general meeting of shareholders to resolve upon an amendment of the articles of association to be made by extraordinary resolution. The agenda of the extraordinary general meeting of shareholders must indicate the proposed amendments to the articles of association. An extraordinary general meeting of shareholders convened for the purposes of amending the articles of association must have a quorum of at least 50% of our issued share capital. If the said quorum is not present, a second meeting may be convened at which Luxembourg Corporate Law does not prescribe a quorum. Irrespective of whether the proposed amendments will be subject to a vote at any duly convened extraordinary general shareholders’ meeting, the amendment is subject to the approval of at least two thirds (2/3) of the votes cast at such extraordinary general meeting of shareholders. Formalities Any resolutions to amend our articles of association must be taken before a Luxembourg notary and such amendments must be published in accordance with Luxembourg law. Merger and Demerger A merger by absorption whereby one Luxembourg company after its dissolution without liquidation transfers to another company all of its assets and liabilities in exchange for the issuance of shares in the acquiring company to the shareholders of the company being acquired, or a merger effected by transfer of assets to a newly incorporated company, must, in principle, be approved at a general meeting by an extraordinary resolution of the Luxembourg company, and the general meeting must be held before a notary. Similarly, a demerger of a Luxembourg company is generally subject to the approval by an extraordinary general meeting of shareholders. 90 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 93/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Dissolution and Liquidation In the event of our dissolution and liquidation of the Company the assets remaining after allowing for the payment of all liabilities of the Company will be paid out to the shareholders pro rata according to their respective shareholdings. The decisions to dissolve and liquidate require the approval by an extraordinary general meeting of shareholders of the Company to be held before a notary. No Appraisal Rights Neither Luxembourg law nor our articles of association provide for any appraisal rights of dissenting shareholders. Dividend Distributions Subject to Luxembourg law, if and when a dividend distribution is declared by the general meeting of shareholders or the board of directors in the case of interim dividend distributions, each ordinary share is entitled to participate equally in such distribution of funds legally available for such purposes. Pursuant to our articles of association, the general meeting of shareholders may approve a dividend distribution and the board of directors may declare an interim dividend distribution, to the extent permitted by Luxembourg law. Declared and unpaid dividend distributions held by us for the account of the shareholders shall not bear interest. Under Luxembourg law, claims for unpaid dividend distributions will lapse in our favor five years after the date such dividend distribution were declared. Annual Accounts Under Luxembourg law, the board of directors must prepare each year annual accounts, i.e., an inventory of the assets and liabilities of Atento together with a balance sheet and a profit and loss account each year. Our board of directors must also annually prepare consolidated accounts and management reports on the annual accounts and consolidated accounts. The annual accounts, the consolidated accounts, the management report and the auditor’s reports must be available for inspection by shareholders at our registered office at least 15 calendar days prior to the date of the annual ordinary general meeting of shareholders. The annual accounts and the consolidated accounts, after approval by the annual ordinary general meeting of shareholders, will need to be filed with the Luxembourg Registry of Trade and Companies within seven months of the close of the financial year. Information Rights Luxembourg law gives shareholders limited rights to inspect certain corporate records 15 calendar days prior to the date of the annual ordinary general meeting of shareholders, including the annual accounts with the list of directors and auditors, the consolidated accounts, the notes to the annual accounts and the consolidated accounts, a list of shareholders whose shares are not fully paid up, the management reports and the auditor’s report. The annual accounts, the consolidated accounts, the auditor’s report and the management report are sent to registered shareholders at the same time as the convening notice for the annual general meeting. In addition, any registered shareholder is entitled to receive a copy of such documents free of charge prior to the date of the annual ordinary general meeting of shareholders. Under Luxembourg law, it is generally accepted that a shareholder has the right to receive responses at the shareholders’ general meeting to questions concerning items on the agenda of that general meeting of shareholders, if such responses are necessary or useful for a shareholder to make an informed decision concerning such agenda item, unless a response to such questions could be detrimental to our interests. 91 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 94/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Board of Directors The management of Atento is vested in a board of directors. Our articles of association will provide that the board must comprise at least three members. The board meets as often as Company interests require. A majority of the members of the board present or represented at a board meeting constitutes a quorum, and resolutions are adopted by the simple majority vote of the board members present or represented. The board may also take decisions by means of resolutions in writing signed by all directors. Each director has one vote. The general shareholders’ meeting elects’ directors and decides their respective terms. Under Luxembourg law, directors may be re-elected but the term of their office may not exceed 6 years. Our articles of association will provide that the directors shall be elected on a staggered basis, with one third (1/3) of the directors being elected each year. The general shareholders’ meeting may dismiss one or more directors at any time, with or without cause by a simple majority of votes cast at a general meeting of shareholders. If the board has a vacancy, the remaining directors have the right to fill such vacancy on a temporary basis pursuant to the affirmative vote of a majority of the remaining directors. The term of a temporary director elected to fill a vacancy expires at the end of the term of office of the replaced director, provided, however, that the next general shareholders’ meeting shall be requested definitively to elect any temporary director. Within the limits provided for by law, our board may delegate to one or more persons the daily management of the Company and the authority to represent the Company. No director shall, solely as a result of being a director, be prevented from contracting with us, either with regard to his tenure in any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any contract in which any director is in any way interested be liable to be voided merely on account of his position as director, nor shall any director who is so interested be liable to account to us or the shareholders for any remuneration, profit or other benefit realized by the contract by reason of the director holding that office or of the fiduciary relationship thereby established. Any director having an interest in a transaction submitted for approval to the board may not participate in the deliberations and vote thereon, unless the transaction is not in the ordinary course of the Company’s business and that conflicts with the Company’s interest, in which case the director shall be obliged to advise the board thereof and to cause a record of his statement to be included in the minutes of the meeting. He may not take part in these deliberations nor vote on such a transaction. At the next general meeting, before any other resolution is put to a vote, a special report shall be made on any transactions in which any of the directors may have had an interest that conflicts with our interest. No shareholding qualification for directors is required. Our articles of association provide that directors and officers, past and present, are entitled to indemnification from us to the fullest extent permitted by Luxemburg law against liability and all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he is involved by virtue of his being or having been a director or officer and against amounts paid or incurred by him in the settlement thereof. We may purchase and maintain insurance for any director or other officer against any such liability. No indemnification is provided against any liability to us or our shareholders (i) by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties of a director or officer; (ii) with respect to any matter as to which any director or officer shall have been finally adjudicated to have acted in bad faith and not in the interest of the Company; or (iii) in the event of a settlement, unless approved by a court or the board of directors. Transfer Agent and Registrar The transfer agent and registrar for our ordinary shares is American Stock Transfer & Trust Company, LLC. with an address of 6201 15th Avenue, Brooklyn, New York 11219. 92 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 95/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents C. Material Contracts We are party to a Master Service Agreement with Telefónica. On November 7, 2016, Atento Luxco 1, S.A. (“Luxco”), a subsidiary of Atento S.A. (the “Company”), entered into Amendment Agreement No.2 (the “Amendment”) to the Master Services Agreement by and between Luxco (f/k/a BC Luxco 1, S.A.) and Telefónica, S.A. (“Telefónica”), dated December 11, 2012 (as amended, the “MSA”). The Amendment strengthens and extends the Company’s strategic relationship with Telefónica, its largest client. The Amendment provides for the following: a guaranty the Company will maintain at least our current share of Telefónica’s spending in all key contracts, revised invoicing and collection processes in all key markets, a two-year extension of the MSA for Brazil and Spain until December 31, 2023 as well as a reset of volume targets for these countries; and certain other amendments. On November 2019, the parties agree on decreasing the minimum revenue thresholds for Spain. In consideration of this reduction, the entity Telefónica de España S.A. (a Subsidiary of Telefónica, “Telefónica España”) and Atento Teleservicios España S.A.U. (entity fully owned by the provider “Atento España”), have entered into an agreement dated on November 1, 2019, with the purpose to, among other agreements, boost the digitalization of the services rendered to Telefónica España. Additionally, Telefónica España, will, subject to the conditions stated in such agreement, collaborate with certain amount to Atento España. For a description of the MSA see “Item 4. Information on the Company—B. Business Overview—Our Clients—Telefónica S.A. Master Service Agreement” as well as the full text of the agreement and its amendment executed in November 2016, a copy of which is filed as Exhibit 4.5. D. Exchange Controls There are no legislative or other legal provisions currently in force in Luxembourg or arising under ours articles of association that restrict the payment of dividends to holders of Atento shares by reason of such holders not being resident in Luxembourg, except for regulations restricting the remittance of dividends and other payments in compliance with United Nations and EU sanctions. There are no limitations, either under the laws of Luxembourg or in the articles of association, on the right of non-Luxembourg nationals to hold or vote Atento shares. E. Taxation Luxembourg Tax Considerations The following is a summary discussion of the material Luxembourg tax considerations of the acquisition, ownership and disposition of your ordinary shares that may be applicable to you if you acquire our ordinary shares. It is not intended to be, nor should it be construed to be, legal or tax advice. This discussion is based on Luxembourg laws and regulations as they stand on the date of this Annual Report and is subject to any change in law or regulations or changes in interpretation or application thereof (and which may possibly have a retroactive effect). Prospective investors should therefore consult their own professional advisers as to the effects of state, local or foreign laws and regulations, including Luxembourg tax law and regulations, to which they may be subject. As used herein, a “Luxembourg individual” means an individual resident in Luxembourg who is subject to personal income tax (impôt sur le revenu) and a solidarity surcharge (contribution au fonds pour l’emploi) on his or her worldwide income from Luxembourg or foreign sources, and a “Luxembourg corporate holder” means a company (that is, a fully taxable collectivity within the meaning of Article 159 of the Luxembourg Income Tax Law) resident in Luxembourg subject to corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal) and a solidarity surcharge (contribution au fonds pour l’emploi) on its worldwide income from Luxembourg or foreign sources. Luxembourg corporate holders may also be subject to net wealth tax (impôt sur la fortune) as well as other duties, levies and taxes. For purposes of this summary, Luxembourg individuals and Luxembourg corporate holders are collectively referred to as “Luxembourg Holders”. A “non- Luxembourg Holder” means any investor in shares of the Company other than a Luxembourg Holder. 93 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 96/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Tax Regime Applicable to Capital Gains Realized Upon Disposal of Shares Luxembourg Holders Luxembourg individual holders. For Luxembourg individuals holding (together, directly or indirectly, with his or her spouse or civil partner or underage children) 10% or less of the share capital of the Company, capital gains will only be taxable if they are realized on a sale of shares, which takes place before their acquisition or within the first six months following their acquisition. The capital gain or liquidation proceeds will be taxed at progressive income tax rates (ranging from 0 to 45.78% in 2018 and 2019). For Luxembourg individuals holding (together with his/her spouse or civil partner and underage children) directly or indirectly more than 10% of the capital of the Company, capital gains will be taxable as follow: · within six months from the acquisition, the capital gain or liquidation proceeds will be taxed at progressive income tax rates (currently ranging from 0 to 45.78%); · after six months the capital gain or the liquidation proceeds will be taxed at a reduced tax rate (i.e. half of the investor’s global tax rate). An allowance of €50,000 (doubled for taxpayers filing jointly), available during a ten-year period, is applicable. Luxembourg corporate holders. Capital gains realized upon the disposal of shares by a Luxembourg corporate holder will in principle be subject to corporate income tax and municipal business tax. The combined applicable rate (including an unemployment fund contribution) is 26.01% for the fiscal year ended 2018 and 26.01% for the fiscal year ended 2019 for a Luxembourg corporate holder established in Luxembourg-City. An exemption from such taxes may be available to the Luxembourg corporate holder pursuant to article 166 of the Luxembourg Income Tax law and by the Grand Ducal Decree of December 21, 2001 subject to anti-abuse rules and to the fulfillment of the conditions set forth therein. Non-Luxembourg Holders Subject to any applicable tax treaty, an individual non-Luxembourg Holder of shares (who has no permanent establishment or permanent representative in Luxembourg to which or to whom the shares would be attributable) will only be subject to Luxembourg taxation on capital gains arising upon disposal of such shares if such holder has (together with his or her spouse or civil partner or underage children) directly or indirectly held more than 10% of the capital of the Company, at any time during the five years preceding the disposal, and either (i) such holder has been a resident of Luxembourg for tax purposes for at least 15 years and has become a non-resident within the five years preceding the realization of the gain, subject to any applicable tax treaty, or (ii) the disposal of shares occurs within six months from their acquisition (or prior to their actual acquisition). If we and a U.S. relevant holder are eligible for the benefits of the Convention between the Government of the Grand Duchy of Luxembourg and the Government of the United States for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital (the “Luxembourg-U.S. Treaty”), such U.S. relevant holder generally should not be subject to Luxembourg tax on the gain from the disposal of such shares unless such gain is attributable to a permanent establishment or permanent representative of such U.S. relevant holder in Luxembourg. Subject to any restrictions imposed by the substantially and regularly traded clause in the limitation on benefits article of the Luxembourg-U.S. treaty, we expect to be eligible for the benefits of the Luxembourg-U.S. Treaty. A corporate non-Luxembourg Holder, which has a permanent establishment or a permanent representative in Luxembourg to which or whom the shares would be attributable, will bear corporate income tax and municipal business tax on a gain realized on a disposal of such shares as set forth above for a Luxembourg corporate holder. In the same way, gains realized on the sale of the shares through a permanent establishment or a permanent representative may benefit from the full exemption provided for by Article 166 of the Luxembourg Income Tax Law and by the Grand Ducal Decree of December 21, 2001 subject in each case to anti-abuse rules and to the fulfillment of the conditions set out therein. A corporate non-Luxembourg Holder, which has no permanent establishment or permanent representative in Luxembourg to which or whom the shares would be attributable will not be subject to any Luxembourg tax on a gain realized on a disposal of such shares unless such holder holds, directly or through tax transparent entities, more than 10% of the share capital of the Company, and the disposal of shares occurs within six months from their acquisition (or prior to their actual acquisition), subject to any applicable tax treaty. If we and a U.S. corporate holder without a permanent establishment in Luxembourg to which or whom the shares would be attributable are eligible for the benefits of the Luxembourg-U.S. Treaty, such U.S. corporate holder generally should not be subject to Luxembourg tax on the gain from the disposal of such shares. 94 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 97/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Tax Regime Applicable to Distributions Withholding Tax. Dividend distributions by the Company are subject to a withholding tax of 15%. Distributions by the Company sourced from a reduction of capital as defined in Article 97 (3) of the Luxembourg Income Tax Law including, among others, share premium should not be subject to withholding tax provided no newly accumulated fiscal profits, or profit reserves carried forward are recognized by the Company on a standalone basis. We or the applicable paying agent will withhold on a distribution if required by applicable law. Where a withholding needs to be applied, the rate of the withholding tax may be reduced pursuant to the double tax treaty existing between Luxembourg and the country of residence of the relevant holder, subject to the fulfillment of the conditions set forth therein. If we and a U.S. relevant holder are eligible for the benefits of the Luxembourg-U.S. Treaty, the rate of withholding on distributions generally is 15%, or 5% if the U.S. relevant holder is a beneficial owner that owns at least 10% of our voting stock. No withholding tax applies if the distribution is made to (i) a Luxembourg resident corporate holder (that is, a fully taxable collectivité within the meaning of Article 159 of the Luxembourg Income Tax Law), (ii) a corporation which is resident of a Member State of the European Union and is referred to by article 2 of the Council Directive 2011/96/EU of November 30, 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states, (iii) a corporation or a cooperative resident in Norway, Iceland or Liechtenstein and subject to a tax comparable to corporate income tax as provided by Luxembourg Income Tax Law, (iv) a corporation resident in Switzerland which is subject to corporate income tax in Switzerland without benefiting from an exemption, (v) a corporation subject to a tax comparable to corporate income tax as provided by Luxembourg Income Tax Law which is resident in a country that has concluded a tax treaty with Luxembourg and (vi) a Luxembourg permanent establishment of one of the above-mentioned categories, provided each time that at the date of payment, the holder has held or commits itself to continue to hold directly or through a tax transparent vehicle, during an uninterrupted period of at least twelve months, shares representing at least 10% of the share capital of the Company or which had an acquisition price of at least €1,200,000. Non-Luxembourg Holders Non-Luxembourg holders of the shares who have neither a permanent establishment nor a permanent representative in Luxembourg to which or whom the shares would be attributable are not liable for any Luxembourg tax on dividends paid on the shares, other than a potential withholding tax as described above. Net Wealth Tax Luxembourg Holders. Luxembourg net wealth tax will not be levied on a Luxembourg Holder with respect to the shares held unless the Luxembourg Holder is an entity subject to net wealth tax in Luxembourg. Net wealth tax is levied annually at the rate of 0.5% and 0.05% for the tranche exceeding EUR 500 million on the net wealth of enterprises resident in Luxembourg, as determined for net wealth tax purposes. The shares may be exempt from net wealth tax subject to the conditions set forth by Article 60 of the Law of October 16, 1934 on the valuation of assets (Bewertungsgesetz), as amended. A minimum net wealth tax is levied on Luxembourg corporate holders. For entities for which the sum of fixed financial assets, transferable securities and cash at bank exceeds 90% of their total gross assets and EUR 350,000, the minimum net wealth tax is set at EUR 4,815. For all other Luxembourg corporate holders which do not fall within the scope of the EUR 4,815 minimum net wealth tax, the minimum net wealth tax ranges from EUR 535 to EUR 32,100, depending on the Luxembourg corporate holders’s total gross assets. Non-Luxembourg Holders Luxembourg net wealth tax will not be levied on a non-Luxembourg Holder with respect to the shares held unless the shares are attributable to an enterprise or part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg. 95 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 98/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Stamp and Registration Taxes No registration tax or stamp duty will be payable by a holder of shares in Luxembourg solely upon the disposal of shares or by sale or exchange unless registered in a notarial deed or otherwise registered in Luxembourg. F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display The Company makes its filings in electronic form under the EDGAR filing system of the U.S. Securities and Exchange Commission. Its filings are available through the EDGAR system at www.sec.gov. The Company’s filings are also available to the public through the Internet at Atento’s website at www.atento.com. Such filings and other information on its website are not incorporated by reference in this Annual Report. Interested parties may request a copy of this filing, and any other report, at no cost, by writing to the Company at the following address: C/ Santiago de Compostela 94, 28035 Madrid—Spain or calling +34 917 407 440 or by e-mail at investor.relations@atento.com. In compliance with New York Stock Exchange Corporate Governance Rule 303A.11, the Company provides on its website a summary of the differences between its corporate governance practices and those of U.S. domestic companies under the New York Stock Exchange listing standards. I. Subsidiary Information Refer to Note 3t to the consolidated financial statements. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our board of directors is currently responsible for overseeing our risk management process. The board of directors focuses on our general risk management strategy and the most significant risks facing us, and ensures that appropriate risk mitigation strategies are implemented by management. The board of directors is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions. Our board of directors delegated to the Audit Committee oversight of our risk management process. Our other board committees also consider and address the risks as they perform their respective committee responsibilities. All committees report to the full board of directors as appropriate, including when a matter rises to the level of a material or enterprise level risk. Our management is responsible for day-to-day risk management. This oversight includes identifying, evaluating and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels. The Atento Group’s activities are exposed to market risks: (foreign currency risk and interest rate risk). The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to hedge certain risk exposures. a) Market risk Interest rate risk in respect of cash flow and fair value Interest risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short- term maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest at fixed rates. Atento Group’s finance costs are exposed to fluctuations in interest rates. At December 31, 2020, 4.5% of financial debt with third parties bore interests at variable rates, while at December 31, 2019 this amount was 0.2%. In both 2019 and 2020, the exposure was to the Brazilian CDI rate and the TJLP (Brazilian Long-Term Interest Rate). 96 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 99/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The Atento Group’s policy is to monitor the exposure to interest at risk. As of December 31, 2020, there were no outstanding interest rate hedging instruments. Foreign currency risk Our foreign currency risk arises from our local currency revenues, receivables and payables, while the U.S. dollar is our reporting currency. We benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same currency as the majority of the expenses we incur. In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure incurred in currencies other than those of the functional currency of the countries. The main source of our foreign currency risk is related to the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity date) and also a portion of the principal (until August 2020). As of December 31, 2020, the estimated fair value of the cross-currency swaps totaled a net asset of $5.9 million (asset of $3.1 million as of December 31, 2019). The table below shows the impact of a +/-10 percentage points variation in the exchange rate on the value of the cross-currency swaps. CROSS-CURRENCY FAIR VALUE +10.0% -10.0% Thousands of U.S. dollars 2020 5,868 9,884 872 For additional information on the interest rate risk and foreign currency risk, see Notes 4 and 14 to our consolidated financial statements. Sensitivity analysis of foreign currency risk The Atento Group has reasonable control over its foreign currency risks, as its financial assets (cash and cash equivalents) and financial liabilities (Finance Leases and other borrowings) denominated in currencies other than their functional are adequately matched. We performed a sensitivity analysis based on the outstanding volume of financial assets and liabilities and we applied a 10% appreciation of each asset/liability currency versus the functional currency which highlights the limited impact that such event would have on the income statements is U.S. dollars. A sensitivity analysis of foreign currency risk for the Atento Group’s is provided in Note 4 of the consolidated financial statements. Country risk To manage or mitigate country risk, we repatriate the funds generated in the Americas and Brazil that are not required for the pursuit of new profitable business opportunities in the region and subject to the restrictions of our financing agreements. b) Credit risk The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts. Credit risk arising from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements are regulated by a master agreement revised annually on the basis of the conditions prevailing in the markets and the countries where Atento operates. The master agreement establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and short-term debt ratings); (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be invested. 