Atento S.A. (ATTO) CEO Carlos López-Abadía on Q4 2019 Results - Earnings Call Transcript

Atento S.A. (ATTO) Q4 2019 Earnings Conference Call March 4, 2020 10:00 AM ET

Company Participants

Shay Chor - Corporate Treasurer, and IR Director

Carlos López-Abadía - CEO

José Antonio de Souza Azevedo - CFO

Conference Call Participants

Pedro Salles - Itau

Declan Hanlon - Santander

Vincent Colicchio - Barrington Research

Diego Aragao - Goldman Sachs

George Melas - MKH Management

Operator

Good day, and welcome to Atento's Fourth Quarter and Full-Year 2019 Results Conference Call. The call will begin with prepared comments by management, followed by a question-and-answer session. Today's call is being recorded. [Operator Instructions]

I will now turn the call over to Shay Chor, Corporate Treasurer, and Investor Relations Director for Atento. Please go ahead.

Shay Chor

Thank you. Welcome everyone to our fiscal fourth quarter and full-year 2019 earnings conference call. Here with us today for the call are Carlos López-Abadía, Atento's Chief Executive Officer; and José Azevedo, Chief Financial Officer. Following our review of Atento's financial and operating results, we will open the call for your questions. Before proceeding, please note that certain comments made on this call will contain financial information that has been prepared under International Financial Reporting Standards.

In addition, this call may contain information that constitutes forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties. Certain results may differ materially from those in the forward-looking statements as a result of various factors. We encourage you to review our publicly available disclosure documents filed with the relevant securities regulators, and we invite you to read the complete disclosure included here on the second slide of our earnings slide presentation. Our public filings and earnings presentation can be found at investors.atento.com. Please note that unless noted otherwise, all growth rates are on a year-over-year and constant currency basis.

I will now turn the call over to Carlos.

Carlos López-Abadía

Thank you, Shay, and thank you ladies and gentlemen for joining us today. We want to talk to you today about our Q4 results and fiscal year 2019 results.

Let me introduce the whole topic with one bullet point, which for me, is describe the whole year. I'm very happy with the progress that we've made in our transformation program brought into in fiscal year 2019. I said that with you not too long ago, and we've made progress that is beginning to show in our results on sales, revenue, and profitability improvement. Those results and that progress allows us to face 2020 with very good momentum and much more confidence than what we had and what I had this time last year when I talked to you for the first time.

If you look at our Three Horizon Plan that I shared with you in the past in our Investor Conference and before, [indiscernible] middle of last year when I felt they had enough understanding of what Atento could do, should do, and the direction we wanted to take Atento. Clearly, this has been the blueprint of what we've done in fiscal year '19. We have focused fiscal year '19 on the first horizon, on operational improvements. We've also made progress on next generation services and digital transformation and growth, but clearly the focus has been the first horizon.

Let me share with you some of the results that we had. If you look at the top line, we look at the revenue, we have grown; not only have we have grown, but we have -- we show accelerating growth. More importantly, sometimes you have to look underneath the numbers, more importantly, the growth comes from Multisector. California continues to be a very important customer of Atento, but we're growing in the right places in the sector and high-growth sectors that we have chosen to, to target, and we've pivoted towards during fiscal year '19. If you look at the growth that has accelerated, particularly in Q4, look at that 13.9, for an industry that grows around 4%, we're showing triple the growth of the industry, which is difficult in any circumstances, but particularly if you are the leader in the market that you compete. We're particularly proud of the results there. You have also some details on sales in the next slide.

Again, these are metrics that we look at for sales, but if you look at the -- the one we tend to look the most closely to is the year revenue. These are sales that have translated into revenue in the fiscal year, show a very, very impressive 45% growth, again, and I would like to add that this is a broad-based growth, it's not one particular country, one particular places, it's growth that we have achieved across the board in all regions.

Very importantly, also the bottom line, you have in this slide the trajectory we have. There's no question that we started the year from a difficult position. I'm also happy to report that since then, we have a steadily quarter and quarter and quarter improved our results. Again, this is part of the results that we're showing from the operational improvements that we have introduced. We're not done by any stretch of imagination, but I'm happy to see and to report to you that we're beginning to get the first results of those improvements.

I would like to mention as well, although it has not been the focus of 2019, we also have worked on our digital transformation and the next generation of Atento. Two areas that we look at has been the shift of customer base, and targeting segments that are of high growth, and that some of them, I call them, Born Digital Customers. These are the segments that we're targeting. We're seeing one-third of our sales into those customer segments.