97 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 100/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The Atento Group’s maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets. The Atento Group holds no guarantees as collection insurance. c) Liquidity risk The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the payments falling due, factoring in a degree of cushion. In practice, this has meant that the Atento Group’s average debt maturity must be longer enough to support business operation normal conditions (assuming that internal projections are met). A maturity schedule for the Atento Group’s financial liabilities is provided in Note 16 of the consolidated financial statements. ($ in millions, except Net Debt/Adj. EBITDA LTM) Cash and cash equivalents Debt: Senior Secured Notes Super Senior Credit Facility Brazilian Debentures BNDES Lease Liabilities (3) Other Borrowings Total Debt Net Debt with third parties (1) (unaudited) Adjusted EBITDA LTM (2) (*) (non-GAAP) (unaudited) Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited) 2018 As of December 31, 2019 2020 133.5 400.0 - 14.7 24.0 5.5 15.5 459.8 326.2 184.8 1.8x 124.7 501.9 - - 1.2 194.8 22.8 720.6 595.9 153.4 3.9x 209.0 505.6 30.0 - 0.6 152.7 38.9 727.8 518.8 161.2 3.2x (1) In considering our financial condition, our management analyzes Net debt, which is defined as total debt less cash and cash equivalents. Net debt is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies. (2) Adjusted EBITDA LTM (Last Twelve Months) is defined as EBITDA adjusted to exclude restructuring costs and other items not related to our core results of operations. (3) Consider the impact on December 31, 2020 of application of IFRS 16 (former operating leases not related to short-term or low-value leases are now shown as debt) was $144.1 million and $8.6 million of other financial leases. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A. Debt Securities Not applicable. 98 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 101/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents B. Warrants and Rights Not applicable. C. Other Securities Not applicable. D. American Depository Shares Not applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Not applicable. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not applicable. ITEM 15. CONTROLS AND PROCEDURES A. Disclosure Controls and Procedures As of December 31, 2020, under management’s supervision and with its participation, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of our disclosure controls and procedures for the period relating to the information contained in this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020 to enable the Company to record, process, summarize, and report information required to be included in the reports that it files or submits under the Securities Exchange Act of 1934, within the time periods required. B. Management’s Annual Report on Internal Control over Financial Reporting The Management of Atento S.A. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, Management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper Management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statements preparation and presentation. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 based on the criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). 99 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 102/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Based on such assessment and criteria, Management has concluded that the Company’s internal controls over financial reporting are effective as of December 31, 2020. C. Attestation Report of the Registered Public Accounting Firm Ernst & Young Auditores Independentes S.S., the independent registered public accounting firm that has audited our consolidated financial statements, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2020 dated March 22, 2021 and included herein, expressed an unqualified opinion. This attestation report appears on page F-2. D. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting for the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 16. [RESERVED] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Our Audit Committee consists of Antonio Viana, Thomas Iannotti and David Garner. Our board of directors has determined that Antonio Viana qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our board of directors has adopted a written charter for the Audit Committee, which is available on our corporate website at www.atento.com. Our website is not part of this Annual Report. ITEM 16B. CODE OF ETHICS We have adopted a Code of Ethics applicable to all of our directors, officers and employees, including our principal executive officer, principal financial officer and accounting officers, and all persons performing similar functions. A copy of the Code is available on our corporate website at www.atento.com. The Code of Ethics as of December 31, 2020 is set forth in Exhibit 11.1 to this Annual Report. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth by category of service the total fees for services performed in 2019 and 2020 by our principal accountants, Ernst & Young Auditores Independentes S.S., including fees from member firms Ernst & Young. Audit-fees (*) Audit-related fees (**) All other fees (***) Total Thousands of U.S. dollars 2019 2020 1,341 - 143 1,484 1,327 422 106 1,855 All services and fees were pre-approved by the Audit Committee Chair. (*) Audit fees: includes audit of the annual financial statements, the review of the Form 20-F Report filed with the Securities and Exchange Commission (SEC) and local statutory audits of subsidiaries of the Atento Group. (**) Audit-related fees: includes fees related to issue comfort letters. (***) Other fees in 2019 services related to support Atento on its contract management process. In 2020 related include service of evaluating industries key trends and potential strategic for the Brazilian market. The fees which were pre-approved by Audit Committee as determined by the section 201 and 202 of the Sarbanes Oxley Act. 100 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 103/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table reflects purchases of our equity securities by us or our affiliates in 2020. Atento S.A. – Buyback Program Period Total Number of Shares Purchased (3) Average Price Paid per Share in USD (4) May 2020 June 2020 July 2020 August 2020 September 2020 October 2020 November 2020 December 2020 Total 5,532 84,066 18,711 7,635 16,430 8,981 11,790 16,594 169,739 4.55 6.28 6.98 10.21 9.90 9.03 10.62 12.24 7.86 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs in 2020 (1) (5) 5,532 89,598 108,309 115,944 132,374 141,355 153,145 169,739 169,739 Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) - - - - - - - (1) On February 4, 2020, the shareholder’s meeting of the Company approved the renewal of the authorization to the Board of Directors to acquire its own fully paid-up shares on the New York Stock Exchange or any other exchange without making an acquisition offer to the shareholders of the Company, for a period of 5 years, for a maximum number of shares to be acquired, which shall be up to 30% of the Company’s share capital. On February 26, 2020, our Board of Directors approved a new share buyback program, pursuant to the program approved by shareholders on February 4, 2020. The program authorized by the Board of Directors is limited to $30.0 million in up to 12 months, beginning March 2020. (2) Conform the new program approved by the Board on February 26, 2020, the share buyback is limited to $30.0 million in up to 12 months, starting in March 2020. We believe the share treasury program approved by the Board of Directors as confidence in our business prospects moving forward. (3) The “Total Number of Shares Purchased” was 5,532 in May 2020, 84,066 in June 2020, 18,711 in July 2020, 7,635 in August 2020, 16,430 in September 2020, 8,981 in October 2020, 11,790 in November 2020 and 16,594 in December 2020. In 2019, the “Total Number of Shares Purchased” was 4,425,499. (4) The “Average Price Paid per Share in USD” was USD 4.55 in May 2020, USD 6.28 in June 2020, USD 6.98 in July 2020, USD 10.21 in August 2020, USD 9.90 in September 2020, USD 9.03 in October 2020, USD 10.62 in November 2020 and USD 12.24 in December 2020. In 2019, the “Average Price Paid per Share in USD” was USD 2.52. (5) The “Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs” in 2020 was 5,532 in May 2020 89,598 in June 2020, 108,309 in July 2020, 115,944 in August 2020, 132,374 in September 2020, 141,355 in October 2020, 153,145 in November 2020 and 169,739 in December 2020. In 2019, the “Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs” was 4,425,499. ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16G. CORPORATE GOVERNANCE Our ordinary shares are listed on the NYSE. For purposes of NYSE rules, so long as we are a foreign private issuer, we are eligible to take advantage of certain exemptions from NYSE corporate governance requirements provided in the NYSE rules. We are required to disclose the significant ways in which our corporate governance practices differ from those that apply to U.S. companies under NYSE listing standards. Set forth below is a summary of these differences: Director Independence—The NYSE rules require domestic companies to have a majority of independent directors, but as a foreign private issuer we are exempt from this requirement. Our board of directors consists of eight members and we believe that five of our board members satisfy the “independence” requirements of the NYSE rules. Board Committees—The NYSE rules require domestic companies to have a Compensation Committee and a nominating and corporate governance committee composed entirely of independent directors, but as a foreign private issuer we are exempt from these requirements. We have a Compensation Committee comprised of two members, one of which we believe satisfies the “independence” requirements of the NYSE rules. We do not have a nominating and corporate governance committee. However, we have an audit committee that we believe consists entirely of “independent” directors, as required by the NYSE listing standards. https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 104/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm ITEM 16H. MINE SAFETY DISCLOSURE Not applicable. 101 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 105/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents PART III ITEM 17. FINANCIAL STATEMENTS The Company has responded to Item 18 in line of this item. ITEM 18. FINANCIAL STATEMENTS Consolidated financial statements of Atento S.A. are filed as part of this Annual Report. ITEM 19. EXHIBITS (a) Index to Consolidated Financial Statements Consolidated Financial Statements of Atento S.A. Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position as of December 31, 2019 and 2020 Consolidated Statements of Operations for the years ended December 31, 2018, 2019 and 2020 Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2018, 2019 and 2020 Consolidated Statements of Changes in Equity for the years ended December 31, 2018, 2019 and 2020 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2019 and 2020 Notes to the Consolidated Financial Statements for the years ended December 31, 2018, 2019 and 2020 (b) List of Exhibits Page F-1 F-4 F-5 F-7 F-8 F-9 F-11 F-12 Exhibit Number 1.1 2.1 4.3 4.4 4.5 4.6 Description Amended and Restated Articles of Association of Atento S.A., incorporated by reference to Exhibit 1.1 to Atento S.A.’s Amendment No. 1 to Annual Report on Form 20-F (File No. 001-36671), initially filed on April 20, 2016. Indenture, dated as of August 10, 2017, among Atento Luxco 1 S.A., the guarantors from time to time party thereto, Wilmington Trust, National Association, as trustee, and Wilmington Trust (London) Limited, in its capacity as security agent under the intercreditor agreement, as collateral agent, incorporated by reference to Exhibit 4.1 to Atento S.A.’s Report on Form 6-K (File No. 001-36671), filed on August 15, 2017. Subscription and Securityholder’s Agreement, dated as of December 4, 2012, by and among BC Luxco Topco, BC Luxco and each of the investors party thereto, incorporated by reference to Exhibit 10.4 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. Subscription and Securityholder’s Agreement, dated as of December 4, 2012, by and among BC Luxco Topco, BC Luxco and each of the investors party thereto, incorporated by reference to Exhibit 10.5 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. Master Services Agreement between BC Luxco 1 and Telefónica S.A., dated as of December 11, 2012, as amended by Amendment Agreement No. 1 thereto dated as of May 16, 2014, and as amended by Amendment Agreement No.2 dated November 10, 2016, incorporated by reference to Exhibit 10.6 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014.** Super Senior Revolving Credit Facilities Agreement, dated as of August 8, 2017, among Atento Luxco 1 S.A., the guarantors party thereto, BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., as arrangers, Banco Bilbao Vizcaya Argentaria, S.A., as agent, and Wilmington Trust (London) Limited, as security agent, incorporated by reference to Exhibit 4.2 to Atento S.A.’s Report on Form 6-K (File No. 001-36671), filed on August 15, 2017. 102 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 106/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 4.8 4.9 4.10 4.11 Exhibit Number 4.12 4.13 4.14 4.15 8.1 11.1 12.1 12.2 13.1 13.2 Instrumento Particular de Escritura (Brazilian debentures), incorporated by reference to Exhibit 10.9 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. 2014 Omnibus Incentive Plan, incorporated by reference to Exhibit 4.2 to Atento S.A.’s Registration Statement on Form S-8 (File No. 333-203101), filed on March 30, 2015. Amendment to 2014 Omnibus Incentive Plan 6 K July 28, 2020. Form of Performance Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.11 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. Form of Time Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.12 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. Description Registration Rights Agreement, incorporated by reference to Exhibit 4.12 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671), filed on March 31, 2015. Consulting Services and Information Rights Agreement, incorporated by reference to Exhibit 4.13 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671), filed on March 31, 2015. Form of Directors and Officers Indemnification Agreement, incorporated by reference to Exhibit 10.15 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014. Amendment Agreement No. 2, dated as of November 8, 2016, to the Master Services Agreement, by and between Luxco (f/k/a BC Luxco 1, S.A.) and Telefónica, S.A., dated as of December 11, 2012, incorporated by reference to Exhibit 99.1 to Atento S.A.’s Report on Form 6-K (File No. 001-36671), filed on November 10, 2016.** List of subsidiaries of Atento S.A., incorporated by reference to Exhibit 8.1 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671), filed on March 31, 2015.* Code of ethics, incorporated by reference to Exhibit 11.1 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671), filed on March 31, 2015. Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith. ** Application has been granted by the Securities and Exchange Commission for confidential treatment of certain provisions of these exhibits. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission. 103 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 107/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 22, 2021 ATENTO S.A. By: Name: Title: By: Name: Title: /s/ Carlos López-Abadía Carlos López-Abadía Chief Executive Officer /s/ Jose Carlos Antonio de Souza Azevedo Jose Carlos Antonio de Souza Azevedo Chief Financial Officer 104 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 108/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents [THIS PAGE INTENTIONALLY LEFT BLANK] https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 109/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Atento S.A. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Atento S.A. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 22, 2021 expressed an unqualified opinion thereon. Adoption of IFRS 16 As discussed in Note 3(u) to the consolidated financial statements, the Company changed its method of accounting for leases in 2019, due to the adoption of IFRS 16 - Leases, using the modified retrospective method of adoption. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. F-1 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 110/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Description of the Matter Recognition of unbilled revenue As discussed in Note 3(i) to the consolidated financial statements, the Company recognizes revenue on an accrual basis during the period in which services are rendered. For services delivered and not yet invoiced the Company recognizes unbilled revenue and trade receivables based on pricing contractually agreed by its customers and volume of services rendered. Auditing the Company´s unbilled revenue and trade receivables was specially challenging as the process to accrue unbilled revenue and trade receivables is highly dependent on manual data collection and calculations. The Company’s disclosures concerning revenue recognition in respect of unbilled revenue are included in Note 3(i) to the consolidated financial statements. We obtained an understanding, evaluated the design and tested the operating effectiveness of the related controls over the Company’s accounting for unbilled revenue and trade receivables. For example, we tested controls over management’s data gathering process and computations used to calculate the unbilled revenue and trade receivables.   How We Addressed the Matter in Our Audit To test unbilled trade receivables, our audit procedures included, among others, obtaining copies of customer contracts and comparing terms and conditions with the Company’s evaluation of the related performance obligations; testing the mathematical accuracy of the Company’s calculation of the amount of revenue to be recognized; assessing whether the prices applied to those services were in accordance with the contractual agreement with the customer and comparing the actual subsequently invoiced services with the unbilled trade receivables. We also assessed the Company’s disclosures in respect to its recognition of unbilled revenue in Note 3(i) to the consolidated financial statements. Description of the Matter Goodwill impairment assessment At December 31, 2020, the Company’s goodwill balance was U.S.$103,014 thousand. As discussed in Note 8 of the financial statements, goodwill is tested for impairment at least annually, as required by IAS 36. Management uses projections of cash flows for the cash generating units to which goodwill is assigned that are based on estimations of future business results and market conditions. Auditing the goodwill impairment testing was complex due to the significant estimation uncertainty that is involved in management´s goodwill impairment assessment. That significant estimation uncertainty is primarily derived from the sensitivity of the respective value in use to the assumptions about future business performance and market conditions. The significant assumptions used to determine the value in use include expected growth rates, the discount rate applied, the terminal growth rate, among others. Such assumptions may be materially affected by market conditions or future economic scenarios. The Company’s disclosures concerning goodwill impairment assessment are included in Note 8 to the consolidated financial statements. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the related controls over the Company’s goodwill impairment assessment process. For example, we tested controls over management’s forecasting process and the review of significant assumptions used in estimating the value in use. To test the estimated value in use of the Company’s reporting units, our audit procedures included, among others, involving our valuation specialists to assist in assessing methodologies, testing significant assumptions and underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model and other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the value in use of the reporting units that would result from changes in the assumptions. We also compared management’s forecasts used in the goodwill impairment assessment to the ones approved by the Board of Directors. We also assessed the Company’s disclosures in respect to its goodwill impairment assessment in Note 8 to the consolidated financial statements. https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 111/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm F-2 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 112/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Description of the Matter Recoverability of deferred tax assets At December 31, 2020, the Company recognized deferred tax assets for U.S.$102,353 thousand. The Company operates in various countries which are subject to their respective local tax regulations. In assessing the recoverability of deferred tax assets management uses projections of taxable income that are based on estimations of future business performance and market conditions, including applicable tax regulations. Auditing the Company´s assessment of recoverability of deferred tax assets was specially challenging as management assessment involves significant judgment by management in relation to underlying assumptions such as the timing and level of future taxable income, which may be affected by future regulatory changes, economic events or market conditions. The Company’s disclosures concerning deferred taxes are included in Note 20 to the consolidated financial statements. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the related controls over the Company’s deferred tax asset recoverability assessment process. For example, we tested controls over management’s forecasting process and the review of significant assumptions used in estimating future taxable income. To test the deferred tax assets recoverability assessment, our audit procedures included, among others, comparing the forecast used in assessing the recoverability of deferred tax assets to the one approved by the Board of Directors; involving our tax professionals to assist in evaluating the application of tax law and regulations in the estimation of future taxable income and performing sensitivity analyses and testing the key assumptions used. We also assessed the Company’s disclosures in respect to its deferred tax assets in Note 20 to the consolidated financial statements. /s/ ERNST & YOUNG Auditores Independentes S.S. We have served as the Company’s auditor since 2005. São Paulo, Brazil, March 22, 2021 F-3 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 113/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Atento S.A. Opinion on Internal Control over Financial Reporting We have audited Atento S.A. and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Atento S.A. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s consolidated statements of financial position as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated March 22, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ ERNST & YOUNG Auditores Independentes S.S. São Paulo, Brazil March 22, 2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 114/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm F-4 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 115/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) ASSETS NON-CURRENT ASSETS Intangible assets Goodwill Right-of-use assets Property, plant and equipment Non-current financial assets Trade and other receivables Other non-current financial assets Derivative financial instruments Other taxes recoverable Deferred tax assets CURRENT ASSETS Trade and other receivables Trade and other receivables Current income tax receivable Other taxes recoverable Other current financial assets Cash and cash equivalents TOTAL ASSETS The accompanying notes are an integral part of the consolidated financial statements. F-5 Notes 6 7 10 9 13 12 14 20c) 20b) 13 20c) 20c) 12 15 December 31, 2019 765,839 2020 604,327 160,041 119,902 181,564 116,893 82,158 22,124 54,652 5,382 5,650 99,631 538,772 388,308 359,599 28,709 24,664 1,094 124,706 106,643 103,014 137,842 90,888 70,275 20,995 38,192 11,088 4,815 90,850 571,796 324,850 299,086 25,764 36,794 1,158 208,994 1,304,611 1,176,123 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 116/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) EQUITY AND LIABILITIES TOTAL EQUITY EQUITY ATTRIBUTABLE TO: OWNERS OF THE PARENT COMPANY Share capital Share premium Treasury shares Retained losses Translation differences Hedge accounting effects Stock-based compensation NON-CURRENT LIABILITIES Deferred tax liabilities Debt with third parties Derivative financial instruments Provisions and contingencies Non-trade payables Other taxes payable CURRENT LIABILITIES Debt with third parties Derivative financial instruments Trade and other payables Trade payables Income tax payables Other taxes payables Other non-trade payables Provisions and contingencies TOTAL EQUITY AND LIABILITIES The accompanying notes are an integral part of the consolidated financial statements. F-6 Notes 19 20b) 17 14 21 18 20c) 17 14 18 20c) 20c) 18 21 December 31, 2019 207,020 2020 119,676 207,020 119,676 49 619,461 (19,319) (127,070) (271,273) (8,872) 14,044 49 613,619 (12,312) (178,988) (280,715) (37,360) 15,383 718,989 651,662 20,378 633,498 2,289 48,326 11,744 2,754 - 594,636 5,220 45,617 4,296 1,893 378,602 404,785 87,117 167 272,547 71,676 12,671 93,765 94,435 18,771 1,304,611 133,187 - 249,723 59,415 16,838 97,104 76,366 21,875 1,176,123 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 117/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2018, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) Revenue Other operating income Other gains and own work capitalized Operating expenses: Supplies Employee benefit expenses Depreciation Amortization Changes in trade provisions Impairment charges Other operating expenses OPERATING PROFIT Finance income Finance costs Net foreign exchange loss NET FINANCE EXPENSE PROFIT/(LOSS) BEFORE INCOME TAX Income tax expense PROFIT/(LOSS) FOR THE YEAR PROFIT/(LOSS) ATTRIBUTABLE TO: OWNERS OF THE PARENT NON-CONTROLLING INTEREST PROFIT/(LOSS) FOR THE YEAR EARNINGS/(LOSS) PER SHARE: Basic earnings/(loss) per share (in U.S. dollars) Diluted earnings/(loss) per share (in U.S. dollars) The accompanying notes are an integral part of the consolidated financial statements. F-7 Notes 22a) 22b) 22c) 22d) 22e) 22f) 22f) 8 22g) 22h) 22h) 22h) 20a) For the years ended December 31, 2020 2018 2019 1,412,262 1,818,180 5,574 19,377 99 180 1,707,286 4,539 10,477 (70,816) (1,365,181) (36,566) (58,679) (1,032) - (215,958) 89,505 (66,427) (1,301,031) (83,556) (57,226) (3,730) (30,909) (166,778) 12,645 (72,276) (1,060,408) (73,939) (46,981) (5,293) - (118,711) 40,327 18,843 (45,612) (28,836) (55,605) 33,900 (13,414) 20,486 18,540 1,946 20,486 20,045 (68,085) (9,080) (57,120) (44,475) (36,218) (80,693) (81,306) 613 (80,693) 15,683 (70,293) (27,818) (82,428) (42,101) (4,779) (46,880) (46,880) - (46,880) 24 24 1.26 1.25 (5.63) (5.63) (3.33) (3.33) https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 118/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME /(LOSS) For the years ended December 31, 2018, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) Profit/(loss) for the year Other comprehensive income/(loss) to be reclassified to profit and loss in subsequent periods: Net investment hedge Exchange differences on translation of foreign operations Translation differences Other comprehensive income/(loss) Total comprehensive income/(loss) Total comprehensive income/(loss) attributable to: Owners of the parent Non-controlling interest Total comprehensive income/(loss) The accompanying notes are an integral part of the consolidated financial statements. F-8 For the years ended December 31, 2020 2019 2018 (46,880) (80,693) 20,486 (1,190) - (88,754) (89,944) (69,458) (69,709) 251 (69,458) (10,346) (6,930) (14,953) (32,229) (112,922) (112,733) (189) (112,922) 13,838 (42,326) (9,442) (37,930) (84,810) (84,810) - (84,810) https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 119/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2018, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) Balance at January 1, 2018 Comprehensive income/(loss) for the year Profit for the year Other comprehensive income/(loss), net of taxes Compensation of retained losses Increase of share capital Dividends Stock-based compensation Acquisition of treasury shares Monetary correction caused by hyperinflation Balance at December 31, 2018 Share capital 48 Share premium 639,435 - - - - 1 - - - - - - - (24,147) - - - - - 49 615,288 Treasury shares - - - - - - - - (8,178) - (8,178) Reserve for acquisition of non- controlling interest Retained earnings/ (losses) (23,531) (94,535) Translation differences (170,063) Hedge accounting effects 9,594 - - - - - - - - - 18,540 18,540 (87,059) (1,190) - - - (87,059) (1,190) 24,147 - - - - 35,524 - - - - - - - - - - - - Stock-based compensation Total owners of the parent company 368,363 Non- controlling interest 9,476 Total equity 377,839 (69,709) 251 (69,458) 7,415 - - - - - - 18,540 (88,249) 1,946 (1,695) - 1 - - - (1,186) 5,551 5,551 - - (8,178) 35,524 - - - 20,486 (89,944) - 1 (1,186) 5,551 (8,178) 35,524 (23,531) (16,325) (257,122) 8,404 12,966 331,551 8,541 340,092 Reserve to acquisition of non- controlling interest Retained (losses) Treasury shares (8,178) (23,531) (16,325) Translation differences (257,122) Share capital 49 Share premium 615,288 Hedge accounting effects Stock-based compensation 8,404 12,966 Total owners of the parent company 331,551 Non- controlling interest 8,541 Total equity 340,092 Balance at January 1, 2019 Comprehensive income/(loss) for the year Loss for the year Other comprehensive income/(loss), net of taxes Acquisition of non- controlling interest Stock-based compensation Shares delivered Acquisition of treasury shares Monetary correction caused by hyperinflation Balance at December 31, 2019 - - - - - - - - - - - - - 4,173 - - - - - - - - (11,141) - 49 619,461 (19,319) - - - (81,306) (14,151) (17,276) (81,306) - - - (14,151) (17,276) - - - - - - - - - - 23,531 (8,096) - - - - - - - - (21,343) (127,070) F-9 (112,733) (189) (112,922) - - - - 5,251 (4,173) - - (81,306) (31,427) 15,435 5,251 - (11,141) (21,343) 613 (802) (8,352) - - - - - (80,693) (32,229) 7,083 5,251 - (11,141) (21,343) 207,020 (271,273) (8,872) 14,044 207,020 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 120/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Balance at January 1, 2020 Comprehensive income/(loss) for the year Loss for the year Other comprehensive income/(loss), net of taxes Stock-based compensation Shares delivered Acquisition of treasury shares Monetary correction caused by hyperinflation Balance at December 31, 2020 Share capital 49 Share premium 619,461 Treasury shares (19,319) Retained (losses) (127,070) Translation differences (271,273) - - - - (5,842) - - - - - - 8,335 (1,328) (46,880) (46,880) (9,442) - - - - - (9,442) (28,488) - - - - - - - - - (5,038) Hedge accounting effects (8,872) (28,488) - Stock-based compensation 14,044 Total owners of the parent company 207,020 Total equity 207,020 - - - 3,832 (2,493) - - (84,810) (46,880) (37,930) 3,832 - (1,328) (5,038) (84,810) (46,880) (37,930) 3,832 - (1,328) (5,038) 613,619 (12,312) (178,988) (280,715) (37,360) 15,383 119,676 119,676 - - - - - - - 49 The accompanying notes are an integral part of the consolidated financial statements. F-10 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 121/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2018, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) Notes 22f) 22b) 22h) 22h) 22h) 5 Operating activities Profit/(loss) before income tax Adjustments to reconcile profit/(loss) before tax to net cash flows: Amortization and depreciation Impairment losses Changes in trade provisions Share-based payment expense Change in provisions Grants released to income Losses on disposal of property, plant and equipment Losses on disposal of financial assets Finance income Finance costs Net foreign exchange differences Changes in other (gains)/losses and own work capitalized Changes in working capital: Changes in trade and other receivables Changes in trade and other payables Other payables Interest paid Interest received Income tax paid Other payments Net cash flows from operating activities Investing activities Payments for acquisition of intangible assets Payments for acquisition of property, plant and equipment Acquisition of subsidiaries, net of cash acquired Net cash flows used in investing activities Financing activities Proceeds from borrowings from third parties Repayment of borrowings from third parties Payments of lease liabilities Acquisition of treasury shares Dividends paid Net cash flows provided by/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Foreign exchange differences Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The accompanying notes are an integral part of the consolidated financial statements. F-11 For the years ended December 31, 2019 2020 2018 33,900 (44,475) (42,101) 95,245 - 1,656 4,088 11,124 (1,000) 1,568 416 (18,843) 45,612 28,896 (180) 168,582 (6,936) (259) (36,094) (43,289) (49,477) 674 (20,446) (8,757) (78,006) 81,187 (24,813) (16,355) - (41,168) 58,462 (81,675) - (8,178) (2,318) (33,709) 6,310 (14,546) 141,762 133,526 140,782 30,909 3,730 5,251 33,917 (1,165) 190 (2) (20,045) 68,085 9,080 (23,013) 247,719 (55,730) 47 (4,837) (60,520) (48,737) 1,406 (31,308) (17,561) (96,200) 46,524 (18,709) (21,359) (15,827) (55,895) 173,717 (101,479) (56,088) (11,141) - 5,009 (4,362) (4,458) 133,526 124,706 120,920 - 5,293 4,316 27,955 (878) 306 - (15,683) 70,293 27,818 (592) 239,748 2,205 1,589 (14,524) (10,730) (46,199) 11,844 (11,222) (14,349) (59,926) 126,991 (6,913) (31,268) - (38,181) 121,771 (70,543) (48,947) (1,328) - 953 89,763 (5,475) 124,706 208,994 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 122/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents ATENTO S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2018, 2019 and 2020 (In thousands of U.S. dollars, unless otherwise indicated) 1) COMPANY ACTIVITY AND CORPORATE INFORMATION (a) Description of business Atento S.A. (the “Company”) and its subsidiaries (“Atento Group”) offer customer relationship management services to their clients through contact centers or multichannel platforms. The Company was incorporated on March 5, 2014 under the laws of the Grand-Duchy of Luxembourg, with its registered office in Luxembourg at 4, Rue Lou Hemmer. The majority direct shareholders of the Company are Mezzanine Partners II Offshore Lux Sarl II, Mezzanine Partners IIOnshore Lux Sarl II, Mezzanine Partners II Institutional Lux Sarl II, Mezzanine Partners II AP LUX SARL II, Chesham Investment Pte Ltd. and Taheebo Holdings LLC, Arch Reinsurance Ltd. The Company may act as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect interests or that form part of its group. The Company may secure funds, with the exception of public offerings, through any kind of lending, or through the issuance of bonds, securities or debt instruments in general. The Company may also carry on any commercial, industrial, financial, real estate business or intellectual property related activity that it deems necessary to meet the aforementioned corporate purposes. The corporate purpose of its subsidiaries, with the exception of the intermediate holding companies, is to establish, manage and operate CRM centers through multichannel platforms; provide telemarketing, marketing and “call center” services through service agencies or in any other format currently existing or which may be developed in the future by the Atento Group; provide telecommunications, logistics, telecommunications system management, data transmission, processing and internet services and to promote new technologies in these areas; offer consultancy and advisory services to clients in all areas in connection with telecommunications, processing, integration systems and new technologies, and other services related to the above. The Company’s ordinary shares are traded on NYSE under the symbol “ATTO”. 2) BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS a) Statement of compliance with IFRS and basis of preparation The consolidated financial statements of December 31, 2020 were prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standard Board (“IASB”) prevailing at December 31, 2020. The consolidated financial statements have been prepared on a historical costs basis, except for Argentina that is adjusted for inflation as required by IAS 29 Financial Reporting in Hyperinflationary Economies in Argentina, and derivative financial instruments and financial liability related to the option for acquisition of non- controlling interest, which have been measured at fair value. The consolidated financial statements have been authorized for issue and publication by the Company's Management and Audit Committee on March 22, 2021. The preparation of financial statements under IFRS as issued by the IASB requires the use of certain key accounting estimates. IFRS also requires Management to exercise judgment throughout the process of applying the Atento Group’s accounting policies. Note 3s discloses the areas requiring a more significant degree of judgment or complexity and the areas where assumptions and estimates are more relevant to the consolidated financial statements. Also, Note 3 contains a detailed description of the most significant accounting policies used to prepare these consolidated financial statements. The amounts in these consolidated financial statements, comprising the consolidated statements of financial position, the consolidated statements of operations, the consolidated statements of comprehensive income/(loss), the consolidated statements of changes in equity, the consolidated statements of cash flows, and the notes thereto are expressed in thousands of U.S. dollars and all values are rounded to the nearest thousand, unless otherwise indicated. F-12 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 123/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents b) Consolidated statements of cash flows The consolidated statements of cash flows have been prepared using the indirect method pursuant to IAS 7, “Statement of Cash Flows”. Foreign currency transactions are translated at the average exchange rate for the period, in those cases where the currency differs from the presentation currency of Atento Group (U.S. dollar), as indicated in Note 3c. The effect of exchange rate fluctuations on cash and cash equivalents, maintained or owed, in foreign currency, is presented in the statements of cash flows to reconcile cash and cash equivalents at the beginning of the year and at year-end. 3) ACCOUNTING POLICIES The main accounting policies used to prepare the accompanying consolidated financial statements are set out below. a) Principles of consolidation, business combinations and goodwill (i) Subsidiaries Subsidiaries are all entities over which the Atento Group has control. The Atento Group controls an entity when the Atento Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Group, until the Group loses control of the entity. Intercompany transactions, balances and unrealized gains on transactions between the Atento Group companies are eliminated on consolidation, except those arisen from exchange variations. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Atento Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of operations, statement of comprehensive income/(loss), statement of changes in equity and financial position. (ii) Business combinations and goodwill When the Atento Group acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquire. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognized in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss. Goodwill is initially measured as any excess of the total consideration transferred over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is greater than the total consideration transferred, the difference is recognized in the statements of operations as a gain from a bargain purchase. Goodwill acquired in a business combination is allocated to each cash-generating unit, or group of cash-generating units, that are expected to benefit from the synergies arising in the business combination. Goodwill is tested for impairment annually or whenever there are certain events or changes in circumstances indicating potential impairment. The carrying amount of the assets allocated to each cash-generating unit is then compared with its recoverable amount, which is the greater of its value in use or fair value less costs to sell. Any impairment loss is immediately taken to the statements of operations and may not be reversed (see Note 3h). F-13 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 124/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents b) Functional and presentation currency Items included in the financial statements of each of the Atento Group’s entities are measured using the currency of the primary economic environment in which the entities operate (‘the functional currency’). The consolidated financial statements are presented in thousands of U.S. dollars, which is the presentation currency of the Atento Group. c) Foreign currency translation The results and financial position of all Atento Group entities whose functional currency is different from the presentation currency are translated into the presentation currency as follow: · Statements of financial position assets and liabilities are translated at the exchange rate prevailing at the reporting date. · Statements of operations items are translated at average exchange rates for the year (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). · Hyperinflationary economies: Under IAS 29, the non-monetary assets and liabilities, the equity and the statements of operations of subsidiaries operating in hyperinflationary economies are restated applying a general price index. The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period and translated to U.S. dollar at the closing rate of the period, for the purposes of conversion, applying IAS 21. · Proceeds and payments shown on the statements of cash flows are translated at the average exchange rates for the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case proceeds and payments are translated at the rate on the dates of the transactions). Proceeds and payments for the subsidiary located in Argentina shown on the statements of cash flows are translated at the exchange rates prevailing at the reporting date. · Retained earnings are translated at historical exchange rates. · All resulting exchange differences are recognized in other comprehensive income/(loss). Goodwill and fair value adjustments to net assets arising from the acquisition of a foreign company are considered to be assets and liabilities of the foreign company and are translated at year-end exchange rates. Exchange differences arising are recognized in other comprehensive income/(loss). d) Foreign currency transactions Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the date of the transactions or valuation date, in the case of items being remeasured. Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation at reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of operations, except when deferred in other comprehensive income/(loss). All differences arising on non–trading activities are taken to other operating income/expense in the statements of operations, with the exception of the effective portion of the differences on cash flows and net investment hedges that are accounted for as an effective hedge against a net investment in a foreign entity. These differences are recognized in other comprehensive income/(loss) (OCI) until the hedge settlement and disposal of the net investment, at which time, they are recognized in the statements of operations. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Non–monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the date of recognition. F-14 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 125/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents e) Segment information Segment information is presented in accordance with management information reviewed by the Chief Operating Decision Maker (“CODM”). The CODM, responsible for allocating resources and assessing performance of operational segments, has been identified as the Chief Executive Officer (“CEO”) responsible for strategic decisions. The CODM considers the business from a geographical perspective and analyzes it across three operational segments-EMEA, Americas and Brazil. No operating segments have been aggregated to form the reportable operating segments as compared to the previous years. f) Intangible assets Intangible assets are stated at acquisition cost, less any accumulated amortization and any accumulated impairment losses. The intangible assets acquired in a business combination are initially measured at their fair value as of the acquisition date. The useful lives of intangible assets are assessed on a case-by-case basis to be either finite or indefinite. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful life and assessed for impairment whenever events or changes indicate that their carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. The amortization charge on intangible assets is recognized in the consolidated statements of operations under “Amortization”. Amortization methods and useful lives are revised annually at the end of each reporting period and, where appropriate, adjusted prospectively. Customer base Customer base acquired in a business combination is recognized at fair value at the acquisition date and have finite useful lives and are subsequently carried at cost less accumulated amortization, which has been estimated to be between seven and twelve years. The customer base relate to all agreements, tacit or explicit, entered into between the Atento Group and the former owner of the Atento Group and between the Atento Group and other customers, in relation to the provision of services, and that were acquired as part of the business combinations. Software Software is measured at cost (at acquisition or development costs) and amortized on a straight-line basis over its useful life, generally estimated to be between three and ten years. Maintenance cost of software is expensed as incurred. Development costs directly attributable to the design and creation of software that are identifiable and unique, and that may be controlled by the Group, are recognized as an intangible asset providing the following conditions are met: · It is technically feasible for the intangible asset to be completed so that it will be available for use or sale. · Management intends to complete the asset for use or sale. · The Group has the capacity to use or sell the asset. · It is possible to show evidence of how the intangible asset will generate probable future economic benefits. · Adequate technical, financial and other resources are available to complete the development and to use or sell the intangible asset. · The outlay attributable to the intangible asset during its development can be reliably determined. Directly attributable costs capitalized in the value of the software include the cost of personnel developing the programs and an appropriate percentage of overheads. F-15 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 126/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Costs that do not meet the criteria listed above are recognized as an expense as incurred. Expenditure for an intangible asset that is initially recognized within expenses for the period may not be subsequently recognized as intangible assets. Other intangible assets Other intangible assets mainly include payment of loyalty incentives which are amortized on a straight-line basis over the term of the agreements which range from four to ten years. g) Property, plant and equipment Property, plant and equipment are measured at cost, less accumulated depreciation and any impairment losses. Acquisition costs include, when appropriate, the initial estimates of decommissioning, withdrawal and site reconditioning costs when the Atento Group is obliged to bear this expenditure as a condition of using the assets. Repairs that do not prolong the useful life of the assets and maintenance costs are recognized directly in the statements of operations. Costs that prolong or improve the life of the asset are capitalized as an increase in the cost of the asset. Property, plant and equipment acquired in a business combination are initially measured at fair value as of the acquisition date. The Atento Group assesses the need to write down, if appropriate, the carrying amount of each item of property, plant and equipment to its period-end recoverable amount whenever there are indications that the assets’ carrying amount may not be fully recoverable through the generation of sufficient future revenue. The impairment allowance is reversed if the factors giving rise to the impairment cease to exist. The depreciation charge for items of property, plant and equipment is recognized in the consolidated statements of operations under “Depreciation”. Depreciation is calculated on a straight-line basis over the useful life of the asset applying individual rates to each type of asset, which are reviewed at the end of each reporting period. The useful lives generally used by the Atento Group are as follow: Buildings Plant and machinery Furniture, tools Other tangible assets h) Impairment of non-current assets Years of useful life 5 - 40 3 - 6 1 - 10 5 - 8 The Atento Group assesses as of each reporting date whether there is an indicator that a non-current asset may be impaired. If any such indicator exists, or when annual impairment testing for an asset is required (e.g. goodwill), the Atento Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell or its value in use. In assessing the value in use, the estimated future cash flow is discounted to its present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired. In this case, the carrying amount is written down to its recoverable amount, and the resulting loss is recognized in the statements of operations. Future depreciation/amortization charges are adjusted to reflect the asset’s new carrying amount over its remaining useful life. Management analyzes the impairment of each asset individually, except in the case of assets that generate cash flow which are interdependent on those generated by other assets (cash generating units – “CGU”). The Atento Group bases the calculation of impairment on the business plans of the various cash generating units to which the assets are allocated. These business plans cover five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. F-16 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 127/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents When there are new events or changes in circumstances that indicate that a previously recognized impairment loss no longer exists or has been decreased, a new estimate of the asset’s recoverable amount is made. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited to the carrying amount that would have been determined if no impairment loss been recognized for the asset in prior years. This reversal is recognized in the statements of operations and the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying amount. Impairment losses relating to goodwill cannot be reversed in future periods. i) Financial assets and liabilities Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The Atento Group has classified all financial assets as amortized cost, except for derivative financial instruments. All purchases and sales of financial assets are recognized on the statement of financial position on the transaction date, i.e. when the commitment is made to purchase or sell the asset. A financial asset is fully or partially derecognized from the statement of financial position only when: 1. The rights to receive cash flow from the asset have expired. 2. The Atento Group has assumed an obligation to pay the cash flow received from the asset to a third party or 3. The Atento Group has transferred its rights to receive cash flow from the asset to a third party, thereby substantially transferring all of the risks and rewards of the asset. Financial assets and financial liabilities are offset and presented on a net basis in the statement of financial position when a legally enforceable right exists to offset the amounts recognized and the Atento Group intends to settle the assets and liabilities net or to simultaneously realize the asset and cancel the liability. Amortized cost financial assets include fixed maturity financial assets not listed in active markets and which are not derivatives. They are classified as current assets, except for those maturing more than twelve months after the reporting date, which are classified as non-current assets. Loans and receivables are initially recognized at fair value plus any transaction costs, and are subsequently measured at amortized cost, using the effective interest method. Interest calculated using the effective interest method is recognized under finance income in the statements of operations. The Atento Group assesses at each reporting date whether a financial asset is impaired. Where there is objective evidence of impairment of a financial asset valued at amortized cost, the amount of the loss to be taken to the statements of operations is measured as the difference between the carrying amount and the present value of estimated future cash flow, discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the impairment loss is expensed in the consolidated statements of operations. Trade receivables Trade receivables are amounts due from customers for the sale of services in the normal course of business. Receivables slated for collection in twelve months or less are classified as current assets; otherwise, the balances are considered non-current assets. These are financial assets measured initially at fair value and subsequently, at amortized cost and are evaluated by the value of the services provided in accordance with the contracted conditions, net of estimated impairment losses. These include the services provided to customers, which were still not billed at the balance sheet date. In general, cash flow relating to short-term receivables is not discounted. F-17 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 128/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Cash and cash equivalents Cash and cash equivalents comprise cash on hand and in banks, demand deposits and other highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. Financial liabilities Debt with third parties (Loans and Borrowings) Debt with third parties is initially recorded at the fair value of the consideration received, less any directly attributable transaction costs. After initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Any difference between the cash received (net of transaction costs) and the repayment value is recognized in the statements of operations over the life of the debt. Debt with third parties is considered to be non-current when the maturity date is longer than twelve months from the reporting date, or when the Atento Group has full discretion to defer settlement for at least another twelve months from that date. Financial liabilities are derecognized in the statement of financial position when the respective obligation is settled, cancelled or matures. Trade payables Trade payables are payment obligations in respect of goods or services received from suppliers in the ordinary course of business. Trade payables falling due in twelve months or less are classified as current liabilities; otherwise, the balances are considered as non-current liabilities. j) Derivative financial instruments and hedging Derivative financial instruments are initially recognized at their fair values on the date on which the derivative contract is entered into and are subsequently remeasured at their fair value. Any gains or losses resulting from changes in the fair value of a derivative instrument are recorded in the statements of operations, except for the effective portion of cash flow and net investment hedges, which is recognized in other comprehensive income/(loss) and later reclassified to profit or loss when the hedge item affects the statements of operations. At the inception of the derivative instrument contract, the Atento Group documents the relationship between the hedging instruments and the hedged items, as well as the risk management objectives and the strategy for groups of hedges. The Atento Group also documents its assessment, both at the inception of the hedge and throughout the term thereof, of whether the derivatives used are highly effective at offsetting changes in the fair value or cash flow of the hedged items. The fair value of a hedging derivative is classified as a non-current asset or liability, as applicable, if the remaining maturity of the hedged item exceeds twelve months, otherwise it is classified as a current asset or liability. For purpose of hedge accounting the Atento Group designates certain derivatives as either: Cash flow hedges Cash flow hedge is defined as a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in the cash flow hedge reserve in equity. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, any gain or loss on the hedging instrument that was previously recognized directly in equity is recycled from reserves into the statements of operations in the same period(s) in which the financial asset or liability affects profit or loss. F-18 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 129/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Net investment hedges Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized in other comprehensive income. Gains or losses relating to the ineffective portion are recognized in the statements of operations. Gains and losses accumulated in equity are included in the statements of operations when the foreign operation is partially disposed of or sold. k) Share capital The ordinary shares of the Company are classified in equity (see Note 19). Issuance costs directly attributable to the issuance of new shares or options are deducted from the proceeds raised in equity, net of the tax effect. l) Treasury shares Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Atento Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in the share premium. m) Provisions Provisions are recognized when the Atento Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions for restructuring include penalties for the cancellation of leases and other contracts, as well as employee termination payments. Provisions are not recognized for future operating losses. When the Atento Group is virtually certain that some or all of a provision is to be reimbursed, for example under an insurance contract, a separate asset is recognized in the statement of financial position, and the expense relating to the provision is recorded in the statements of operations, net of the expected reimbursement. Provisions are measured at the present value of expenditure expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the specific risks inherent to the obligation. Contingent liabilities represent possible obligations to third parties, and existing obligations that are not recognized, given that it is not likely that an outflow of economic resources will be required in order to settle the obligation or because the amount cannot be reliably estimated. Contingent liabilities are not recognized on the consolidated statement of financial position unless they are recorded as part of a business combination. n) Employee benefit Share-based payments Atento S.A. has a share-based compensation plan, under which the subsidiaries of Atento S.A. receive services from employees as consideration for the equity instruments of Atento S.A. The subsidiaries themselves are not party to any of the contracts; Atento S.A. settles these agreements. The plan offers various instruments (award agreements, stock options, restricted stock units, etc.), but some types of restricted stock units (“RSUs”) have been granted to selected employees, as described in Note 19. The fair value of the employee services received in exchange for the grant of the RSUs is recognized as an expense in the consolidated financial statements of Atento S.A. The total amount to be expensed is determined with reference to the fair value of the RSUs granted: · Including any market performance conditions (for example, an entity’s share price); · Excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and F-19 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 130/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents · Including the impact of any non-vesting conditions (for example, the requirement for employees to save or hold shares for a specific period of time). At the end of each reporting period, the group revises its estimates of the number of RSUs that are expected to vest based on the non-market vesting conditions and service conditions. It recognizes the impact of the revisions to original estimates, if any, in the statements of operations, with a corresponding adjustment to equity. When the RSUs vest, Atento S.A. issues new shares or buys them back in the market. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium. The social security contributions payable in connection with the granting of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction. Termination benefits Termination benefits are paid to employees when the Atento Group decides to terminate their employment contracts prior to the usual retirement age or when the employee agrees to resign voluntarily in exchange for these benefits. The Atento Group recognizes these benefits as an expense for the year, at the earliest of the following dates: (a) when the Atento Group is no longer able to withdraw the offer for these benefits; or (b) when the Atento Group company recognizes the costs of a restructuring effort as per IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, and when this restructuring entails the payment of termination benefits. When benefits are offered in order to encourage the voluntary resignation of employees, termination benefits are measured on the basis of the number of employees expected to accept the offer. Benefits to be paid in more than twelve months from the reporting date are discounted to their present value. o) Income tax The income tax expense includes all the expenses and credits arising from the corporate income tax levied on all the Atento Group companies. Income tax expenses for each period represent the aggregate amounts of current and deferred taxes, if applicable. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amounts are those that are enacted at the reporting date in each country in which the Atento Group operates. The Atento Group determines deferred tax assets and liabilities by applying the tax rates that will be effective when the corresponding asset is received or the liability settled, based on tax rates and tax laws that are enacted (or substantively enacted) at the reporting date. Deferred taxes are calculated on temporary differences arising from differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets also arise from unused tax credits and tax loss carryforwards. The carrying amounts of deferred income tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax liabilities associated with investments in subsidiaries and branches are not recognized when the timing of the reversal can be controlled by the parent company, and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax relating to items directly recognized in equity is also recognized in equity. Deferred tax assets and liabilities resulting from business combinations are added to or deducted from goodwill. Deferred tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. F-20 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 131/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents p) Revenue and Expenses Revenue and Expenses are recognized in the statements of operations an accrual basis, regardless of when actual payment or collection occurs. The Atento Group’s incorporation, start-up and research expenses, as well as expenses that do not qualify for capitalization under IFRS, are recognized in the consolidated statements of operations when incurred and classified in accordance with their nature. q) Interest income and expenses Interest expenses incurred in the construction of any qualified asset are capitalized during the time necessary to complete the asset and prepare it for the intended use. All other interest expenses are expensed as incurred. Interest income is recognized using the effective interest method. When a loan or a receivable has been impaired, the carrying amount is reduced to the recoverable amount, discounting the estimated future cash flow at the instrument’s original effective interest rate and recognizing the discount as a decrease in interest income. Interest income on impaired loans is recognized when the cash is collected or on the basis of the recovery of the costs when the loan is secured. r) Leases (as lessee) Until December 31, 2018, the Atento Group rented certain properties. Leases where the lessor does not transfer substantially all of the risks and benefits of ownership of the asset were classified as operating leases. Operating lease payments were recognized as an expense in the statements of operations on a straight-line basis over the lease term. Those lease arrangements under which the Atento Group holds the significant risks and benefits inherent in owning the leased item were treated as finance leases. Finance leases were capitalized as an asset at the inception of the lease period and classified according to their nature. Finance leases were capitalized at the lower of the present value of the minimum lease payments agreed, and the fair value of the leased asset. Lease payments were proportionally allocated to the principal of the lease liability and to finance charges. Finance charges are reflected in the statements of operations over the lease term so as to achieve a constant rate of interest on the balance pending repayment in each period. From January 1, 2019, the Group has adopted IFRS 16 Leases, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on January 1, 2019. As explained in Note 3u below, the Group has changed its accounting policy for leases where the Group is the lessee. The Atento Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Atento Group as a lessee The Atento Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. (i) Right-of-use assets The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. F-21 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 132/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents (ii) Lease liabilities At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. (iii) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery (i.e., those leases that have a lease term of 12 months or less from the commencement date). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. s) Critical accounting estimates and assumptions The preparation of consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates that affect the carrying amount of assets and liabilities within the next financial year. Some of the accounting policies applied in preparing the accompanying consolidated financial statements required Management to apply significant judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities would be adjusted accordingly. Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related consolidated statements of operations. An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities is as follow: Impairment of goodwill The Atento Group tests goodwill for impairment annually, in accordance with the accounting policies described in Note 3h. Goodwill is subject to impairment testing as part of the cash-generating unit to which it has been allocated. The recoverable amounts of cash-generating units defined in order to identify potential impairment in goodwill are determined on the basis of value in use, applying five-year financial forecasts based on the Atento Group’s strategic plans, approved and reviewed by Management. These calculations entail the use of assumptions and estimates, and require a significant degree of judgment. The main variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business variables. Deferred taxes The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts depends ultimately on the Atento Group’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections. F-22 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 133/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Atento Group as a result of changes in tax legislation or unforeseen transactions that could affect the tax balances (see Note 20). The Atento Group has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will generate future taxable profits against which they may be utilized. The carrying amount of deferred income tax assets is reviewed at each reporting date, and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Provisions and contingencies Provisions are recognized when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from, inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Atento Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal counsel or consultants. No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the consolidated financial statements. Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized originally on the basis of these estimates (see Note 21). Fair value of derivatives The Atento Group uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in exchange rates. Derivatives are recognized at the inception of the contract at fair value. The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied. Update On COVID-19 The estimates and assumptions included in the financial statements include our assessment of potential impacts arising from the COVID-19 pandemic that may affect the amounts reported and the accompanying notes. To-date, no significant impacts on our collection experience and expected credit losses have been noted and we do not currently anticipate any material impairments of our long-lived assets or of our indefinite-lived intangible assets as a result of the COVID-19 pandemic. We will continue to monitor the impacts and will prospectively revise our estimates as appropriate. t) Interest in subsidiaries All subsidiaries are fully consolidated. Where necessary, the accounting policies of subsidiaries have been aligned to those adopted in the Atento Group. F-23 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 134/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The details of Atento Group subsidiaries at December 31, 2018, 2019 and 2020 are as follow: Name Atento Luxco Midco, S.à.r.l. Atento Luxco 1 S.A. Atalaya Luxco 2. S.à.r.l. Atento Argentina. S.A Registered address Luxembourg Luxembourg Luxembourg Buenos Aires (Argentina) Line of business Holding company Holding company Holding company Operation of call centers Atento Estrategias de Transformación, S.L.U. (former Global Rossolimo. S.L.U) Atento Spain Holdco. S.L.U Atento Spain Holdco 6. S.L.U Atento Spain Holdco 2. S.A.U Atento Teleservicios España. S.A.U Madrid (Spain) Madrid (Spain) Madrid (Spain) Madrid (Spain) Madrid (Spain) Atento Servicios Técnicos y Consultoría S.A.U Madrid (Spain) Atento Impulsa. S.A.U Barcelona (Spain) Atento Servicios Auxiliares de Contact Center. S.A.U Madrid (Spain) Atento B V Teleatento del Perú. S.A.C Amsterdam (Netherlands) Lima (Peru) Holding company Holding company Holding company Holding company Operation of call centers Execution of technological projects and services, and consultancy services Management of specialized employment centers for disabled workers Execution of technological projects and services, and consultancy services Holding company Operation of call centers Woknal. S.A. Montevideo (Uruguay) Operation of call centers Atento Colombia. S.A. Bogotá DC (Colombia) Operation of call centers Atento Holding Chile. S.A. Atento Chile. S.A. Atento Educación Limitada Atento Centro de Formación Técnica Limitada Santiago de Chile (Chile) Holding company Santiago de Chile Operation of call (Chile) centers Santiago de Chile Operation of call (Chile) centers Santiago de Chile Operation of call (Chile) centers Atento Spain Holdco 4. S.A.U Madrid (Spain) Atento Brasil. S.A São Paulo (Brazil) R Brasil Soluções S.A. São Paulo (Brazil) Holding company Operation of call centers Operation of call centers F-24 % interest 2019 100 100 100 14.03 85.97 100 100 100 100 100 100 2018 100 100 100 90 10 100 100 100 100 100 100 2020 100 100 100 12.99 87.01 100 100 100 100 100 Holding company Atento S.A. Atento Luxco Midco, S.à.r.l Atento Luxco 1. S.A. Atalaya Luxco 2. S.à.r.l. Atento Luxco 1. S.A. Atento Spain Holdco. S.L.U. Atento Luxco 1. S.A. Atento Spain Holdco. S.L.U. Atento Spain Holdco 6. S.L.U. Atento Spain Holdco 2. S.A.U. 100 Atento Teleservicios España S.A.U. 100 100 100 Atento Teleservicios España S.A.U. 100 100 100 100 100 Atento Teleservicios España. S.A.U. 100 Atento Spain Holdco 2. S.A.U. 83.3333 83.3333 83.3333 Atento B.V. (Class A) (Class A) (Class A) 16.6667 16.6667 16.6667 Atento Holding Chile. S.A. (Class B) (Class B) (Class B) 100 Atento B.V. 94.97871 94.97871 94.97871 Atento B.V. 100 100 0.00424 0.00424 0.00424 Atento Servicios Auxiliares de Contact 0.00854 0.00854 0.00854 Atento Servicios Técnicos y Consultoría. 5.00427 5.00427 5.00427 Atento Teleservicios España. S.A.U. 0.00424 0.00424 0.00424 Teleatento del Perú SAC. 99.9999 99.9999 99.9999 Atento B.V. Center. S.L.U. S.L.U. 0.0001 0.0001 0.0001 99.99 0.01 99 1 99 1 100 99.99 0.01 99 1 99 1 100 99.99 0.01 99 1 99 1 100 99.999 99.999 99.999 0.001 81.4885 9.25 9.25 0.001 100 - - 0.001 100 - - Atento Spain Holdco 2 Atento Holding Chile. S.A. Atento B.V. Atento Chile. S.A. Atento Holding Chile. S.A. Atento Chile. S.A. Atento Holding Chile. S.A. Atento Spain Holdco. S.L.U. Atento Spain Holdco 4. S.A.U. Atento Spain Holdco. S.L.U. Atento Brasil. S.A. Flávio Luiz Rossetto Jorge Luiz Rossetto https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 135/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Atento Spain Holdco 5. S.L.U Madrid (Spain) Holding company Atento Mexico Holdco S. de R.L. de C.V. Mexico Holding company Atento Puerto Rico. Inc. Contact US Teleservices Inc. Atento Panamá. S.A. Atento Atención y Servicios. S.A. de C.V. Rico) centers Guaynabo (Puerto Operation of call Houston, Texas (USA) Operation of call Operation of call Administrative, professional and consultancy services Mexico City (Mexico) Panama City centers centers Atento Servicios. S.A. de C.V. Mexico City (Mexico) Atento Centroamérica. S.A. Atento de Guatemala. S.A. Guatemala (Guatemala) Guatemala (Guatemala) Sale of goods and services Holding company Operation of call centers Atento El Salvador. S.A. de C.V. City of San Salvador Operation of call (El Salvador) centers Atento Nicaragua S.A. Atento Costa Rica S.A. Nicaragua Costa Rica Interservicer - Serviços de BPO Ltda Interfile Serviços de BPO Ltda. São Paulo (Brasil) São Paulo (Brasil) Operation of call centers Operation of call centers Operation of call centers Operation of call centers Nova Interfile Holding Ltda. Interservicer - Serviços em Crédito Imobiliário Ltda. São Paulo (Brasil) São Paulo (Brasil) Holding company Operation of call centers 100 99.966 0.004 100 100 100 99.966 0.004 100 100 100 99.966 0.004 100 100 Atento Spain Holdco. S.L.U. Atento Spain Holdco 5. S.L.U. Atento Spain Holdco. S.L.U. Atento Mexico Holdco S. de R.L. de C.V. Atento Mexico Holdco S. de R.L. de C.V. 100 100 100 0.002 99.998 99.998 99.998 Atento Mexico Holdco S. de R.L. de C.V. Atento Mexico Holdco S. de R.L. de C.V. Atento Servicios. S.A. de C.V. Atento Mexico Holdco S. de R.L. de C.V. Atento Atención y Servicios. S.A. de C.V. 99.9999 99.9999 99.9999 Atento Mexico Holdco S. de R.L. de C.V. 99.998 99.998 99.998 0.002 0.002 0.002 0.002 0.002 0.0001 0.0001 0.0001 99.99999 99.99999 99.99999 Atento Centroamérica. S.A. 0.00001 0.00001 0.00001 Atento El Salvador S.A. de C.V. Atento El Salvador S.A. de C.V. 4.35 4.35 95.65 95.65 7.4054 7.4054 Atento Centroamerica. S.A. 7.4054 92.5946 92.5946 92.5946 Atento de Guatemala. S.A. Atento Centroamerica. S.A. 4.35 Atento Mexico Holdco S. de R.L. de C.V. 95.65 99.999 Atento Mexico Holdco S. de R.L. de C.V. 0.0001 Atento Centroamerica. S.A. 50.00002 Nova Interfile Holding Ltda. 50.00002 50.00002 50.00002 Nova Interfile Holding Ltda. 0.0001 99.999 99.999 0.0001 100 100 49.99998 49.99998 Interfile Holding Ltda. 100 100 100 Atento Brasil. S.A. 50.00011 50.00011 50.00011 Nova Interfile Holding Ltda. 49.99989 49.99989 Interfile Holding Ltda. At December 31, 2018, 2019 and 2020, none of the Group’s subsidiaries is listed on a stock exchange, except for Atento Luxco 1 S.A., which has debt securities listed in the International Stock Exchange (TISE) in Guernsey. All subsidiaries use year-end December 31 as their reporting date. u) New standards adopted in 2019 IFRS 16 was issued in January 2016. It resulted in almost all leases being recognized on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term and low-value leases. The standard affected primarily the accounting for the Group’s operating leases. On January 1, 2019, lease commitments that the group recognized as right-of-use assets amount 184,099 thousand U.S. dollars, and lease liabilities in the same amount. The Group adopted IFRS 16 in accordance with the modified retrospective approach. The prior-year figures were not adjusted. The consolidated statement of operations was impacted by a decrease of operating expenses and an increase of the amortization of the right- of-use assets and interest on the lease liability. As at the reporting date, lease commitments of the Group are recognized as right-of-use assets amount to 181,564 thousand U.S. dollars and lease liabilities in the amount of 194,765 thousand U.S. dollars on December 31, 2019. The following reconciliation to the opening balance for the lease liabilities as at January 1, 2019 is based upon the operating lease obligations as at December 31, 2018: F-25 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 136/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Assets Right-of-use assets (*) Liabilities (**) Non-current liabilities Lease liabilities Current liabilities Lease liabilities December 31, 2018 IFRS 16 January 1, 2019 5,798 184,099 189,897 (2,369) (132,551) (134,920) (3,158) (51,548) (54,706) (*) Recorded in property, plant and equipment as of December 31, 2018. (**) Recorded as lease liabilities in Debt with third parties. IFRIC 23 Uncertainty over Income Tax Treatment Atento reviewed the tax treatment under the terms of IFRIC 23 in all subsidiaries and as at the reporting date, the Group did not identify any material impact on the financial statements. Atento implemented a process for periodically review the income tax treatments consistent under IFRIC 23 requirements across the Group. v) New and amended standards adopted by the Group The Atento Group applied the amendments to IAS 1 and IAS 8 and to IFRS 3 for the first time in 2020. The nature and effect of the changes as a result of adoption of these new accounting standards are described below. Amendments to IAS 1 and IAS 8 Definition of Material In October 2018, the IASB issued changes to IAS 1 and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, to clarify the definition of “material” and to align the definition used in the Conceptual Framework and the standards themselves. The new definition states that “the information is material if its omission, distortion or obscuration can reasonably influence decisions that the main users of the general purpose financial statements make based on these financial statements, which provide financial information on the entity’s specific report”. Amendments to IFRS 3 Definition of a Business In October 2018, the IASB issued changes to the definition of a business in IFRS 3, to help entities determine whether it has acquired a business or a group of assets. They clarify minimum requirements, eliminate the assessment of whether market participants are able to replace any missing elements, add guidance and illustrative examples to help entities assess whether a substantive process has been acquired, better define business and product definitions, and introduce an optional concentration test. The adoption of these changes had no impact on the consolidated financial statements in the initial adoption period (January 1, 2020). w) Standards issued but not yet effective There are no other standards that are not yet effective and that would be expected to have a material impact on the Atento Group in the current or future reporting periods and on foreseeable future transactions. 4) MANAGEMENT OF FINANCIAL RISK 4.1 Financial risk factors The Atento Group’s activities are exposed to various types of financial risk: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to hedge certain risk exposures. a) Market risk Interest rate risk in respect of cash flow and fair value Interest risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short- term maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest at fixed rates. Atento Group’s finance costs are exposed to fluctuations in interest rates. At December 31, 2020, 4.5% of financial debt with third parties bore interests at variable rates, while at December 31, 2019 this amount was 0.2%. In both 2019 and 2020, the exposure was to the Brazilian CDI rate and the TJLP (Brazilian Long-Term Interest Rate). https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 137/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm The Atento Group’s policy is to monitor the exposure to interest at risk. As of December 31, 2020, there were no outstanding interest rate hedging instruments. F-26 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 138/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Foreign currency risk Our foreign currency risk arises from local currency revenues, receivables and payables, while the U.S. dollar is our functional and reporting currency. We benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same currency as the majority of the expenses we incur. In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure incurred in currencies other than those of the functional currency of the countries. The main source of our foreign currency risk is related to the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity date). The referred cross- currency swaps are the only derivative transactions we have in place in Atento Group. As of December 31, 2020, the estimated fair value of the cross-currency swaps totaled a net asset of 5,868 thousand U.S. dollars (net asset of 3,093 thousand U.S. dollars as of December 31, 2019). The table below shows the impact of a +/-10 percentage points variation in the exchange rate on the value of the cross-currency swaps. CROSS-CURRENCY FAIR VALUE +10.0% -10.0% Thousands of U.S. dollars 2020 5,868 9,884 872 2020 Functional currency - financial asset/liability currency Euro - Colombian Pesos Euro - Dirham Moroccan Euro - Peruvian Nuevos Soles Euro - USD Chilean Pesos – USD Mexican Pesos – USD Brazilian Reais – USD Guatemalan Quetzal – USD Colombian Pesos – USD Peruvian Nuevos Soles - USD United States Dolar - Euro United States Dolar - MXN Chilean Pesos – Euro Financial assets (*) Financial liabilities (*) Sensitivity analysis Functional currency (thousands) Asset currency (thousands) U.S. Dollar (thousands) Functional currency (thousands) Liability currency (thousands) U.S. Dollar (thousands) Appreciation of asset/liability currency vs functional currency Appreciation of financial assets in functional currency Statements of operations (thousands of U.S. dollar) Appreciation of financial liabilities in functional currency Statements of operations (thousands of U.S. dollar) 385 1,645,647 473 883 9,648 1,083 863 3,838 1,059 2,812 2,155,420 2,810 3,031 3,448 - - - - - - - - - - - - 10% 3,845.6 10% 9.8 428 981 10% 4.0 959 10% 1.1 2,544 53 120 118 (329) 337 - - - - - - - - 59,707 (8) 3,031 53,736 76 76 10% 0.0 2,394,911 87,481 4,394 4,394 - - - - - - - - - - - - - - - 10% 0.0 97,202 488 10% 0.2 10% 0.1 - - - - - - - 1,630,642 468 468 2,229,450 649 649 10% 0.0 1,811,824 52 2,511,929 17,103 4,719 4,719 4,631 1,278 1,278 10% 0.2 19,003 524 5,146 - - - - - - - - - - - - - - - - - - 10% 0.7 10% 17.9 10% 0.0 - - - - - - - - - - - - (81) (142) - - - (*) Financial liabilities correspond to borrowing in currencies other than functional currencies. Financial assets correspond to cash and cash equivalents in currencies other than functional currencies. F-27 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 139/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents b) Credit risk The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts (see Note 13). Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the risks assumed and the financial resources necessary to manage the Group’s various units, in order to optimize the risk-reward relationship in the development and implementation of business plans in the course of their regular business. Credit risk arising from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements are regulated by our Corporate Treasury policy on the basis of the conditions prevailing in the markets and the countries where Atento operates. The Corporate Treasury policy establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and short-term debt ratings); (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be invested. The Atento Group’s maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets. The Atento Group holds no guarantees as collection insurance. c) Liquidity risk The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the payments falling due, factoring in a degree of cushion. In practice, this has meant that the Atento Group’s average debt maturity must be long enough to support business operation normal conditions (assuming that internal projections are met). A maturity schedule for the Atento Group’s financial liabilities is provided in Note 16. 4.2 Capital Management The Atento Group’s Finance Department, which is in charge of the capital management, takes various factors into consideration when determining the Group’s capital structure. The Atento Group’s capital management goal is to determine the financial resources necessary both to continue its recurring activities, as going concern, and to maintain a capital structure that optimizes own and borrowed funds. The Atento Group sets an optimal debt level in order to maintain a flexible and comfortable medium-term borrowing structure, in order to be able to carry out its routine activities under normal conditions and to address new opportunities for growth. Debt levels are kept in line with forecasted future cash flows and with quantitative restrictions imposed under financing contracts. In addition to these general guidelines, we take into account other considerations and specifics when determining our financial structure, such as country risk, tax efficiency and volatility in cash flow generation. The Super Senior Revolving Credit Facility, described in Note 17, carries no financial covenant obligations regarding debt levels. However, the notes do impose limitations on dividend distributions, payments or distributions to the shareholders, the incurrence of additional debt, and on investments and disposal of assets. As of the date of these consolidated financial statements, the Atento Group was in compliance with all restrictions established in the aforementioned financing contracts and does not foresee any future non-compliance. To that end, the Atento Group regularly monitors figures for net financial debt with third parties and EBITDA. Net financial debt with third parties at December 31, 2019 and 2020 is as follows: F-28 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 140/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Senior Secured Notes (Note 17) Super Senior Credit Facility (Note 17) Bank borrowings (Note 17) Lease liabilities (Note 17) Less: Cash and cash equivalents (Note 15) Net financial debt with third parties 5) ACQUISITION OF NON-CONTROLLING INTERESTS a)RBrasil Soluções S.A. Thousands of U.S. dollars 2019 2020 501,922 - 23,928 194,765 (124,706) 595,909 505,611 30,038 39,475 152,699 (208,994) 518,829 On September 2, 2016, the Company through its indirect subsidiary Atento Brasil S.A. acquired the control and 81.49%, of the shares of RBrasil Soluções S.A. (“RBrasil”), a leading provider of late-stage collection services in Brazil. Put/Call options As per the Shareholders' Agreement, the Company had a purchase option, where non-controlling shareholders irrevocably and irreversibly granted to the Company, through that instrument, the right, but not the obligation, at the sole discretion of the Company, to acquire all of their shares, and the non-controlling shareholders, through the exercise of that right, would be obliged to sell their shares to the Company ("call option"). The call option might be exercised by any controlling shareholder between January 1, 2019 and December 31, 2020. The Shareholders' Agreement also provided for a put option, where the non-controlling shareholders had the right, irrevocable and irreversible, but not the obligation, to sell all of their shares to the Company ("put option"). The put option might be exercised by non-controlling shareholders between January 1, 2019 and December 31, 2020. On the basis of the above, the Company recognized as of September 2, 2016 a financial liability related to the potential for acquisition of non-controlling interest for an amount of 3,444 thousand Brazilian Reais (1,057 thousand U.S. dollars). The financial liability was initially recognized against specific reserve in equity. In the acquisition of non-controlling interest this reserve was reversed. The exercise price of the call option would be determined by multiples, already defined in the Shareholders' Agreement, of the EBITDA of the year immediately prior to the exercise of the option, multiplied by the percentage of participation to be acquired. On June 7, 2019, the Company acquired to the remaining interest of 18.51% of the shares of RBrasil. The total amount paid for this acquisition was 1,738 thousand U.S. dollars. b) Nova Interfile Holding Ltda On June 9, 2017, the Company through its indirect subsidiary Atento Brasil S.A. acquired the control and 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of Interservicer – Serviços em Crédito Imobiliário Ltda, (“Interfile”) leading providers of BPO services and solutions, including credit origination, for the banking and financial services sector in Brazil. Put/Call options As per the Shareholders' Agreement, the Company had a purchase option, where non-controlling shareholders granted to Atento Brasil S.A., through that instrument, the right, to acquire all of their shares, and the non-controlling shareholders, through the exercise of that right, would be obliged to sell their shares to Atento Brasil S.A. ("call option"). The call option might be exercised by Atento Brasil S.A. between January 1, 2020 and April 15, 2020. The Shareholders' Agreement also provided for put options, where the non-controlling shareholders had the right, to sell partial or all of their shares to the Atento Brasil S.A. ("put options"). Many put options were understood by Management as protective clauses with remote possibility of being exercised. The assessment of the put options were made taking into account the following; (i) probability of occurrence; (ii) degree of importance (primary or secondary, in this case as term extension or acceleration of other options) and (iii) function: effective options or clauses protecting the parties. F-29 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 141/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Considering the valuation of the acquired entity and Management’s best estimates, the put option that would likely to be exercised by the non-controlling shareholders was between January 1, 2020 and April 15, 2020 – which was symmetrical with the call option. According to IAS 32, a parent must recognize a financial liability when it has an obligation to pay cash in the future to purchase the minority’s shares, even if the payment is conditional on the option being exercised by the holder. The exercise price of the put option would be determined by multiples, already defined in the Shareholders' Agreement, of the EBITDA of the year immediately prior to the exercise of the option, multiplied by the percentage of participation to be acquired. On the basis of the above, the Company recognized on June 9, 2017 a financial liability related to the potential acquisition of non-controlling interest of 74,401 thousand Brazilian Reais (22,474 thousand US dollars). The financial liability was recognized against specific reserve in equity, considering that these are transactions between shareholders. In the acquisition of non-controlling interest this reserve was reversed. On May 17, 2019, the Company acquired to the remaining interest of 49.99998% of Interfile. The total amount paid for this acquisition was 14,089 thousand U.S. dollars. 6) INTANGIBLE ASSETS The following table presents the breakdown of intangible assets at December 31, 2019 and 2020 and respective changes in the year: Cost Development Customer base Software Other intangible assets Work in progress Total cost Accumulated amortization Development Customer base Software Other intangible assets Total accumulated amortization Impairment Net intangible assets Thousands of U.S. dollars Reclassifications between Intangible and PP&E Additions Disposals Transfers Balance at December 31, 2018 Translation differences Hyperinflation Adjustments Balance at December 31, 2019 5,090 262,927 194,966 69,062 1,089 533,134 184 - 1,065 - - 1,249 (647) (143,290) (113,845) (40,159) (297,941) (23,991) 211,202 (154) (22,570) (25,025) (9,477) (57,226) - (55,977) (41) - (2,771) (1,410) (25) (4,247) 41 - 2,212 83 2,336 - (1,911) F-30 (1) - 507 52 (505) 53 - (234) - 181 (53) - - - - 12,623 - - 12,623 - - - - - - 12,623 (3,213) (5,202) (7,371) (6,336) (459) (22,581) 251 2,083 2,425 4,705 9,465 1,070 (12,046) 434 5,226 2,386 279 - 8,325 2,453 262,951 201,405 61,647 100 528,556 (148) (1,434) (370) (223) (2,175) - 6,150 (657) (165,445) (134,603) (44,890) (345,594) (22,921) 160,041 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 142/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Cost Development Customer base Software Other intangible assets Work in progress Total cost Accumulated amortization Development Customer base Software Other intangible assets Total accumulated amortization Impairment Net intangible assets Balance at December 31, 2019 Additions Disposals Transfers Thousands of U.S. dollars Reclassifications between Intangible and PP&E Translation differences Hyperinflation Adjustments Balance at December 31, 2020 2,453 262,951 201,405 61,647 100 528,556 99 - 2,859 - - 2,958 (657) (165,445) (134,603) (44,890) (345,594) (22,921) 160,041 (165) (19,848) (23,405) (3,563) (46,981) - (44,023) - (622) (9,748) (97) (25) (10,492) - 720 9,721 - 10,441 - (51) 403 639 8,327 1,062 - 10,431 (400) (630) (9,966) 565 (10,431) - - - - 12,572 - - 12,572 - - - - - - 12,572 (28) (22,656) (28,647) (5,835) - (57,166) 59 15,695 18,228 2,396 36,378 (2,116) (22,904) 174 3,029 1,349 181 - 4,733 (172) (2,497) (833) (223) (3,725) - 1,008 3,101 243,341 188,117 56,958 75 491,592 (1,335) (172,005) (140,858) (45,715) (359,913) (25,037) 106,643 “Customer base” represents the fair value, of the intangible assets arising from customer relationships (tacit or explicitly formulated in contracts) with Telefónica Group and with other customers identified in business combination transactions. Of the total customer base in 2020, the fair value assigned to commercial relationships with Telefónica at the acquisition date amounts to 187,916 thousand U.S. dollars, while the remaining amount relates to other customers. In terms of geographic distribution, in 2020 the customer base corresponds to businesses in Brazil (83,071 thousand U.S. dollars), Spain (54,165 thousand U.S. dollars) net of impairment, Mexico (47,579 thousand U.S. dollars), Peru (14,591 thousand U.S. dollars), Colombia (2,941 thousand U.S. dollars), Chile (8,745 thousand U.S. dollars) and Argentina and Uruguay (7,205 thousand U.S. dollars). “Other intangible assets” mainly include payment of loyalty incentives established with customers of the Atento Brasil S.A. and the intangible asset arising from the directory services business in Atento Teleservicios España. 7) GOODWILL Goodwill was mainly generated on December 1, 2012 from the acquisition of the Customer Relationship Management (“CRM”) business from Telefónica, S.A and on December 30, 2014 from the acquisition of CBCC. On September 2, 2016, additional goodwill was generated from the acquisition of RBrasil on June 9, 2017 an additional goodwill from the acquisition of Interfile in the amount of 8,400 thousand U.S. dollars was recorded in Brazil. The breakdown and changes in goodwill in 2019 and 2020 are as follow: 12/31/2018 Hyperinflation Translation differences Thousands of U.S. dollars Impairment 12/31/2019 Hyperinflation Peru Chile Colombia Mexico Brazil Argentina Total 29,069 16,608 5,770 1,844 68,118 33,580 154,989 - - - - - 11,415 11,415 543 (1,091) (48) 77 (2,636) (12,438) (15,593) 29,612 15,517 5,722 1,921 65,482 1,648 119,902 - - - - - (30,909) (30,909) F-31 - - - - - 419 419 Translation differences 12/31/2020 (2,509) 728 (259) (101) (14,692) (474) (17,307) 27,103 16,245 5,463 1,820 50,790 1,593 103,014 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 143/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 8) IMPAIRMENT OF ASSETS As of December 31, 2020, the impairment assessment on goodwill performed by the Atento Group’s management indicated that the carrying amount of goodwill is recoverable. Such assessment was based on the calculation of the recoverable amount of goodwill through the calculation of the expected future cash flow from the cash-generating units to which goodwill is allocated. The Atento Group carries out its goodwill impairment tests to all CGUs using the various cash-generating units’ five-year strategic plans and budgets. The three-year plan used as the basis for the impairment test was approved by the board of directors on the date of February 24, 2021. Recoverable amount is based on value in use calculated using cash flow from projected results adjusted for amortization/depreciation, finance costs, and taxes, based on the last period, and using the expected growth rates obtained from studies published in the sector and assuming said growth to be constant from the fifth year. Estimated cash flow determined in this manner is discounted using the WACC applicable to that CGU. The discount rates used reflect the current assessment of specific market risks in each of the cash-generating units, considering the time value of money and individual country risks not included in the cash flow estimates. WACC takes both the cost of debt and capital into account. The latter is obtained based on the return expected by the shareholders of the Atento Group, while the former is obtained based on the Atento Group’s finance costs. In addition, the risks specific to each country were included in the WACC using corrective factors. These tests are performed annually and whenever it is considered that the recoverable amount of goodwill may be impaired. At December 31, 2020, the tests conducted did not identify any impairment in the value of goodwill, since the related recoverable amounts calculated using value in use were in all cases higher than the carrying amount of the related cash-generating units, even after sensitivities were applied to the variables used. At December 31, 2019, all CGUs, except Argentina, passed in the impairment tests with projections to support all assets. We wrote-off those assets in Argentina in 2019. In Argentina, with the deterioration of the economic situation, discount rates increased significantly, making discounted cash flow of the operations not enough to cover its asset base. The test resulted in an impairment of 30,909 thousand U.S. dollars in 2019. The calculation of values in use for the CGUs is most sensitive to the revenues, EBITDA and discount rates assumptions. The CGUs revenues projection has a variation based on management expectations growth plus inflation and the EBITDA margin has a variability range from +1.7p.p. to +4.8p.p. The pre-tax discount rates, which factor in country and business risks, and the projected terminal growth rates were as follow: December 2019 December 2020 December 2019 December 2020 Discount rate Brazil Mexico Colombia Peru Chile Argentina 14.87% 16.47% 15.82% 15.94% 10.42% 12.58% 11.82% 14.41% 9.52% 13.92% 92.14% 80.25% Terminal Growth rate Brazil Mexico Colombia Peru Chile Argentina 4.81% 4.31% 5.47% 2.65% 6.40% 6.29% 7.11% 3.33% 6.41% 3.88% 30.29% 40.50% The carrying amounts per CGUs were as follow: Thousand U.S. dollars Carrying Amount December 2019 December 2020 Brazil 275,231 188,847 Mexico 99,070 79,610 Colombia 33,824 31,242 Peru 69,214 59,153 Chile 36,654 35,991 Argentina 36,442 1,778 F-32 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 144/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents In the event of a 3% increase in the discount rate used to calculate the recoverable amount of the abovementioned CGUs in each country, with the other variables remaining unchanged, the recoverable amount would still be higher than the corresponding carrying amount. This sensitivity is on the reasonability of the management expectations. Management also considers that the appearance of potential competitors in the market in which the Atento Group operates could negatively affect the growth of its CGUs. As an additional sensitivity analysis, assuming that there is a fall in demand or an increase in costs and, as such, results before amortization/depreciation, finance cost and taxes margin (EBITDA margin) used for estimating cash flow were to keep constant for the five years in each CGU, with all other variables remaining unchanged, the recoverable amount from each cash generating unit would continue to be higher than its corresponding carrying amount. In addition to the above, specifically for certain countries, the following assumptions were used: Cash flow for Brazil, Mexico, Spain, Colombia, Peru Chile and Argentina CGUs were estimated based on growth projections considering the management expectation of the business performance, using predicted inflation levels taken from external sources. 9) PROPERTY, PLANT AND EQUIPMENT (PP&E) Details of property, plant and equipment at December 31, 2019 and 2020 are as follow: Balance at December 31, 2018 12,129 8,187 Thousands of U.S. dollars Reclassification to right-of-use assets Additions Disposals Transfers Reclassifications between Intangible and PP&E Translation differences Hyperinflation Adjustments Balance at December 31, 2019 - - 236 95 (302) (123) - (574) - - (1,302) (114) 651 - 11,412 7,471 294,548 (24,427) 19,687 (10,801) 21,319 4,119 (3,227) - 301,218 22,420 337,284 - (24,427) 38,803 58,821 (163) (11,389) (20,929) (184) (16,742) (12,623) (8,510) (13,153) - 651 14,879 334,980 (4,425) (6,332) - - (107) (741) (202,587) 18,629 (29,201) - 155 866 (213,344) 18,629 (30,049) 1,021 123,940 (5,798) 28,772 (10,368) - - 184 184 - - - - - 888 78 4,867 5,833 (361) - (4,005) (6,840) - (207,242) (361) (218,087) (12,623) (7,320) 290 116,893 Cost Buildings Plant and machinery Furniture, tools and other tangible assets PP&E under construction Total cost Accumulated depreciation Buildings Plant and machinery Furniture, tools and other tangible assets Total accumulated depreciation Property, plant and equipment F-33 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 145/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Cost Buildings Plant and machinery Furniture, tools and other tangible assets PP&E under construction Total cost Accumulated depreciation Buildings Plant and machinery Furniture, tools and other tangible assets Total accumulated depreciation Property, plant and equipment 11,412 7,471 301,218 14,879 334,980 (4,005) (6,840) Balance at December 31, 2019 Reclassification to right-of-use assets Additions Disposals Transfers Reclassifications between Intangible and PP&E Translation differences Hyperinflation Adjustments Balance at December 31, 2020 Thousands of U.S. dollars - - - 55 (3) - 3,606 (2,938) - - 811 (90) (2) 21 15,824 4,519 1,331 4,179 (12,837) 48,963 800 (33,400) 5,194 315,448 - 1,331 28,682 32,916 (1,113) (13,953) (13,162) 36,469 (13,372) (12,572) (1,844) (34,523) - 5,213 14,070 349,861 - - (217) (530) 149 3 (149) (1,051) (207,242) (3,401) (25,935) 12,424 (35,269) (218,087) (3,401) (26,682) 12,576 (36,469) - - - - (384) 162 20 (9) (4,586) (8,265) 18,098 (4,797) (246,122) 17,876 (4,786) (258,973) 116,893 (2,070) 6,234 (1,377) - (12,572) (16,647) 427 90,888 For 2019, the additions reflect mainly the new operations and remodeling in Atento Brasil in the amount of 32,415 thousand U.S. dollars. In Americas there are 5,907 thousand U.S. dollars due to Atento Mexico sites remodeling for attending new clients, 2,409 thousand U.S. dollars in software’s licenses and equipment’s for Atento Peru and 2,335 thousand U.S. dollars in sites remodeling and equipment’s for Atento Colombia. The capital expenditures for the year ended December 31, 2020 include costs associated with shifting a portion of Atento’s call center employees to the work@home model. Owing to the impact of the COVID-19 pandemic on Atento’s markets, all non-essential capital expenditures remained largely suspended in April and May 2020. No impairment was recognized on items of property, plant and equipment in 2019 and 2020. All Atento Group companies have contracted insurance policies to cover potential risks to their items of PP&E. Management considers that coverage of these risks was sufficient at December 31, 2019 and 2020. 10) LEASES The Atento Group holds the following right-of-use assets: Furniture, tools and other tangible assets Plant and machinery Buildings Total F-34 Thousands of U.S. dollars Net carrying amount of asset 2020 2019 6,512 495 174,557 181,564 9,518 - 128,324 137,842 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 146/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Leases are shown as follows in the balance sheet as at December 31, 2019 and 2020: Assets Right-of-use assets (-) Accumulated depreciation Assets Right-of-use assets (-) Accumulated depreciation 11) FINANCIAL ASSETS January 1, 2019 Additions/ (Disposals) Reclassification between PPEQ and right-of-use assets Translation difference December 31, 2019 208,526 (18,629) 189,897 49,261 (53,507) (4,246) 24,427 (18,629) 5,798 (28,790) 18,905 (9,885) 253,424 (71,860) 181,564 December 31, 2019 Additions/ (Disposals) Reclassification between PPEQ and right-of-use assets Translation difference December 31, 2020 253,424 (71,860) 181,564 32,723 (47,256) (14,533) (1,331) 3,401 2,070 (47,165) 15,906 (31,259) 237,651 (99,809) 137,842 As of December 31, 2019 and 2020 all the financial assets of the Company are classified as amortized cost. As of December 31, 2020, all Cross-Currency Swaps is designated as Net Investment Hedges. Credit risk arises from the possibility that the Atento Group might not recover its financial assets at the amounts recognized and in the established terms. Atento Group Management considers that the carrying amount of financial assets is similar to the fair value. As of December 31, 2020, Atento Teleservicios España S.A., Atento Chile S.A., Teleatento del Perú S.A.C, Atento Brasil S.A. and Atento Mexico have entered into factoring agreements without recourse, anticipating an amount of 117,295 thousand U.S. dollars, receiving cash net of discount, the related trade receivables were realized and interest expenses was recognized in the statement of operations. As of December 31, 2019, Atento Teleservicios España S.A., Atento Chile S.A., Atento Colombia S.A., Teleatento del Perú S.A.C and Atento Brasil S.A. have entered into factoring agreements without recourse, anticipating an amount of 258,313 thousand U.S. dollars, receiving cash net of discount, the related trade receivables were realized and interest expenses was recognized in the statement of operations. 12) OTHER FINANCIAL ASSETS Details of other financial assets at December 31, 2019 and 2020 are as follow: Other non-current receivables (*) Non-current guarantees and deposits Total non-current Other current receivables Current guarantees and deposits Total current Total Thousands of U.S. dollars 2019 2020 9,457 45,195 54,652 76 1,018 1,094 55,746 5,972 32,220 38,192 12 1,146 1,158 39,350 (*) “Other non-current receivables” as of December 31, 2019 and 2020 primarily comprise a loan granted by the subsidiary RBrasil to third parties. The effective annual interest rate is CDI + 3.75% p.a., maturity in five years beginning on May 4, 2017, when the value of the loan will be amortized in a single installment. F-35 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 147/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 13) TRADE AND OTHER RECEIVABLES The breakdown of “Trade and other receivables” at December 31, 2019 and 2020 is as follow: Non-current trade receivables Other non-financial assets (*) Total non-current Current trade receivables Other receivables Prepayments Personnel Total current Total Thousands of U.S. dollars 2020 2019 6,321 15,803 22,124 334,949 5,953 12,675 6,022 359,599 381,723 8,477 12,518 20,995 274,355 4,678 14,698 5,355 299,086 320,081 (*) "Other non-financial assets" as of December 31, 2019 and 2020 primarily comprise tax credits with the Brazilian social security authority (Instituto Nacional do Seguro Social), recorded in Atento Brasil S.A. Trade receivables Allowances of trade receivables Trade receivables, net Thousands of U.S. dollars 2019 2020 347,703 (6,433) 341,270 286,403 (3,571) 282,832 As of December 31, 2020, trade receivables not yet due for which no allowance has been made amounted to 247,902 thousand U.S. dollars (311,552 thousand U.S. dollars as of December 31, 2019). As of December 31, 2020, trade receivables due for which no allowance has been made amounted to 16,033 thousand U.S. dollars (26,999 thousand U.S. dollars as of December 31, 2019). These balances relate to certain customers with no recent history of default. The aging analysis of these accounts is as follow: Less than 90 days Between 90 and 180 days Between 180 and 360 days Over 360 days Thousands of U.S. dollars 12/31/2019 12/31/2020 22,606 13,197 1,224 739 1,233 782 1,936 1,315 Total 26,999 16,033 Changes in allowances of trade receivables in 2019 and 2020 were as follow: Opening balance Allowance of trade receivables(*) Reversal (*) Use of provision Translation differences Total Thousands of U.S. dollars 2019 2020 (2,175) (4,588) 277 - 53 (6,433) (6,433) (6,649) 1,356 7,930 225 (3,571) (*) The total of allowance of trade provision and reversal are the impact in change in trade provisions in the consolidated statements of operations. The Atento Group’s maximum exposure to credit risk at the reporting date is equivalent to the carrying amount of each of the aforementioned trade receivables categories. The Atento Group holds no guarantees as collection insurance. F-36 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 148/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 14) DERIVATIVE FINANCIAL INSTRUMENTS Details of derivative financial instruments at December 31, 2019 and 2020 are as follow: Cross currency swaps - net investment hedges Cross currency swaps - that do not meet the criteria for hedge accounting Total Non-current portion Current portion Thousands of U.S. dollars 2019 Assets Liabilities Assets 5,382 - 5,382 5,382 - (2,289) (167) (2,456) (2,289) (167) 11,088 - 11,088 11,088 - 2020 Liabilities (5,220) - (5,220) (5,220) - Atento Luxco1 entered into Cross-Currency Swaps to reduce its foreign exchange risk, since it generates cashflow in local currencies. With these instruments, the company ensures that its cashflow in local currencies is swapped into a fixed dollar amount, the currency used to pay debt obligations, therefore reducing foreign exchange risks. Derivatives held for trading are classified as current assets or current liabilities. The fair value of a hedging derivative is classified as a non- current asset or a non-current liability, as applicable, if the remaining maturity of the hedged item exceeds twelve months. Otherwise, it is classified as a current asset or liability. In connection with the Refinancing process and the repayment of the first Brazilian Debentures, the hedge accounting for the interest rate swap was discontinued and the OCI balance was transferred to finance cost. Thereafter, any changes in fair value was directly recognized in the statements of operations. On April 1, 2015, the Company started a hedge