In terms of services that we sell, we're seeing 50% of our services, being of the new type of services we're targeting, the next generation services. These things are important, these facts are important from a strategic perspective from where we're taking the company, but also show very specific and tangible results. We see higher margins in these types of sectors and these types of services, three percentage points higher when we hit the sectors we're going after, and seven percentage points when we actually succeed with the next generation services.

I wouldn't like to leave without touching on perhaps in non-financial or not directly financial results, things that are also very important to us, and where we're making progress, and we will continue to work on in 2020. That's environmental, social, and governance. Particularly, I want to highlight to you today, the program that we have introduced in Brazil, we have introduced an environmental project that has already is having very good results in fiscal year '19. We are rolling this out to the rest of the geographies of Atento in 2020.

The other aspect is our employees. Our employees are our most important assets. I know that most companies say things like this, in our case, we're a people company.

They are indeed -- our employees are indeed our most important asset, and we've committed to provide an environment in which they can grow, both personally and professionally. We continue to get awards. You have some on this slide, we have many others, I would like to highlight the award of being one of the Top 25 Global Companies, A Great Place to Work that we achieved this year. Again, this is super important for us, this is something we're committed to continue improving year-on-year.

With that just recapping, the most important points, the same way I started my remarks, a very important transition year for us, 2019, very happy with the progress we've made in our transformation plan. That progress is beginning to show in the numbers. Much more work to do in 2020. We'll continue with the program, but it's always very encouraging to see the year beginning to have the results that you're seeking. We've also made important progress in next generation services and the transformation of Atento. These will be the focus of 2020 much more than it has been in 2019, and with the results that I've shared with you, facing 2020 with much more confidence and with very good momentum coming out of 2019.

Thanks a lot, and I'm going to turn this over to José Azevedo, our CFO to give you much more detail on our results.

José Antonio de Souza Azevedo

Thank you, Carlos. In Q4, we had a strong Multisector growth 14% year-over-year and 4% sequentially, primarily drove total revenue growth of 4.8% versus fourth quarter 2018. With a focus on profitable growth, we return non-performing client programs in Brazil and South. These combining with lower volumes in Peru, Chile, and EMEA led to a 12.3% decline in Telefonica revenues. Also reported EBITDA decreases just over 41% due to $11.6 million in extraordinary costs related to our transformation program and a non-cash impact charge of $30.9 million in Argentina. That were partially offset by a positive effects of $17.9 million related to IFRS 16.

Excluding the impairments, these extraordinary items and the effect of IFRS 16, our EBITDA margin was 10.9%, 40 basis points lower than the fourth quarter 2018, mainly due to lower Telefonica volumes that I referenced before. Our reported EPS of negative $0.42 reflects mainly the extraordinary items related to the transformation plan and the impairments in Argentina.

Excluding these effects, normalized EPS was positive $0.21 in line with year-over-year. We delivered a strong free cash flow of $41 million on a improved working capital during the quarter, due to a positive, historical seasonality and the recovery of collections from renegotiated contracts, which we pointed out during the third quarter earnings call, we repurchased 1.3 million shares during the quarter for a total cost of $3.4 million.

On a full-year basis, our revenue increased just over 2% within our guidance range. Multisector revenue grew 7.5% year-over-year and accounted for 64.7% of total revenue, 370 basis points increase versus year-end 2018. Telefonica revenues decreased 6.4% due to lower Americas' volumes and the Internet programs in Brazil that we had noted.

Our 2019 EBITDA margin was 10.8% when excluding the fourth quarter, impairment charge and 20 basis points below our guidance range must lead to the non-performing Telco programs in the first-half of the year, as we mentioned we return in the second-half. Normalized EPS was $0.23 when excluding the extraordinary items and impairment charges.

Free cash flow was a negative $9.4 million due to the extraordinary costs of our transformation program and the acquisition of the remaining stakes in Interfile and RBrasil. Net debt at the end of 2019 was $480 million when excluding $187.9 million under IFRS 16. Net leverage was sequentially stable at 2.6 times when excluding IFRS 16, the extraordinary costs and the impairment charge from EBITDA.

Now for a review of our results in each reporting regions, starting with Brazil, our flagship operation on slide 14, as a result of returning the previously mentioned in Telefonica programs in the fourth quarter, Brazil's revenues declining 1.2%, Multisector sales increased 6.3% year-over-year and 2.8% sequentially, as Carlos noted Multisector growth was driven by Born digital and healthcare clients. This shift in our revenue mix in Born digital and the healthcare companies expanded our EBITDA margin by 50 basis points to 14.4%. Full-year revenue was up 2.1% with Multisector sales increasing 6.4% to 72.6% of total sales, 290 basis points increase.

For the year, our normalized profitability decreased 20 basis points to just over 11% due to the lower margin Telco programs that impacted the first-half of the year, the return of our clients programs in the second-half is expected to contribute approximately 100 basis points of margin in 2020.