accounting for net investment hedge related to exchange risk between the U.S. dollar and foreign operations in Euro (EUR), Mexican Peso (MXN), Colombian Peso (COP) and Peruvian Nuevo Sol (PEN). In connection with the Refinancing process, 8 of the 10 derivatives contracts designated as Net Investment Hedges were terminated between August 1, 2017 and August 4, 2017, generating positive cash of 46,080 thousand U.S. dollars, net of charges. During August 2017, Atento Luxco 1 also entered into new Cross- Currency Swaps related to exchange risk between U.S. dollars and Euro (EUR), Mexican Peso (MXN), Brazilian Reais (BRL) and Peruvian Nuevo Sol (PEN). Except for the Cross-Currency Swap between U.S. dollars and Brazilian Reais (BRL), all Cross-Currency Swaps were designated for hedge accounting as net investment hedge. On January 01, 2019, the Company started to also designate the Cross-Currency Swap between U.S. dollars and Brazilian Reais (BRL) for hedge accounting as net investment hedge. On January 1, 2019, the Company designated the Cross-Currency Swap between U.S. dollars and Brazilian Reais for hedge accounting as net investment hedge. Prior to the date of designation of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change in fair value was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany debt, which were recorded in earnings. Effective January 1, 2019, the intercompany debt was reclassified as “permanent in equity” (which assumes that the related payable is neither planned nor likely to occur in the foreseeable future, since it is in substance, a part of the entity’s net investment in that foreign operation) and, as a consequence, the changes arising from the exchange rate are recorded in other comprehensive income. On January 1, 2020 Atento decided to assign the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as “permanent in equity”, with its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes related to the USD-MXN exchange rate are now recorded in other comprehensive income. On February 14, 2020, Atento Brasil S.A. entered into a cross-currency swap to hedge a EURO loan of 7,402 thousand Euros at a fixed rate of 1.49% exchanged to a 35,000 thousand Brazilian Reais with interest rate of the average daily rate of the one day “over extra-group” – DI – Interbank Deposits - plus a spread of 1.95% per annum. The transaction was liquidated on August 13, 2020 due to the repayment of the loan. F-37 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 149/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents At December 31, 2018, 2019 and 2020, details of interest rate swap, cross-currency swaps that do not qualify for hedge accounting and net investment hedges were as follows: 2018 Bank Maturity Notional currency Index Interest Rate Swap Notional in contract currency (thousands) Fair value assets Fair value liability D/(C) D/(C) Other comprehensive income, net of taxes D/(C) Change in OCI, net of taxes D/(C) Statements of operations - Finance cost D/(C) Itaú Dec-18 BRL BRL CDI 135,000 - - - - - - - - 972 972 Cross Currency Swaps - that do not qualify for hedge accounting Bank Maturity Purchase currency Selling currency Notional (thousands) Fair value assets Fair value liability D/(C) D/(C) Other comprehensive income D/(C) Change in OCI, net of taxes D/(C) Statements of operations - Finance cost D/(C) Goldman Sachs Aug-22 USD BRL 754,440 6,020 6,020 - - - - - - (4,302) (4,302) Bank Maturity Purchase currency Cross-currency swap- Net Investment Hedges Fair value liability Fair value assets Notional (thousands) Selling currency Other comprehensive income Change in OCI Income statement - Finance Cost D/(C) D/(C) D/(C) D/(C) D/(C) Nomura International Aug-22 USD Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs Jan-20 USD Santander Jan-20 USD Santander Jan-20 USD Goldman Sachs Jan-20 USD Goldman Sachs Jan-20 USD Nomura International Jan-20 USD Nomura International Jan-18 USD Goldman Sachs Jan-18 USD Goldman Sachs Jan-18 USD BBVA Jan-18 USD BBVA EUR MXN PEN EUR MXN EUR MXN MXN EUR PEN COP PEN COP Total Derivative financial instrument-asset Derivative financial instrument-liability 34,109 1,065,060 194,460 20,000 11,111 48,000 40,000 23,889 22,000 13,800 7,200 55,200 28,800 189 6,025 - - - - - - - - - - - 6,214 12,234 - (922) (682) - - - - - - - - - - (1,604) (1,604) 11,313 (682) F-38 (257) (3,094) 2,413 1,742 (2,113) 3,587 (7,600) (4,357) 1,620 22 (80) 71 (359) (8,405) (8,405) 640 (4,163) 2,333 - - - - - - - - - - (1,190) (1,190) - - - - - - - - - - - - - - (3,330) https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 150/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 2019 Cross Currency Swaps - that do not qualify for hedge accounting Bank Maturity Purchase currency Selling currency Notional (thousands) Fair value asset D/(C) Fair value liability D/(C) Other comprehensive income D/(C) Change in OCI D/(C) ABC Brasil S.A. Aug-20 USD BRL 12,232 8,740 8,740 (8,907) (8,907) - - - - Statements of operations - Finance cost D/(C) - - Derivative financial instrument - liability (167) Net Investment Hedges Bank Maturity Purchase currency Selling currency Notional (thousands) Fair value asset Fair value liability D/(C) D/(C) Other comprehensive income D/(C) Change in OCI D/(C) Statements of operations - Finance cost D/(C) Statements of operations - Change in fair value D/(C) Nomura International Aug-22 USD Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs Jan-20 USD Santander Jan-20 USD Santander Jan-20 USD Goldman Sachs Jan-20 USD Goldman Sachs Jan-20 USD Nomura International Jan-20 USD Nomura International Jan-18 USD Goldman Sachs Jan-18 USD Goldman Sachs Jan-18 USD BBVA Jan-18 USD BBVA Aug-22 USD Morgan Stanley Aug-22 USD Morgan Stanley EUR MXN PEN BRL EUR MXN EUR MXN MXN EUR PEN COP PEN COP BRL PEN Derivative financial instrument - asset Derivative financial instrument - liability 34,109 447 1,065,060 6,696 194,460 2,689 754,440 4,782 - 20,000 - 11,111 - 48,000 - 40,000 - 23,889 - 22,000 - 13,800 - 7,200 - 55,200 - 28,800 135 308,584 13 66,000 - (6,543) (4,898) - - - - - - - - - - - (148) (80) 14,762 (11,669) 5,382 (2,289) F-39 (714) 4,014 5,124 812 1,742 (2,113) 3,587 (7,600) (4,357) 1,620 22 (80) 71 (359) 99 74 457 (7,108) (2,710) (812) - - - - - - - - - - (99) (74) 1,942 (10,346) - - - - - - - - - - - - - - (3,545) (1,815) (5,360) - - - - - - - - - - - - - - - - - https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 151/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 2020 Net Investment Hedges Bank Maturity Purchase currency Selling currency Notional (thousands) Fair value asset Fair value liability Nomura International Aug-22 USD Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs Jan-20 USD Santander Jan-20 USD Santander Jan-20 USD Goldman Sachs Jan-20 USD Goldman Sachs Jan-20 USD Nomura International Jan-20 USD Nomura International Jan-18 USD Goldman Sachs Jan-18 USD Goldman Sachs Jan-18 USD BBVA Jan-18 USD BBVA Aug-22 USD Morgan Stanley Aug-22 USD Morgan Stanley Aug-22 USD Goldman Sachs Aug-22 USD Goldman Sachs EUR MXN PEN BRL EUR MXN EUR MXN MXN EUR PEN COP PEN COP BRL PEN MXN PEN D/(C) D/(C) 13 34,109 - 1,065,060 194,460 - 754,440 8,866 - 20,000 - 11,111 - 48,000 - 40,000 - 23,889 - 22,000 - 13,800 - 7,200 - 55,200 28,800 - 308,584 2,096 120 66,000 - 1,065,060 - 194,460 11,095 (7) (3,224) (1,996) - - - - - - - - - - - - - - - (5,227) Derivative financial instrument - asset Derivative financial instrument - liability 11,088 (5,220) The ineffective portion of all our cross-currency swaps is zero. Other comprehensive income D/(C) Change in OCI D/(C) Statements of operations - Finance cost D/(C) Statements of operations - Change in fair value D/(C) (454) 41 (339) (6,167) 1,742 (2,113) 3,587 (7,600) (4,357) 1,620 22 (80) 71 (359) (2,589) (115) 2,230 2,965 (260) 3,973 5,463 6,979 - - - - - - - - - - 2,688 189 (2,230) (2,964) (11,895) 13,838 - 48 - (289) - - - - - - - - - - - - - - (241) - - - - - - - - - - - - - - - - - - - Gains and losses on net investment hedges accumulated in equity will be taken to the statement of operations when the foreign operation is partially disposed of or sold. Summary of Outstanding Derivatives – Rates Counterparty Product Receive Ccy. Receive Rate Notional Receive Pay Ccy. Pay Rate Notional Pay Nomura Goldman Sachs Goldman Sachs Goldman Sachs Morgan Stanley Morgan Stanley Cross Currency Swap Cross Currency Swap Cross Currency Swap Cross Currency Swap Cross Currency Swap Cross Currency Swap USD USD USD USD USD USD 6.125% 6.125% 6.125% 6.125% 6.125% 6.125% 40,000,000 60,000,000 240,000,000 60,000,000 80,000,000 20,000,000 EUR MXN BRL PEN BRL PEN 34,109,320 5.83% 10.255% 1,065,060,000 754,440,000 7.208% 194,460,000 8.715% 308,584,000 6.613% 66,000,000 6.399% 15) CASH AND CASH EQUIVALENTS Deposits held at call Short-term financial investments Total Thousands of U.S. dollars 2019 2020 96,978 27,728 124,706 139,264 69,730 208,994 “Short-term financial investments” comprises short-term fixed-income securities in Brazil, which mature in less than 90 days and accrue interest pegged to the CDI. F-40 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 152/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 16) FINANCIAL LIABILITIES As of December 31, 2019 and 2020 all the financial liabilities of the Company are classified as other financial liabilities at amortized cost, except for the derivative financial instruments that are classified as financial liability at fair value through profit or loss. The payments schedule for other financial liabilities, trade and other payables and liabilities at December 31, 2019 and 2020, including estimated future interest payments, calculated based on interest rates and foreign exchange rates applicable as at December 31, 2019 and 2020 are as follow: Thousands of U.S. dollars Maturity (years) 2019 2020 2021 2022 2023 2024 More than 5 years Senior Secured Notes Lease liabilities Bank borrowings Trade and other payables Total financial liabilities 30,625 66,415 23,248 166,111 286,399 30,625 52,134 449 11,744 94,952 530,625 41,069 351 - 572,045 - - - 32,079 21,481 23,826 - - - - - - 32,079 21,481 23,826 Thousands of U.S. dollars Maturity (years) 2020 2021 2022 2023 2024 2025 More than 5 years Senior Secured Notes Lease liabilities Bank borrowings Trade and other payables Total financial liabilities 30,625 52,698 68,668 135,781 287,772 530,625 41,047 1,569 4,296 577,537 - - - - 33,500 22,985 12,128 16,744 - - - - - - - - 33,500 22,985 12,128 16,744 Total 591,875 237,004 24,048 177,855 1,030,782 Total 561,250 179,102 70,237 140,077 950,666 17) FINANCIAL DEBT WITH THIRD PARTIES Details of debt with third parties at December 31, 2019 and 2020 are as follow: Senior Secured Notes Bank borrowing Lease liabilities Total non-current Senior Secured Notes Super Senior Credit Facility Bank borrowing Lease liabilities Total current TOTAL DEBT WITH THIRD PARTIES F-41 Thousands of U.S. dollars 2019 2020 490,012 748 142,738 633,498 11,910 - 23,180 52,027 87,117 720,615 493,701 1,420 99,515 594,636 11,910 30,038 38,055 53,184 133,187 727,823 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 153/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Senior Secured Notes On August 10, 2017, Atento Luxco 1 S.A., closed an offering of 400,000 thousand U.S. dollars aggregate principal amount of 6.125% Senior Secured Notes due 2022 in a private placement transaction. The notes are due in August 2022. The 2022 Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s wholly owned subsidiaries. The issuance costs of 11,979 thousand U.S. dollars related to this new issuance are recorded at amortized cost using the effective interest method. On April 4, 2019, Atento Luxco 1 S.A., closed an offering of an additional $100.0 million in aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Additional Notes"). The Additional Notes were offered as additional notes under the indenture, dated as of August 10, 2017, pursuant to which the Issuer previously issued $400.0 million aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Existing Notes"). The Additional Notes and the Existing Notes are treated as the same series for all purposes under the indenture and collateral agreements, each as amended and supplemented, that govern the Existing Notes and the Additional Notes. The terms of the Indenture governing the 2022 Senior Secured Notes, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain additional indebtedness; make certain dividends distributions, investments and other restricted payments; sell the property or assets to another person; incur additional liens; guarantee additional debt; and enter into transaction with affiliates. As of December 31, 2020, we were in compliance with these covenants. The outstanding amount at December 31, 2020 is 505,611 thousand U.S. dollars. All interest payments are made on a half yearly basis. The fair value of the Senior Secured Notes, calculated on the basis of their quoted price on December 31, 2020, is 500,200 thousand U.S. dollars. The fair value hierarchy of the Senior Secured Notes is Level 1 as the fair value is based on the quoted market price at the reporting date. On February 10, 2021, Atento Luxco 1 S.A., closed an offering of a $500.0 million aggregate principal amount of 8.0% Senior Secured Notes due February 10, 2026 in a private placement transaction. Atento Luxco 1 used the net proceeds to repurchase all of its 6.125% Senior Secured Notes due 2022. The terms of the Indenture governing the 2026 Senior Secured Notes, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell property or assets to another person; incur additional liens; guarantee additional debt; and enter into transactions with affiliates. Details of the corresponding debt at each reporting date are as follows: Currency Principal 2019 Accrued interests Thousands of U.S. dollars Total debt Principal 2020 Accrued interests Total debt U.S. dollar 490,012 11,910 501,922 493,701 11,910 505,611 Maturity 2022 Bank borrowings On February 3, 2014, Atento Brasil S.A. entered into a credit agreement with Banco Nacional de Desenvolvimento Econômico e Social - BNDES (“BNDES”) in an aggregate principal amount of 300,000 thousand Brazilian Reais (the “BNDES Credit Facility”), equivalent to 109,700 thousand U.S. dollars as of each disbursement date. The total amount of the BNDES Credit Facility is divided into five tranches subject to the following interest rates: F-42 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 154/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Tranche Tranche A Tranche B Tranche C Tranche D Tranche E Long-Term Interest Rate (Taxa de Juros de Longo Prazo — TJLP) plus 2.5% per annum SELIC Rate plus 2.5% per annum 4.0% per year 6.0% per year Long-Term Interest Rate (Taxa de Juros de Longo Prazo — TJLP) Interest Rate Each tranche intends to finance different purposes, as described below: • Tranche A and B: investments in workstations, infrastructure, technology, services and software development, marketing and commercialization, within the scope of BNDES program – BNDES Prosoft. • Tranche C: IT equipment acquisition, covered by law 8.248/91, with national technology, necessary to execute the project described on tranches “A” and “B”. • Tranche D: acquisitions of domestic machinery and equipment, within the criteria of FINAME, necessary to execute the project described on tranches “A” and “B”. • Tranche E: investments in social projects to be executed by Atento Brasil S.A. Date March 27, 2014 April 16, 2014 July 16, 2014 August 13, 2014 Subtotal 2014 March 26, 2015 April 17, 2015 December 21, 2015 Subtotal 2015 October 27, 2016 Subtotal 2016 Total Tranche A Tranche B (Thousands of U.S. dollars) Tranche D Tranche C Tranche E Total 11,100 4,714 - 27,584 43,398 5,753 12,022 7,250 25,025 - - 68,423 5,480 2,357 - 3,013 10,850 1,438 3,006 1,807 6,251 - - 17,101 7,672 3,300 - 4,430 15,402 2,042 4,266 - 6,308 - - 21,710 548 236 - 477 1,261 167 349 - 516 - - 1,777 - - 270 - 270 - - 177 177 242 242 689 24,800 10,607 270 35,504 71,181 9,400 19,643 9,234 38,277 242 242 109,700 This facility should be repaid in 48 monthly installments. The first payment was made on March 15, 2016 and the last payment would be due on February 15, 2020, however Atento Brasil S.A. repaid in advance on April 30, 2019 all the outstanding amount. The amount repaid was BRL61.7 million (equivalent to $15.6 million) plus interest accrued and a penalty of BRL 0.7 million (equivalent to $0.2 million). The BNDES Credit Facility contains covenants that restrict Atento Brasil S.A.’s ability to transfer, assign, change or sell the intellectual property rights related to technology and products developed by Atento Brasil S.A. with the proceeds from the BNDES Credit Facility. As of December 31, 2020, Atento Brasil S.A. was in compliance with these covenants. The BNDES Credit Facility does not contain any other financial maintenance covenant. The BNDES Credit Facility contains customary events of default including the following: (i) reduction of the number of employees without providing program support for outplacement, as training, job seeking assistance and obtaining pre-approval of BNDES; (ii) existence of unfavorable court decision against the Company for the use of children as workforce, slavery or any environmental crimes and (iii) inclusion in the by-laws of Atento Brasil S.A. of any provision that restricts Atento Brasil S.A’s ability to comply with its financial obligations under the BNDES Credit Facility. On September 26, 2016, Atento Brasil S.A. entered into a new credit agreement with BNDES in an aggregate principal amount of 22,000 thousand Brazilian Reais, equivalent to 6,808 thousand U.S. dollars as of September 30, 2016. The interest rate of this facility is Long-Term Interest Rate (Taxa de Juros de Longo Prazo - TJLP) plus 2.0% per annum. The facility should be repaid in 48 monthly instalments. The first payment was due on November 15, 2018 and the last payment will be due on October 15, 2022. This facility is intended to finance an energy efficiency project to reduce power consumption by implementing new lightening, air conditioning and automation technology. On November 24, 2017, 6,500 thousand Brazilian Reais (equivalent to 1,993 thousand U.S. dollars as of November 30, 2017) were released under this facility. F-43 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 155/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents As of December 31, 2020, the outstanding amount under BNDES Credit Facility was 581 thousand U.S. dollars. The fair value as of December 31, 2020 calculated based on discounted cash flow is 560 thousand U.S. dollars. On April 25, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Santander (Brasil) S.A. in an aggregate principal amount of up to 80,000 thousand Brazilian Reais (the “2017 Santander Bank Credit Certificate”), equivalent to approximately 25,012 thousand U.S. dollars as of April 30, 2017. The interest rate of the 2017 Santander Bank Credit Certificate equals to the average daily rate of the one day “over extra-group” – DI – Interbank Deposits (as such rate is disclosed by CETIP – “Central De Custódia e Liquidação Financeira de Títulos Privados” in the daily release available on its web page), plus a spread of 2.70% per annum. The 2017 Santander Bank Credit Certificate matures every 180 days and has been renewed on a regular basis. On April 7, 2020, the Company paid the full outstanding balance, and the “2017 Santander Bank Credit Certificate” was terminated by mutual agreement between the parties. On August 10, 2017, Atento Luxco 1 S.A. entered into a new Super Senior Revolving Credit Facility (the “Super Senior Revolving Credit Facility”) which provides borrowings capacity of up to 50,000 thousand U.S. dollars and will mature on February 10, 2022. Banco Bilbao Vizcaya Argentaria, S.A., as the agent, the Collateral Agent and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Morgan Stanley Bank N.A. and Goldman Sachs Bank USA are acting as arrangers and lenders under the Super Senior Revolving Credit Facility. The Super Senior Revolving Credit Facility may be utilized in the form of multi-currency advances for terms of one, two, three or six months. The Super Senior Revolving Credit Facility bears interest at a rate per annum equal to LIBOR or, for borrowings in euro, EURIBOR or, for borrowings in Mexican Pesos, TIIE plus an opening margin of 4.25% per annum. The margin may be reduced under a margin ratchet to 3.75% per annum by reference to the consolidated senior secured net leverage ratio and the satisfaction of certain other conditions. The terms of the Super Senior Revolving Credit Facility Agreement limit, among other things, the ability of the Issuer and its restricted subsidiaries to (i) incur additional indebtedness or guarantee indebtedness; (ii) create liens or use assets as security in other transactions; (iii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iv) make investments; (v) merge, amalgamate or consolidate, or sell, transfer, lease or dispose of substantially all of the assets of the Issuer and its restricted subsidiaries; (vi) enter into transactions with affiliates; (vii) sell or transfer certain assets; and (viii) agree to certain restrictions on the ability of restricted subsidiaries to make payments to the Issuer and its restricted subsidiaries. These covenants are subject to a number of important conditions, qualifications, exceptions and limitations that are described in the Super Senior Revolving Credit Facility Agreement. The Super Senior Revolving Credit Facility Agreement includes a financial covenant requiring the drawn super senior leverage ratio not to exceed 0.35:1.00 (the “SSRCF Financial Covenant”). The SSRCF Financial Covenant is calculated as the ratio of consolidated drawn super senior facilities debt to consolidated pro forma EBITDA for the twelvemonth period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Super Senior Revolving Credit Facility being at least 35% drawn (excluding letters of credit (or bank guarantees), ancillary facilities and any related fees or expenses) on the relevant test date. The SSRCF Financial Covenant only acts as a draw stop to new drawings under the Revolving Credit Facility and, if breached, will not trigger a default or an event of default under the Super Senior Revolving Credit Facility Agreement. The Issuer has four equity cure rights in respect of the SSRCF Financial Covenant prior to the termination date of the Super Senior Revolving Credit Facility Agreement, and no more than two cure rights may be exercised in any four consecutive financial quarters. On October 16, 2017, Atento El Salvador S.A. de C.V. entered into an overdraft credit line agreement with Banco de America Central, S.A. - BAC for an amount of 1,600,000 thousand U.S. dollars, maturing on One Year, extendable with simple exchange of letters with an annual interest rate of 8.0% per annum. As of December 31, 2020, the outstanding balance was 2 thousand U.S. dollars. F-44 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 156/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On March 25, 2020, Atento Luxco 1 S.A. withdrew the full amount of 50,000 thousand U.S. dollars maturing on September 21, 2020 with an annual interest rate of Libor + 4.25%. On September 21, 2020, the full amount of 50,000 thousand U.S. dollars was rolled over until December 20, 2020, at the same interest rate. On December 20, 2020, Atento Luxco 1 S.A. repaid 20,000 thousand U.S. dollars and the outstanding 30,000 thousand U.S. dollars as of such date was rolled over and matures on March 22, 2021. As of December 31, 2020, we were in compliance with this covenant and the outstanding amount under this facility was 30,038 thousand U.S. dollars. On March 13, 2019, Atento Brasil S.A. entered into a financing agreement with Banco Santander Brasil S.A. (“Risco Sacado”) for the annual Microsoft software licenses, for an amount of 23,254 thousand Brazilian Reais, maturing on March 9, 2020, with an annual interest rate of 8.9% per annum. The total outstanding balance was paid on the due date. On August 13, 2019, Atento Brasil S.A. entered into an overdraft credit line agreement with Banco do Brasil for an amount of 30,000 thousand Brazilian Reais, with maturity every six months, with an annual interest rate of CDI plus 2.127% per annum. On February 27, 2020, the amount of the agreement was increased up to 40,000 thousand Brazilian Reais, with an annual interest rate of CDI plus 5.54% per annum, with maturity date on July 27, 2020. On July 22, 2020, the amount of the agreement was maintained at up to 40,000 thousand Brazilian Reais, with an annual interest rate of CDI plus 5.54% per annum, with next maturity date on October 20, 2020. On October 14, 2020, Atento Brasil paid the full outstanding balance. On October 14, 2020, Atento Brasil entered into a bank credit certificate with Banco do Brasil for an amount of 30,000 thousand Brazilian Reais, maturing on February 28, 2021 with an annual interest rate of CDI plus 2,127%. As of December 31, 2020, the outstanding balance was 5.821 thousand U.S. dollars. On August 20, 2019, Atento Brasil S.A. entered into a loan agreement with Banco ABC Brasil for an amount of 7,766 thousand Euros maturing on February 18, 2020 with an annual interest rate of 1.25%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in EURO, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over extragroup” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.80% over 35,000 thousand Brazilian Reais. The total outstanding balance was paid on the due date. On February 14, 2020, Atento Brasil S.A. entered into a loan agreement with Banco ABC Brasil for an amount of 7,402 thousand Euros maturing on August 13, 2020 with an annual interest rate of 1.49%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in EURO, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over extragroup” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.95% over 35,000 thousand Brazilian Reais. The total outstanding balance was paid on the due date. On February 20, 2020, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Itaú for an amount of 35,217 thousand Brazilian Reais, maturing on May 20, 2020 with an annual interest rate of CDI plus 1.95% per annum. The total outstanding balance was paid on the due date. On March 13, 2020, Atento Brasil S.A. entered into a financing agreement with Banco Itaú (“Risco Sacado”) for the annual Microsoft software licenses, for an amount of 24,499 thousand Brazilian Reais, maturing on April 1, 2021, with an annual interest rate of 7.2%. As of December 31, 2020, the outstanding balance was 4,714 thousand U.S. dollars. On April 6, 2020, Atento Brasil S.A. entered into a loan agreement with Banco Santander for an amount of 110,000 thousand Brazilian Reais, maturing on April 06, 2021 with an annual interest rate of CDI plus 4.96% per annum. On July 13, Atento Brasil S.A. made a partial amortization in the amount of 60,000 thousand Brazilian Reais plus accrued interest. As of December 31, 2020, the outstanding balance was 9,910 thousand U.S. dollars. On May 12, 2020, Atento Peru entered a loan agreement with Scotiabank Peru, under the government financing program related to Covid-19 (Reactiva Peru), for an aggregate principal amount of 10,000 thousand Peruvian Soles, with an annual interest rate of 1.0% per annum. This facility should be repaid in 36 months. The first payment would be due on May 12, 2021 and the last payment would be due on May 12, 2023. On November 13, Atento Peru prepaid the total outstanding balance. F-45 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 157/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On June 12, 2020, Atento Brasil entered into a financing agreement with Banco De Lage Landen for an amount of 10,000 thousand Brazilian Reais to finance the purchase of Microsoft software licenses, maturing on June 30, 2023 with an annual interest rate of 9.0% per annum. Atento Brasil drew down on the financing agreement on July 01, 2020. The outstanding balance as of December 31, 2020 was 1,924 thousand U.S. dollars. On August 26, 2020, Atento Brasil entered into a bank credit certificate with Banco ABC Brasil for an amount 50,000 thousand Brazilian Reais, maturing on February 22, 2021 with an annual interest rate of CDI plus 2.70% per annum. The balance under the loan agreement as of December 31, 2020 was 9,776 thousand U.S. dollars. On December 15, 2020, Atento Brasil entered into a bank credit certificate with Banco ABC Brasil for an amount 35,000 thousand Brazilian Reais, maturing on June 14, 2021 with an annual interest rate of CDI plus 2.50% per annum. The balance under the loan agreement as of December 31, 2020 was 6,748 thousand U.S. dollars. Lease liabilities Liabilities Current liabilities Non-current liabilities January 1, 2019 Additions/ (Disposals) Payments Interest accrued Interest paid Translation difference 54,706 134,920 189,626 29,474 (1,592) 27,882 (56,088) - (56,088) 18,307 - 18,307 (812) - (812) 6,440 9,410 15,850 December 31, 2019 52,027 142,738 194,765 Liabilities Current liabilities Non-current liabilities December 31, 2019 Additions/ (Disposals) Payments Interest accrued Interest paid Amortization (addition) fees Transfer Translation difference December 31, 2020 52,027 142,738 194,765 8,514 21,121 29,635 (48,947) - (48,947) 14,426 - 14,426 (559) - (559) 29 697 726 49,777 (49,777) - (22,083) (15,264) (37,347) 53,184 99,515 152,699 The future lease liabilities payments are as follows: Lease liabilities payments 2021 52,698 2022 41,047 2023 33,500 2024 22,985 2025 12,128 Others 16,744 Total 179,102 a) Financing activities See below the changes in debt with third parties arising from financing activities: Thousands of U.S. dollars 2018 Senior Secured Notes Brazilian bonds - Debentures Lease liabilities Other borrowings Total Cash flows provided by/(used in) financing activities New borrowing Amortization December 31, 2017 398,346 21,055 10,498 56,392 486,291 - - - 58,462 58,462 - (3,543) (4,221) (73,911) (81,675) New leases/ IFRS 16 Interest accrued Interest paid (*) Amortization (addition) fees Translation differences December 31, 2018 - - - - - 24,500 1,809 856 3,491 30,656 (24,500) (1,920) (856) (6,283) (33,559) 2,245 (118) - - 2,127 (556) (2,575) (750) 1,347 (2,534) 400,035 14,708 5,527 39,498 459,768 F-46 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 158/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 2019 Senior Secured Notes Brazilian bonds - Debentures Lease liabilities Other borrowings Total Cash flows provided by/(used in) financing activities December 31, 2018 New borrowing Amortization New leases/ IFRS 16 Interest accrued Interest paid (*) Amortization (addition) fees Translation differences December 31, 2019 Thousands of U.S. dollars 400,035 14,708 5,527 39,498 459,768 100,170 - - 73,547 173,717 - (14,513) (56,088) (86,966) (157,567) - - 211,981 - 211,981 29,779 441 18,307 2,728 51,255 (27,563) (676) (812) (2,258) (31,309) (499) (295) - - (794) - 335 15,850 (2,621) 13,564 501,922 - 194,765 23,928 720,615 2020 Cash flows provided by/(used in) financing activities December 31, 2019 New borrowing Amortization New leases/ IFRS 16 Interest accrued Interest paid (*) Amortization (addition) fees Translation differences December 31, 2020 Thousands of U.S. dollars Senior Secured Notes Super Senior Credit Facility Lease liabilities Other borrowings Total 501,922 - 194,765 23,928 720,615 - 50,000 - 71,771 121,771 - (20,000) (48,947) (50,543) (119,490) - - 29,635 - 29,635 30,625 1,910 14,426 71 47,032 (30,625) (1,872) (559) (1,021) (34,077) 3,689 - 726 - 4,415 - - (37,347) (4,731) (42,078) 505,611 30,038 152,699 39,475 727,823 (*) For the purposes of the statements of cash flows, it is classified as "interest paid" in operating activities. 18) TRADE AND OTHER NON-TRADE PAYABLES Details of trade and other payables at December 31, 2019 and 2020 are as follow: Other payables Suppliers Total non-current non-trade payables Suppliers Advances Total current trade payables Suppliers of fixed assets Personnel Other payables Advances from customers Total current other non-trade payables Total current Total Thousands of U.S. dollars 2019 2020 10,261 1,483 11,744 71,311 365 71,676 21,276 67,208 4,806 1,145 94,435 166,111 177,855 2,734 1,562 4,296 59,338 77 59,415 12,668 57,010 5,761 927 76,366 135,781 140,077 The carrying amount of trade and other non-trade payables is similar to the fair value. F-47 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 159/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 19) EQUITY Share capital As of December 31, 2020, share capital was 49 thousand U.S. dollars, equivalent to €33,979 (49 thousand U.S. dollars, equivalent to €33,979 as of December 31, 2019), divided into 15,000,000 shares (15,000,000 shares in December 31, 2019). On January 18, 2019, the Board approved a share capital increase and issued 335,431 shares increasing outstanding shares to 75,406,357. On July 28, 2020, an extraordinary shareholder’s meeting approved the reverse share split of 75,406,357 ordinary shares without nominal value, representing the entire share capital of the Company, into 15,000,000 ordinary shares without nominal value using a ratio of 5.027090466672970, and subsequently amending article 5 of the articles of association of the Company. Mezzanine Partners II Offshore Lux Sarl II owns 25.36%; Chesham Investment Pte Ltd owns 21.85%, Taheebo Holdings LLC owns 14,87% of ordinary shares of Atento S.A. Reserve for acquisition of non-controlling interest Refers to options attributable to Atento Brasil S.A. in the acquisition of RBrasil and Interfile in the total amount of 23,531 thousand U.S. dollars as of December 31, 2018. On May 17, 2019 and June 7, 2019, the Company acquired remaining shares of Interfile and RBrasil, respectively, and therefore the reserve for acquisition of non-controlling interest was written off. Share premium The share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value. Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimburse or repurchase shares. On January 2, 2020, the Company vested the total of 1,305,065 TRSUs, issued by treasury shares, with an impact in share premium of 5,842 thousand of U.S. dollars. Treasury shares In 2019, Atento S.A. repurchased 4,425,499 shares (corresponding to 880,330 shares of the reserve share split) at a cost of 11,141 thousand of U.S. dollars and an average price of $2.52 ($12.66 in reverse share split basis), totalizing 5,531,657 shares in treasury (corresponding to 1,100,639 shares of the reserve share split). As a result of the vesting of 1,305,065 TRSUs (corresponding to 259,606 shares of the reserve share split), Atento S.A. had 4,226,592 shares in treasury (corresponding to 840,763 shares of the reserve share split). As of July 28, 2020, Atento S.A. announced a reverse share split that converted the Company’s entire share capital of 75,406,357 into 15,000,000 shares. At that time Atento S.A. had 4,771,076 shares on treasury that became 949,073. Considering the reverse share split basis, during 2020, Atento S.A. repurchased 169,739 shares at a cost of 1,337 thousand of U.S. dollars and an average price of $7.87. As of December 31, 2020, Atento S.A. had 1,010,502 shares in treasury (1,100,369 shares as of December 31, 2019, in the reverse share split basis). Legal reserve According to commercial legislation in Luxembourg, Atento S.A. must transfer 5% of its year profits to legal reserve until the amount reaches 10% of share capital. The legal reserve cannot be distributed. At December 31, 2019 and 2020, no legal reserve had been established, mainly due to the losses incurred by Atento S.A. F-48 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 160/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On February 26, 2020, the Board of Directors has proposed the allocation to legal reserve of the amount of sixty-seven with forty-seven cents Euros (EUR 67.47). At July 28, 2020 the Annual Meeting resolves to (i) allocate the amount of EUR 67.47 to the legal reserve of the Company out of the profit of EUR 1,071,315.52 and (ii) to carry forward the remaining amount of the profit to the next financial year. Hedge accounting effects As discussed on Note 14, on January 1, 2019 Atento formalized at a meeting of the “Board of Directors”, which took place on December 20, 2018, its intention to renew the loan agreement between Atento Luxco 1 and Atento Brasil on its maturities per indefinite time and designate it as permanent equity, as the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value related to the USD-BRL exchange rate is recorded in equity as part of other comprehensive income. At the same time the, on January 1, 2019, the Cross-Currency Swap USD BRL was designated as a net investment hedge. Prior to the date of designation of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change in fair value was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany debt, which were recorded in earnings. Therefore, changes in fair value related to the USD-BRL Cross-Currency Swap are recorded in equity as part of other comprehensive income. Also, on January 1, 2020 the Company assigned the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as permanent in equity, with its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value related to the USD-MXN exchange rate are now recorded in equity as part of other comprehensive income. Translation differences Translation differences reflect the differences arising on account of exchange rate fluctuations when converting the net assets of fully consolidated foreign companies from local currency into Atento Group’s presentation currency (U.S. dollars). Stock-based compensation a) Description of share-based payment arrangements The 2017 Plan On July 3, 2017, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries: 1. Time Restricted Stock Units (“RSU”) (equity settled) • Grant date: July 3, 2017 • Amount: 886,187 RSUs • Vesting period: 100% of the RSUs vest on January 2, 2020 • There are no other vesting conditions The 2018 Plan On July 2, 2018, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. The share-based payment had the following arrangements: 1. Time Restricted Stock Units (“RSUs”) (equity settled) • Grant date: July 2, 2018 • Amount: 1,065,220 RSUs • Vesting period: 100% of the RSUs vests on January 4, 2021 • There are no other vesting conditions F-49 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 161/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents As of January 4, 2019, a total of 1,161,870 TRSUs vested, which is composed of 1,109,338 RSUs of the 2016 Plan granted on July 1, 2016, 29,300 RSUs of the Board of directors plan granted on May 31, 2017 and June 3, 2017, and 23,232 RSUs of the Board of directors plan granted on April 19, 2018. The 2019 Plan – Board and Extraordinary On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant for a total in a one-time award with a one-year vesting period. 1. Time Restricted Stock Units (“RSU”) (equity settled) • Grant date: March 1, 2019 • Amount: 109,785 and 704,057 RSUs • Vesting period: 100% of the RSUs vests on January 2, 2020 • There are no other vesting conditions As of January 2, 2020, a total of 813,842 TRSUs vested. The 5 Years Plan On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors (a total of 238,663 RSUs) in a one-time award with a five-year vesting period of 20% each year. 1. Time Restricted Stock Units (“RSU”) (equity settled) • Grant date: March 1, 2019 • Amount: 238,663 RSUs • Vesting period: 20% of the RSUs each year beginning on January 2, 2020 and last vested on January 4, 2024. • There are no other vesting conditions The 2019 Plan On June 3, 2019, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. The share-based payment had the following arrangements: 1. Time Restricted Stock Units (“RSU”) (equity settled) • Grant date: June 3, 2019 • Amount: 2,560,666 RSUs • Vesting period: 100% of the RSUs vests on January 3, 2022 • There are no other vesting conditions As of January 2, 2020, a total of 1,305,065 TRSUs vested, which is composed of 443,490 RSUs of the 2017 Plan granted on July 3, 2017, 109,785 RSUs of the Board of directors Plan granted on March 1, 2019, 704,057 RSUs of the Board and Extraordinary Plan granted on March 1, 2019 and 47,733 RSUs of the 20% of the 5 Years Plan granted on March 1, 2019. F-50 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 162/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The 2020 Plan – Board and Extraordinary On March 2, 2020, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant for a total in a one-time award with a one-year vesting period. 1. Time Restricted Stock Units (“RSU”) (equity settled) • Grant date: March 2, 2020 • Amount: 153,846 and 16,722 RSUs • Vesting period: 100% of the RSUs vests on January 4, 2021 • There are no other vesting conditions On August 3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. The share-based payment is composed by Stock Options with the following arrangements: 1. Stock Options (“SOP”) • Grant date: August 3, 2020 • Amount: 1,524,065 SOPs • Vesting period: 1/3 each year (August 3, 2021, August 3, 2022 and August 3, 2023) • Expiration date: 4.5 years since the grant date or on February 3, 2025 • There are no other vesting conditions On August 3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. This payment is composed by a Long-Term Performance Award with the following arrangements: 2. Long-Term Performance Award • Grant date: August 3, 2020 • Amount: USD 4,305,100 • *Matching shares Amount: USD 2,152,550 • Vesting conditions: linked to the degree of achievement of the objective – 3-year average EBITDA margin (external view / as reported) on August 3, 2023 and the possibility to opt to receive part of this incentive in shares – at least 50% (*with a 3-year holding restriction condition until August 2026 to be eligible to receive the additional matching shares) • There are no other vesting conditions On August 3, 2020, Atento granted a new share-based payment arrangement to directors as an Extraordinary Grant for a total in a one-time award with a three-year vesting period. 1. Stock Options (“SOP”) • Grant date: August 3, 2020 • Amount: 195,000 SOPs • Vesting period: 100% of the SOPs vests on August 3, 2023 • There are no other vesting conditions b) Measurement of fair value The fair value of the RSUs, for all arrangements, has been measured using the Black-Scholes model. For all arrangements are equity settled and the fair value of RSUs is measured at grant date and not remeasured subsequently. F-51 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 163/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The inputs used in the measurement of the fair values at the grant date of the 2020 Plan – Board and Extraordinary are presented below: The 2019 Plan – 5 Years: Time RSU Comments Variable Stock price (USD) Strike price (USD) Time (years) 3.96 Stock price of Atento S.A. in USD at grant date March 1, 2019 0.01 For valuation purposes set to 0.01 5 Time to vest as per the contract The Time RSU reflects the fact that 20% of the RSUs each year beginning on January 2, 2020 and last vested on January 2, 2024. The 2019 Plan: Variable Stock price (USD) Strike price (USD) Time (years) Risk free rate Expected volatility Dividend yield Value RSU in USD Time RSU Comments 2.66 Stock price of Atento S.A. in USD at grant date June 3, 2019 0.01 For valuation purposes set to 0.01 2.5 Time to vest as per the contract 1.77% USD risk free rate obtained from Bloomberg 26.74% Assumption is made to base volatility on the average volatility of main competitors because Atento S.A. itself is listed in October 2014 0.01% Assumption is made here that no dividends will be paid out as this is not in the line of expectations 2.65 The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 3, 2022. The 2020 Plan – Board and Extraordinary: Time RSU Comments Variable Stock price (USD) Strike price (USD) Time (years) 2.99 Stock price of Atento S.A. in USD at grant date March 2, 2020 0.01 For valuation purposes set to 0.01 1 Time to vest as per the contract The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 4, 2021. F-52 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 164/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Stock Options (SOP) Comments Variable Stricke price (USD) Time (years) Time (years) c) Outstanding RSUs 8.35 Strike price of Atento S.A. in USD at grant date August 3, 2020 3 Time to vest as per the contract 1/3 each year for 2020 Plan 3 Time to vest as per the contract for Extraordinary SOP On July 28, 2020, a Reverse Share Split occurred according to the Company’s Extraordinary General Meeting of Shareholders. The Company’s shareholders have approved a conversion of the Company’s entire share capital of 75,406,357 ordinary shares into 15,000,000 ordinary shares, without nominal value, using a ratio of conversion of 5.027090466672970, impacting in the number of RSUs agreed in the signed contract on the Grant date of the plans in force until that time. As of December 31, 2020, there are 105,728 Time RSUs outstanding related to 2018 Grant, 37,981 Time RSUs outstanding related to 2019 – Plan 5Y Grant, 424,373 Time RSUs outstanding related to 2019 Grant and 30,604 and 3,327 Time RSUs outstanding related to 2020 Board and Extraordinary Grant. Holders of RSUs will receive the equivalent in shares of Atento S.A. without cash settlement of stock values when the RSUs vest. The 2017 Plan Outstanding December 31, 2019 Vested Outstanding December 31, 2020 The 2018 Plan Outstanding December 31, 2019 Forfeited (*) Outstanding December 31, 2020 Outstanding December 31, 2020 after Reverse Split (**) The 2019 Plan – Board and Extraordinary Outstanding December 31, 2019 Vested Outstanding December 31, 2020 The 2019 Plan – 5 Years Outstanding December 31, 2019 Vested Outstanding December 31, 2020 Outstanding December 31, 2020 after Reverse Split (**) F-53 Time RSU 443,490 (443,490) - Time RSU 647,215 (115,830) 531,385 105,728 Time RSU 813,842 (813,842) Time RSU 238,663 (47,733) 190,930 37,981 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 165/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The 2019 Plan Outstanding December 31, 2019 Forfeited (*) Outstanding December 31, 2020 Outstanding December 31, 2020 after Reverse Split (**) The 2020 Plan – Board and Extraordinary Outstanding December 31, 2019 Forfeited (*) Outstanding December 31, 2020 Outstanding December 31, 2020 after Reverse Split (**) The 2020 Plan – Stock Option Granted August 3, 2020 Forfeited (*) Outstanding December 31, 2020 The 2020 Plan – Performance Award Granted August 3, 2020 Forfeited (*) Outstanding December 31, 2020 The 2020 Plan – Performance Award (Potential Matching Shares) Calculated by August 3, 2020 Forfeited (*) Outstanding December 31, 2020 The 2020 Plan – Extraordinary SOP Granted August 3, 2020 Forfeited (*) Outstanding December 31, 2020 Time RSU 2,622,843 (484,401) 2,138,442 424,373 Time RSU 170,568 - 170,568 33,931 SOP 1,524,065 (16,547) 1,507,518 Performance Award 4,305,100 (48,800) 4,256,300 SOP (Matching Shares) 2,152,550 (24,400) 2,128,150 SOP 195,000 - 195,000 (*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions. (**) Number of RSUs converted by the ratio of 5.027090466672970. The 2017 Plan Country Brazil Chile Spain United States Total Time RSU Balance December 31, 2018 Transfer Forfeited Vested 71,497 66,028 69,398 608,770 815,693 - - 43,915 (43,915) - - - (41,418) (95,718) (137,136) - - - (235,067) (235,067) Balance December 31, 2019 71,497 66,028 71,895 234,070 443,490 Vested (71,497) (66,028) (71,895) (234,070) (443,490) Balance December 31, 2020 - - - - - F-54 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 166/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The 2018 Plan Country Argentina Brazil Chile Colombia Spain Mexico Peru United States Total The 2019 Plan – Board and Extraordinary Country United States Total The 2019 Plan – 5 Year Country Atento Luxembourg Total The 2019 Plan Balance December 31, 2018 Transfer Forfeited Vested Time RSU Balance December 31, 2019 - (3,680) 27,244 282,743 70,009 21,049 105,168 68,591 60,736 20,306 472,965 (64,911) - - - - 1,060,220 - - (58,962) (4,195) - (48,864) (5,025) - (195,595) (312,641) - - - - - - - (100,364) (100,364) 27,244 220,101 65,814 21,049 124,895 55,711 20,306 112,095 647,215 Time RSU Forfeited Balance December 31, 2020 - (20,352) (14,471) - (1,279) (45,215) (15,010) (19,503) (115,830) 27,244 199,749 51,343 21,049 123,616 10,496 5,296 92,592 531,385 Balance December 31, 2020 after Reverse Split (*) 5,420 39,743 10,216 4,188 24,597 2,090 1,054 18,420 105,728 Balance December 31, 2018 Granted Balance December 31, 2019 Vested Balance December 31, 2020 - 813,842 - 813,842 Balance December 31, 2018 Granted Balance December 31, 2019 813,842 813,842 Time RSU Vested (813,842) (813,842) - - Balance December 31, 2020 Balance December 31, 2020 after Reverse Split (*) - 238,663 - 238,663 238,663 238,663 (47,733) (47,733) 190,930 190,930 37,981 37,981 Balance December 31, 2018 Granted Additional Grant Forfeited Time RSU Balance December 31, 2019 Forfeited Balance December 31, 2020 Balance December 31, 2020 after Reverse Split (*) - - - - - - - - - - 108,352 889,108 147,021 53,972 478,473 - 219,963 61,175 602,602 2,560,666 - 400,000 - - 133,212 100,000 - - - 633,212 - - (9,825) (112,838) 108,352 (174,050) 1,115,058 137,196 53,972 498,847 100,000 214,492 61,175 (268,851) 333,751 (571,035) 2,622,843 (5,471) - - - - (9,456) 108,352 (46,731) 1,068,327 52,496 (84,700) 53,972 489,391 100,000 41,307 (173,185) 38,925 (22,250) (148,079) 185,672 (484,401) 2,138,442 - 21,555 211,489 10,443 10,737 97,357 8,219 7,744 19,893 36,936 424,373 Country Argentina Brazil Chile Colombia Spain Guatemala Mexico Peru United States Total The 2020 Plan – Board and Extraordinary Time RSU Country United States Total Balance December 31, 2019 Granted Balance December 31, 2020 Balance December 31, 2020 after Reverse Split (*) - - 16,722 16,722 16,722 16,722 3,327 3,327 F-55 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 167/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The 2020 Plan – Board and Extraordinary Time RSU Country Atento Luxembourg Total Balance December 31, 2019 Granted Balance December 31, 2020 Balance December 31, 2020 after Reverse Split (*) - - 153,846 153,846 153,846 153,846 30,604 30,604 The 2020 Plan – Stock Option SOP Country Argentina Brazil Colombia Spain Mexico Peru Chile Guatemala El Salvador United States Total The 2020 Plan – Performance Award Country Argentina Brazil Colombia Spain Mexico Peru Chile Guatemala El Salvador United States Total The 2020 Plan – Performance Award (Potential Matching Shares) Country Argentina Brazil Colombia Spain Mexico Peru Chile Guatemala El Salvador United States Total Balance December 31, 2019 Granted Transfer Forfeited Balance December 31, 2020 49,355 419,138 21,242 226,740 38,472 19,439 - - - - - - - 63,456 - 1,611 - - 684,612 - 1,524,065 - - - - - - (8,058) 8,058 - - - - Balance December 31, 2019 Granted Transfer Forfeited Performance Award - 152,500 - 1,693,200 158,200 - 972,200 - 194,500 - - 156,800 - 157,500 - 16,000 - - 804,200 - 4,305,100 - - - - - - (60,000) 60,000 - - - - - (16,547) - - - - - - - - (16,547) - (48,800) - - - - - - - - (48,800) 49,355 402,591 21,242 226,740 38,472 11,381 8,058 63,456 1,611 684,612 1,507,518 Balance December 31, 2020 152,500 1,644,400 158,200 972,200 194,500 96,800 60,000 157,500 16,000 804,200 4,256,300 Balance December 31, 2019 Granted Transfer Forfeited Balance December 31, 2020 SOP (Matching Shares) 76,250 846,600 79,100 486,100 97,250 78,400 - - - - - - - 78,750 - 8,000 - - 402,100 - 2,152,550 - - - - - - (30,000) 30,000 - - - - - (24,400) - - - - - - - - (24,400) 76,250 822,200 79,100 486,100 97,250 48,400 30,000 78,750 8,000 402,100 2,128,150 The 2020 Plan – Extraordinary SOP Time RSU Country Brazil Total Balance December 31, 2019 Granted Balance December 31, 2020 - - 195,000 195,000 195,000 195,000 (*) Number of RSUs converted by the ratio of 5.027090466672970. https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 168/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm d) Impacts in Profit or Loss In 2020, 4,723 thousand U.S. dollars (7,302 thousand U.S. dollars in 2019 and 6,417 thousand U.S. dollars in 2018) related to stock-based compensation were recorded as employee benefit expenses. F-56 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 169/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 20) TAX MATTERS a) Income tax The reconciliation between the income tax expense that would result in applying the statutory tax rate and the income tax expense recorded is as follow: Profit/(loss) before income tax Income tax applying the statutory tax rate Permanent differences Adjustments due to international tax rates Tax credits / Withholding Tax of Spanish Branches DTA write off Other adjustments Total income tax expense Thousands of U.S. dollars For the years ended December 31, 2019 2018 2020 33,900 (12,899) (5,052) 2,240 2,297 - - (13,414) (44,475) 11,726 (78) (4,718) (4,705) (38,639) 196 (36,218) (42,101) 6,694 (175) (1,018) (4,661) (5,291) (328) (4,779) Permanent differences in 2020 are mainly related to non-deductible expenses in Brazil, Spain and Mexico. The breakdown of the Atento Group’s income tax expense is as follow: Current tax expense Deferred tax Total income tax expense b) Deferred tax assets and liabilities Thousands of U.S. dollars For the years ended December 31, 2019 2018 2020 (23,165) 9,751 (13,414) (20,438) (15,780) (36,218) (22,797) 18,018 (4,779) Details of deferred tax assets and liabilities at December 31, 2019 and 2020 are as follow: Deferred tax assets Tax loss carryforwards Tax credits Tax credits - IFRS 16 Deferred tax assets from temporary differences Litigations provisions Financial costs Fixed Assets Operating provisions and others Total deferred tax assets Deferred tax liabilities Intangible assets – PPA Others Total deferred tax liabilities Balance at December 31, 2020(*) Thousands of U.S. dollars 2019 2020 32,743 4,575 - 10,903 7,942 6,371 37,097 99,631 (19,040) (1,338) (20,378) 36,546 7,336 950 4,478 (426) 11,639 41,830 102,353 (9,917) (1,586) (11,503) 90,850 (*) DTA assets/liabilities were offset by the entity that has the legal right to settle the tax amounts on a net basis. F-57 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 170/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The deferred tax not recognized as of December 31, 2020 is 33,249 thousand of U.S. dollars (22,532 thousand of U.S. dollars in December 31, 2019). The temporary differences associated with investments in the Atento’s subsidiaries, for which a deferred tax liability has not been recognized, aggregate to 4,526 thousand of U.S. dollars. Atento has determined that the undistributed profits of its subsidiaries, joint venture or associate will not be distributed in the foreseeable future. The breakdown and balances of deferred tax assets and deferred tax liabilities at December 31, 2019 and 2020 are as follow: DEFERRED TAX ASSETS Unused tax losses (*) Unused tax credits Deferred tax assets (temporary differences) (**) DEFERRED TAX LIABILITIES Deferred tax liabilities (temporary differences) (*) Tax credits for loss carryforwards. (**) The decrease is mainly due to DTA write off. DEFERRED TAX ASSETS Unused tax losses (*) Unused tax credits Deferred tax assets (temporary differences) (**) DEFERRED TAX LIABILITIES Deferred tax liabilities (temporary differences) Balance at 12/31/2018 Income Statement Increases Decreases Translation differences Balance at 12/31/2019 Thousands of U.S. dollars 125,163 23,414 3,935 97,814 (30,221) (30,221) 43,128 25,955 6,002 11,171 (1,561) (1,561) (69,768) (20,967) (3,833) (44,968) 3,563 3,563 1,108 4,341 (1,529) (1,704) 7,841 7,841 99,631 32,743 4,575 62,313 (20,378) (20,378) Thousands of U.S. dollars Balance at 12/31/2019 Income Statement Increases Decreases Translation differences Balance at 12/31/2020 99,631 32,743 4,575 62,313 (20,378) (20,378) 31,605 3,545 2,027 26,033 (735) (735) (13,010) (5,123) (120) (7,767) 159 159 (15,873) 5,381 855 (22,109) 9,451 9,451 102,353 36,546 7,337 58,470 (11,503) (11,503) (*) Tax credits for loss carryforwards. (**) The increase is mainly due to the constitution of DTA related to Financial Interests in the Spanish Entities. There is no expectation of distribute future dividends until this report date. Dividends distribution must be subject to Board approval, and will depend on the Company’s future earnings, cash flow, financial condition, financial covenants and other relevant factors. F-58 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 171/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents c) Taxes recoverable/payables Details of taxes recoverable and payables at December 31, 2019 and 2020 are as follow: Recoverable Non-current Indirect taxes Current Indirect taxes Other taxes Income tax Total Payables Non-current Social security Current Indirect taxes Other taxes Income tax Total Thousands of U.S. dollars As of December 31, 2019 2020 5,650 5,650 17,819 6,845 24,664 28,709 59,023 Thousands of U.S. dollars As of December 31, 2019 2020 2,754 2,754 35,370 58,395 93,765 12,671 109,190 4,815 4,815 29,340 7,454 36,794 25,764 67,373 1,893 1,893 38,026 59,078 97,104 16,838 115,835 21) PROVISIONS AND CONTINGENCIES Movements in provisions in 2019 and 2020 are as follow: Non-current ]Provisions for liabilities Provisions for taxes Provisions for dismantling Other provisions Total non-current Current Provisions for liabilities Provisions for taxes Provisions for dismantling Other provisions Total current 12/31/2018 Additions Payments Reversal Transfers Translation differences 12/31/2019 Thousands of U.S. dollars 24,537 16,871 8,430 1,336 51,174 9,020 2,455 60 7,515 19,050 21,769 3,275 1,464 4,658 31,166 16,249 9 27 4,878 21,163 (12,745) (386) - (27) (13,158) (12,728) (474) - (6,925) (20,127) F-59 (8,500) (9,830) - (226) (18,556) (56) (8) (59) - (123) - - - (296) (296) 1 - 296 (1) 296 (766) (536) (295) (407) (2,004) (953) 20 (10) (545) (1,488) 24,295 9,394 9,599 5,038 48,326 11,533 2,002 314 4,922 18,771 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 172/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Non-current Provisions for liabilities Provisions for taxes Provisions for dismantling Other provisions Total non-current Current Provisions for liabilities Provisions for taxes Provisions for dismantling Other provisions Total current 12/31/2019 Additions Payments Reversal Transfers Translation differences 12/31/2020 Thousands of U.S. dollars 24,295 9,394 9,599 5,038 48,326 11,533 2,002 314 4,922 18,771 15,709 12,441 579 403 29,132 14,769 29 2 4,116 18,916 (9,836) (103) (97) (64) (10,100) (1,689) - - (2,506) (4,195) (7,030) (1,764) - (1,600) (10,394) (9,096) - (120) (1,564) (10,780) - - - 78 78 - - (78) - (78) (4,973) (1,997) (1,702) (2,753) (11,425) (807) (106) (94) 248 (759) 18,165 17,971 8,379 1,102 45,617 14,710 1,925 24 5,216 21,875 “Provisions for liabilities” primarily relate to provisions for legal claims underway in Brazil. Atento Brasil S.A. has made payments in escrow related to legal claims from ex-employees, amounting to 38,823 thousand U.S. dollars and 26,763 thousand U.S. dollars as of December 31, 2019 and 2020, respectively. Also, the variation of the period was impacted by the Brazilian Reais and Argentinian Peso depreciations against the U.S. dollar. “Provisions for taxes” mainly relate to probable contingencies in Brazil with respect to social security payments and other taxes, which are subject to interpretations by tax authorities. Atento Brasil S.A. has made payments in escrow related to taxes claims of 3,468 thousand U.S. dollars and 2,393 thousand U.S. dollars as of December 31, 2019 and 2020, respectively. The amount recognized under “Provision for dismantling” corresponds to the necessary cost of dismantling of the installations held under operating leases to bring them to its original condition. As of December 31, 2020, lawsuits outstanding in the courts were as follows: Brazil At December 31, 2020, Atento Brasil was involved in 9,208 labor-related disputes (9,408 labor disputes as of December 31, 2019), being 9,054 of labor massive and 41 of outliers and others, filed by Atento’s employees or ex-employees for various reasons, such as dismissals or claims over employment conditions in general. The total amount of the main claims classified as possible was 33,598 thousand U.S. dollars (62,514 thousand U.S. dollars on December 31, 2019), of which 18,916 thousand U.S. dollars Labor Massive-related, 1,553 thousand U.S. dollars Labor Outliers-related and 13,128 thousand U.S. dollars Special Labor cases related. On December 31, 2020, the subsidiary RBrasil Soluções S.A. holds contingent liabilities of labor nature classified as possible in the amount of 62 thousand U.S. dollars. On December 31, 2020, the subsidiary Interfile holds contingent liabilities of labor nature and social charges classified as possible in the amount of 294 thousand U.S. dollars. As of December 31, 2020, Atento Brasil S.A. is party to 10 civil lawsuits ongoing for various reasons (5 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of the claims is 3,464 thousand U.S. dollars (2,365 thousand U.S. dollars on December 31, 2019). As of December 31, 2020, the subsidiary RBrasil Soluções S.A. holds 24 civil lawsuits ongoing for various reasons classified as possible in the amount of 34 thousand U.S. dollars. F-60 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 173/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On December 31, 2020, the subsidiary Interfile holds 4 civil lawsuits ongoing for various reasons classified as possible in the amount of 112 thousand U.S. dollars. As of December 31, 2020 Atento Brasil is party to 42 disputes ongoing with the tax authorities and social security authorities for various reasons relating to infraction proceedings filed (29 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of these claims is 38,198 thousand U.S. dollars (36,508 thousand U.S dollars on December 31, 2019). In March 2018, Atento Brasil S.A. an indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax amortization of goodwill the deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the withholding taxes on payments made to certain of our former shareholders. The amount of the tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was approximately 105,268 thousand U.S. dollars, and was assessed by the Company’s outside legal counsel as possible loss. We disagree with the proposed tax assessment and we are defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies. On September 26, 2018, the Federal Tax Office issued a decision accepting the application of the statute of limitation on the withholding tax discussion. We and the Public Attorney appealed to the Administrative Tribunal (CARF). On February 11, 2020, CARF issued a partially favorable decision in favor of Atento, recognizing the application of the statute of limitation on the withholding tax discussion and reducing the penalty imposed. On September 18, 2020, the decision issued by CARF become final. Thus, the amount at stake, not including interest and penalties was reduced from 105,268 thousand U.S. dollars to 69,301 thousand U.S. dollars. Based on our interpretation of the relevant law, and based on the advice of our legal and tax advisors, we believe the position we have taken is sustainable. Consequently, no provisions are recognized regarding these proceedings. Afterward of the issuance of the tax notice in March 2018, the Brazilian tax administration started a procedure to audit the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) of Atento Brasil S.A. for the period from 2016 to 2017. This tax audit was concluded on July 10, 2020 with the notification of a tax assessment that reject the deductibility of the above-mentioned financing expenses and the deductibility of the tax amortization of goodwill. The tax assessment notified by the Brazilian Federal Revenue Service was approximately 59,955 thousand U.S. dollars, including penalties and interest. Company’s external legal advisors considered 45,704 thousand U.S. dollars as possible loss while the remaining 14,244 thousand U.S. dollars was assessed as remote loss. The Company disagrees with the proposed tax assessment and the Company is defending its position, which believes is meritorious, through applicable administrative and, if necessary, judicial remedies. On December 31, 2020, the subsidiaries Interfile and Interservicer hold 22 disputes with the tax authorities and social security authorities ongoing for various reasons classified as possible in the amount of 490 thousand U.S. dollars. Spain At December 31, 2020, Atento Teleservicios España S.A.U. including its branches and our other Spanish companies were party to labor- related disputes filed by Atento employees or former employees for different reasons, such as dismissals and disagreements regarding employment conditions. According to the Company’s external lawyers, materialization of the risk event is possible for 950 thousand U.S. dollars. Mexico At December 31, 2020, Atento Mexico through its two entities (Atento Servicios, S.A. de C.V. and Atento Atencion y Servicios, S.A. de C.V.) is a party of labor related disputes filed by Atento employees that abandoned their employment or former employees that base their claim on justified termination reasons, totaling 12,997 thousand U.S. dollars (Atento Servicios, S.A. de C.V. 8,493 thousand U.S. dollars and Atento Atencion y Servicios, S.A. de C.V. 4,504 thousand U.S. dollars), according to the external labor law firm for possible risk labor disputes. F-61 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 174/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 22) REVENUE AND EXPENSES a) Revenue The breakdown of revenue for the years ended December 31, 2018, 2019 and 2020 is as follow: Revenue Services rendered Total b) Other operating income Thousands of U.S. dollars 2019 2018 2020 1,818,180 1,818,180 1,707,286 1,707,286 1,412,262 1,412,262 Details of other operating income for the years ended December 31, 2018, 2019 and 2020 are as follow: Other operating income Other operating income (a) Grants Income from indemnities and other non-recurring income Gain on disposal of data center Gains on disposal of non-current assets Total Thousands of U.S. dollars 2019 2018 2020 15,686 1,000 42 2,265 384 19,377 2,612 1,165 601 - 161 4,539 4,486 878 199 - 11 5,574 (a) December 31, 2018 includes $8.7 million of partial insurance indemnity in Puerto Rico as a result of impacts from the natural disasters in the country. c) Other gains and own work capitalized Other gains and own work capitalized increased from 180 thousand U.S. dollars in the year ended December 31, 2018 to 10,477 thousand U.S. dollars in the year ended December 31, 2019 mostly due to a specific agreement in 2019. F-62 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 175/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents d) Supplies Details of amounts recognized under “Supplies” during the years ended December 31, 2018, 2019 and 2020 are as follow: Supplies Subcontracted services Leases Purchases of materials Communications Expenses with labor unions Other Total e) Employee benefit expenses Thousands of U.S. dollars 2019 2018 2020 10,630 13,856 2,919 19,460 1,051 22,900 70,816 16,044 15,097 3,061 13,718 1,951 16,556 66,427 25,994 14,678 4,266 11,488 797 15,053 72,276 Details of amounts recognized under “Employee benefit expenses” during the years ended December 31, 2018, 2019 and 2020 are as follow: Employee benefit expenses Salaries and wages Social security Supplementary pension contributions Termination benefits Other welfare costs Total f) Depreciation and amortization Thousands of U.S. dollars 2018 2019 2020 1,024,094 130,161 2,840 26,510 181,576 1,365,181 946,752 120,353 2,972 36,065 194,889 1,301,031 788,297 101,911 3,111 24,262 142,827 1,060,408 The depreciation and amortization expenses for the years ended December 31, 2018, 2019 and 2020 are as follow: Depreciation and amortization Intangible assets (Note 6) Property, plant and equipment (Note 10) Right-of-use assets Total g) Other operating expenses Thousands of U.S. dollars 2019 2018 2020 58,679 36,566 - 95,245 57,226 30,049 53,507 140,782 46,981 26,683 47,256 120,920 The breakdown of “Other operating expenses” for the years ended December 31, 2018, 2019 and 2020 is as follow: F-63 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 176/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Other operating expenses Services provided by third parties Losses on disposal of fixed assets Taxes other than income tax Other management expenses Total Thousands of U.S. dollars 2019 2018 2020 202,543 817 10,038 2,560 215,958 156,868 352 9,494 64 166,778 106,526 316 11,610 259 118,711 Details of “Services provided by third parties” under “Other operating expenses” are as follow: Services provided by third parties Leases (*) Installation and maintenance Lawyers and law firms Tax advisory services Consultants Audits and other related services Studies and work performed Other external professional services Publicity, advertising and public relations Insurance premiums Travel expenses Utilities Banking and similar services Other TOTAL Thousands of U.S. dollars 2018 2019 2020 67,902 24,290 7,743 179 8,372 1,576 65 43,404 5,332 548 6,979 27,142 1,771 7,240 202,543 18,029 25,586 4,734 218 17,805 1,628 62 44,070 6,677 547 6,021 25,790 2,307 3,394 156,868 13,202 23,775 3,157 14 11,584 1,187 126 24,779 3,556 1,517 1,631 17,736 971 3,291 106,526 (*) For 2019 and 2020, the amount is related to contracts there are not under IFRS 16, related to the exemptions to short-term leases and lease of low- value assets. The amounts recognized under “Consultants” and “Other external professional services” for the years ended December 31, 2018, 2019 and 2020 mainly refers to consulting and other costs in connection with efficiencies and costs reduction projects implemented in Brazil and EMEA. h) Net finance expense The breakdown of “Finance income” and “Finance costs” for the years ended December 31, 2018, 2019 and 2020 are as follow: F-64 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 177/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Finance income Interest from third parties and hyperinflationary adjustment in Argentina (a) Total finance income Finance costs Interest accrued to third parties Discounts to the present value of provisions and other liabilities Total finance costs (b) Thousands of U.S. dollars 2019 2018 2020 18,843 18,843 20,045 20,045 (43,351) (2,261) (45,612) (65,680) (2,405) (68,085) 15,683 15,683 (66,719) (3,574) (70,293) (a) Contain a positive impact of 5,285 thousand of U.S. dollars for the year ended December 31, 2020 (15,787 thousand of U.S. dollars for the year ended December 31, 2019 and 10,700 thousand of U.S dollars for the year ended December 31, 2018) due to the application of the IAS 29 Financial Reporting in Hyperinflationary Economies in Argentina. This impact is mainly explained by the effects of monetary correction on the goodwill generated on December 1, 2012, from the acquisition of the customer relationship management (CRM) business from Telefónica S.A. (b) The decrease in finance costs in December 31, 2018 was driven by lower interest expenses from the debt refinancing program concluded in August 2017, combined with a negative effect in the year ended December 31, 2017 of $19.0 million related to the debt refinancing. The increase in finance costs in 2019 and 2020 was mainly driven by 17,495 thousand of U.S. dollars and 14,435 thousand of U.S. dollars, respectively, from the application of IFRS 16 adopted in 2019. The breakdown of “Change in fair value of financial instruments” and “Net foreign exchange gain/(loss)” is shown in the table below: Thousands of U.S. dollars Foreign exchange gains/(losses) Loans and receivables Other financial transactions Current transactions Total Thousands of U.S. dollars Foreign exchange gains/(losses) Loans and receivables Other financial transactions Current transactions Total Thousands of U.S. dollars Foreign exchange gains/(losses) Loans and receivables Other financial transactions Current transactions Total Gains 2018 Losses 2,928 19,432 43,845 66,205 (433) (29,786) (64,822) (95,041) Gains 2019 Losses 1,822 15,634 194,611 212,067 261 (278) (221,130) (221,147) Gains 2020 Losses 6,805 16,385 32,607 55,797 (2,995) (37,626) (42,994) (83,615) Net 2,495 (10,354) (20,977) (28,836) Net 2,083 15,356 (26,519) (9,080) Net 3,810 (21,241) (10,387) (27,818) F-65 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 178/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 23) SEGMENT INFORMATION The CEO is the Chief Operating Decision Maker (“CODM”). Management has determined the operating segments on the basis of the information reviewed by the CEO for the purposes of allocating resources and assessing performance. The results measurement used by the CEO to assess the performance of the Atento Group’s segments is the EBITDA and Adjusted EBITDA (as defined below). The CEO considers the business from the geographical perspective in the following areas: • EMEA, which combines the activities carried out regionally in Spain. • The Americas, which includes the activities carried out by the various Spanish-speaking companies in Mexico, Central and South America. It also includes transactions in the United States. • Brazil, which is managed separately in view of its different language and major importance. The Atento Group uses EBITDA to track the performance of its segments and to establish operating and strategic targets. Management believes that EBITDA and Adjusted EBITDA provides an important measure of the segment’s operating performance because it allows management to evaluate and compare the segments’ operating results, including their return on capital and operating efficiencies, from period to period by removing the impact of their capital structure (interest expenses), asset bases (depreciation and amortization), and tax consequences. EBITDA is defined as profit/(loss) for the period from continuing operations before net finance expense (which includes finance income, finance costs, change in fair value of financial instruments and net foreign exchange losses), income taxes and depreciation and amortization. EBITDA is a commonly reported measure and are widely used among analysts, investors and other interested parties in the Atento Group’s industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. EBITDA should not be considered as an alternative to the profit for the year as a measurement of our consolidated earnings or as an alternative to consolidated cash flow from operating activities as a measurement of our liquidity. The following tables present financial information for the Atento Group’s operating segments for the years ended December 31, 2018, 2019 and 2020 (in thousand U.S. dollars): For the year ended December 31, 2018 Sales to other companies Sales to Telefónica Group Sales to other group companies Other operating income and expense EBITDA Depreciation and amortization Operating profit Net finance expense Income tax Profit for the year Capital expenditure Intangible, Goodwill and PP&E Allocated assets Allocated liabilities EMEA Americas Brazil Other and eliminations Total Group Thousands of U.S. dollars 388,889 293,945 25,910 (652,531) 56,213 (34,683) 21,530 (5,536) (2,054) 13,940 41,466 195,369 557,695 254,150 93,173 147,686 - (228,591) 12,268 (9,733) 2,535 (1,620) (893) 22 6,192 42,766 394,325 122,784 F-66 609,307 266,596 1,756 (794,148) 83,511 (50,376) 33,135 (30,309) (1,422) 1,404 42,226 251,520 595,807 437,200 - - (9,082) 41,840 32,758 (453) 32,305 (18,140) (9,045) 5,120 1 476 (334,474) 59,126 1,091,369 708,227 18,584 (1,633,430) 184,750 (95,245) 89,505 (55,605) (13,414) 20,486 89,885 490,131 1,213,353 873,260 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 179/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents For the year ended December 31, 2019 Sales to other companies Sales to Telefónica Group Sales to other group companies Other operating income and expense EBITDA Depreciation and amortization Operating profit/(loss) Net finance expense Income tax Loss for the year Capital expenditure Intangible, Goodwill and PP&E Allocated assets Allocated liabilities For the year ended December 31, 2020 Sales to other companies Sales to Telefónica Group Sales to other group companies Other operating income and expense EBITDA Depreciation and amortization Operating profit Net finance expense Income tax Profit/(loss) for the year Capital expenditure Intangible, Goodwill and PP&E Allocated assets Allocated liabilities EMEA Americas Brazil Other and eliminations Total Group Thousands of U.S. dollars 98,545 134,241 22 (215,821) 16,987 (15,791) 1,196 (1,414) (21,960) (22,178) 3,312 48,712 388,416 139,834 387,272 245,909 26,933 (629,380) 30,734 (48,951) (18,217) (5,612) (2,048) (25,877) 22,370 186,111 557,822 294,227 598,297 226,989 2,022 (730,427) 96,881 (75,769) 21,112 (46,504) 7,392 (18,000) 40,570 342,954 711,563 577,009 - - (12,944) 21,769 8,825 (271) 8,554 (3,590) (19,602) (14,638) - 623 (353,190) 86,521 1,084,114 607,139 16,033 (1,553,859) 153,427 (140,782) 12,645 (57,120) (36,218) (80,693) 66,252 578,400 1,304,611 1,097,591 EMEA Americas Brazil Other and eliminations Total Group Thousands of U.S. dollars 113,859 120,798 5 (219,313) 15,349 (12,551) 2,798 (1,260) 3,643 5,181 3,234 47,759 400,010 153,405 372,462 195,804 13,772 (529,440) 52,598 (44,856) 7,742 (9,604) (8,076) (9,938) 8,931 150,100 545,587 309,118 466,701 133,962 8,732 (531,181) 78,214 (63,220) 14,994 (42,487) 5,809 (21,684) 23,699 240,032 539,222 451,376 - - (13,833) 28,919 15,086 (293) 14,793 (29,077) (6,155) (20,439) 10 496 (308,696) 142,548 953,022 450,564 8,676 (1,251,015) 161,247 (120,920) 40,327 (82,428) (4,779) (46,880) 35,874 438,387 1,176,123 1,056,447 "Other and eliminations" includes activities of the intermediate holdings in Spain (Atento Spain Holdco, S.L.U.), Luxembourg holdings, as well as inter-group transactions between segments. F-67 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 180/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents The breakdown of sales to customers by the main countries where the Atento Group operates is as follow: Country Spain Other and eliminations (*) EMEA Argentina Chile Colombia El Salvador United States Guatemala Mexico Peru Puerto Rico Uruguay Panama Nicaragua Costa Rica Other and eliminations (*) Americas Brazil Other and eliminations (*) Brazil Other and eliminations (*) Total revenue For the years ended December 31, 2019 2018 2020 240,859 - 240,859 134,557 112,679 71,219 14,260 42,318 16,195 177,595 136,266 9,439 2,866 4,095 4,360 7,431 (24,536) 708,744 875,903 1,758 877,661 (9,084) 1,818,180 232,697 112 232,809 98,237 99,881 72,609 16,933 43,640 11,620 179,835 116,202 12,278 2,314 3,683 3,864 7,493 (8,475) 660,114 825,286 2,022 827,308 (12,945) 1,707,286 234,662 - 234,662 67,905 82,188 70,970 17,507 62,262 6,232 161,492 85,375 16,689 2,298 3,615 3,314 8,022 (5,831) 582,038 600,663 8,732 609,395 (13,833) 1,412,262 (*) Includes holding company level revenues and consolidation adjustments. The Atento Group signed a framework contract with Telefónica that expires on December 31, 2023 for Brazil and Spain representing the majority of Telefónica’s business overall and December 31, 2021 expires for the other countries. In 2020, 31.8% of service revenue were generated from business with Telefónica Group companies (35.6% in 2019 and 39.0% in 2018). F-68 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 181/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents 24) EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity owners of the Company by the weighted average number of ordinary shares outstanding during the periods as demonstrated below: For the years ended December 31, 2019 2018 2020 Result attributable to equity owners of the Company Atento’s profit/(loss) attributable to equity owners of the parent (in thousands of U.S. dollars) Weighted average number of ordinary shares (*) Basic earnings/(loss) per share (in U.S. dollars) (*) 18,540 14,688,705 1.26 (81,306) 14,446,297 (5.63) (46,880) 14,082,904 (3.33) (*) As a consequence of the reverse share split occurred on July 28, 2020 as described in Note 19, weighted average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding. Diluted results per share are calculated by adjusting the weighted average number of ordinary shares outstanding to reflect the conversion of all dilutive ordinary shares. The weighted average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The losses in the periods presented are anti-dilutive. For the years ended December 31, 2019 2018 2020 Result attributable to equity owners of the Company Atento’s profit/(loss) attributable to equity owners of the parent (in thousands of U.S. dollars) Potential increase in number of ordinary shares outstanding in respect of share-based plan Adjusted weighted average number of ordinary shares (*) Diluted earnings/(loss) per share (in U.S. dollars) (*)(1) 18,540 186,314 14,875,018 1.25 (81,306) - 14,446,297 (5.63) (46,880) - 14,082,904 (3.33) (*) As a consequence of the reverse share split occurred on July 28, 2020 as described in Note 19, adjusted weighted average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding. (1) As of December 31, 2019 and 2020, potential ordinary shares of 610,557 and 1,729,548, respectively, relating to the stock option plan were excluded from the calculation of diluted loss per share as the losses in the years are anti-dilutive. 25) COMMITMENTS Guarantees As of December 31, 2019 and 2020, the Atento Group has guarantees to third parties of 350,602 thousand U.S. dollars and 307,403 thousand U.S. dollars, respectively. The transactions guaranteed and their respective amounts at December 31, 2019 and 2020 are as follow: F-69 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 182/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents Guarantees Financial, labor-related, tax and rental transactions Contractual obligations Other Total Thousands of U.S. dollars 2020 2019 152,297 198,283 22 350,602 119,356 187,962 85 307,403 The Company’s directors do not believe that any contingencies will arise from these guarantees other than those already recognized. The breakdown shown in the table above relates to guarantees extended by Atento Group companies, classified by purpose. Of these guarantees, the majority relate to commercial purposes and rental activities, the remaining guarantees relates to tax and labor proceedings. 26) RELATED PARTIES The following table shows the breakdown of the total remuneration paid to the Atento Group’s key management personnel in 2018, 2019 and 2020: Salaries and variable remuneration Salaries Share-based compensation Variable remuneration Payment in kind Medical insurance Life insurance premiums Other Total 27) SUBSEQUENT EVENTS a) Vesting of stock option 2018 Thousands of U.S. dollars 2019 2020 10,703 9,524 - 1,179 1,116 206 44 866 11,819 11,104 5,828 4,173 1,103 793 177 86 530 11,897 6,137 2,359 2,493 1,285 289 77 64 148 6,426 On February 4, 2021, the Company vested the total of 149,154 TRSUs, issued by treasury shares. b) Senior Secured Notes On February 10, 2021, Atento Luxco 1 S.A., closed an offering of 500,000 thousand U.S. dollars aggregate principal amount of 8.0% Senior Secured Notes due February 10, 2026 in a private placement transaction. On February 17, 2021, Atento Luxco 1 S.A. purchased 275,815 thousand U.S. dollars of its 6.125% Senior Secured Notes due 2022 in a tender offer. The notes were purchased at a price equal to 1,015.31 U.S. dollars per 1,000 U.S. dollars principal amount. F-70 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm 183/185 22/03/2021 https://www.sec.gov/Archives/edgar/data/1606457/000129281421001085/attoform20f_2020.htm Table of Contents On February 18, 2021, Atento Luxco 1 S.A. redeemed the remainder 224,185 thousand U.S. dollars of its 6.125% Senior Secured Notes due 2022. The redemption price was equal to 1,015.31 U.S. dollars per 1,000 U.S. dollars principal amount, plus accrued and unpaid interest on the principal amount of the Notes, which was equal to 1,016.67 U.S. dollars per 1,000 U.S. dollars principal amount. With these transactions, the Company completed the refinancing of all 500,000 thousand U.S. dollars aggregate principal amount of its 6.125% Senior Secured Notes due 2022, extending the Company’s average life to 4.5 years from 1.5 years. c) Bank Borrowings On February 22, 2021, Atento Brasil rolled-over the bank credit certificate with Banco ABC Brasil for an amount of 50,000 thousand Brazilian Reais, until February 22, 2022, with an annual interest rate of CDI plus 2.75%. On February 28, 2021, Atento Brasil rolled-over the bank credit certificate with Banco do Brasil for an amount of 30,000 thousand Brazilian Reais, until August 28, 2021, with an annual interest rate of CDI plus 2.65%. d) Change in Registrant’s Certifying Accountant On March 15, 2021, the Company filed as Exhibit 99.1 to its Report on Form 6-K a notice and proxy statement with respect to the ordinary general meeting of shareholders, at which, among other things, shareholders of the Company will be asked to approve the appointment of Deloitte Touch Tohmatsu Auditores Independentes (“Deloitte”) as independent auditor of the Company with respect to the financial year ending on December 31, 2021, to replace Ernst & Young Auditores Independentes S.S. (“E&Y”) as independent auditor (réviseur d’entreprises agréé). The recommendation is subject to shareholder approval at the ordinary general meeting to be held on April 2, 2021. The appointment of Deloitte will take effect on April 2, 2021. 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