In the Americas, the same shift in our revenue mix drove 15.5% increase in revenue during the fourth quarter. Multisector sales rose over 27% year-over-year, and 4% sequentially driven by higher volumes in both new and existing contracts, mostly with clients in Mexico and Colombia.

Lower volumes in Peru and Chile led to a 7.6% decline in Telefonica revenues in this quarter, due to the ongoing economic crisis and hyper-inflation in Argentina. We look at the non-cash $30.9 million impairment charge in the quarter. Our normalized EBITDA margin expanded 40 basis points since last year to 9% due mainly to the new client programs acquired throughout the year in Colombia and Mexico.

For the year, Americas' revenues grew 2.8% on a 9.4% increase in Multisector sales which expanded 470 basis points to 63.2% of total revenue. Multisector growth was mostly driven by new contracts from existing as well as new clients in Colombia and Mexico.

Telefonica revenues decreased nearly 7% on lower volumes and as we exited some low margin programs, mainly in Peru and Chile throughout the year. Lastly, on this slide, our 2019 normalized EBITDA margin contracted 110 basis points due to the lower Telefonica volumes in Peru and Chile and to the wrapping up of new programs acquired throughout the year in Colombia, and Mexico. In EMEA, we continued growing Multisector revenue during the fourth quarter, EMEA's total revenues decreased just over 1%, 8.8% decline in Telefonica revenues more than offset Multisector sales which increased 9.8% year-over-year and 7% sequentially.

High volumes from programs won from existing clients during the year were responsible for Multisector expansion. Of note, the control of our indirect cost expanded the quarter's normalized EBITDA margins 290 basis points to 7.6%. For all of 2019 revenue increases, 2% on a 10.3% increase in Multisector, sales that were partially offset by 3.5% decline in Telefonica revenues.

As in the fourth quarter, high volumes in programs acquired existing clients throughout Multisector's growth. Atento and Multisector's revenues accounted for just over 43% of total revenue, and increase of 320 basis points compared to 2018. Our 2019 normalized EBITDA margin was 230 basis points lower at 5.8% due to lower profitability in certain programs in the first-half of the year and lower Telefonica volumes throughout the year.

For a view of our cash flow in the quarter we delivered solid $41 million free cash flow in the quarter, reflecting improved working capital has explained it earlier. The free cash flow generation has been funding our transformation plan and the returning capital to shareholders. In the quarter, we acquired 1.3 million shares under our buyback program for a total amount of $3.4 million. In full-year, our operating cash flow reaches $52.7 million or reflecting lower EBITDA from the transformation pla6n. This combining with almost 50 million we invested in Brazil to acquire the remaining stakes in Interfile and RBrasil led to a negative free cash flow of $9.6 million.

Cash CapEx for 2019 was a low 2.4% of revenue reflecting approximately $20 million with payment terms were really negotiated to 2020. Adjusting further payments, cash CapEx was 3.6% of 2019 revenue, in line with provided guidance of 3.5% to 4.5% of the revenues. The additional share repurchase during the quarter broke the years buybacks to $4.4 million for a total of just over $11 million before presenting our 2020 guidance, the discussion of attendance here and balance sheets on slide 18.

Our balance sheets remain safely and we still have the financial flexibility we need to effectively increase our growth strategy as well has returned capital to shareholders when its advantages to do so. Cash and cash equivalents at the year-end were $125 million, with implied liquidity of over $220 million when taking into account under revolving credit facilities of approximately $95 million. Our net debt was $480 million when excluding the effect of IFRS 16.

The average maturity of our debt is 2.7 years and no relevant principal payment is due until August 2022. The average cost in the last 12-month is equivalent to 7% per annum Our debt leverage was stable sequentially at 2.6 times that bring us the last slide of our presentation today. For 2020, we expect low-to-single digits 2020 revenue growth on a constant currency basis.

Our EBITDA margin is expected to expand to between 12% and 13%, which compares to the 10.8% we delivered in 2019 with expected improvement is a result of Three Horizon Plan and in line with what we presented in the Investor Day. We do not expect relevant changes in our interest expenses when you compare it to 2019. Finally, we forecasting cash CapEx as a percentage of revenue to be between 4% and 4.5%

This concludes our review of our fourth quarter and full-year performance. Operator, please open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Pedro Salles with Itau. Please proceed with your question.

Pedro Salles

Hi. My first question is directed to Mr. Carlos. I would like to know if the process of returning client contracts that are no longer profitable, could you give us some more color and how they are evolving, and if they will be an ongoing effort? And my second question would be to Mr. José Azevedo, that it was mentioned that increasingly focused on improving cash flow and profitability in the release, could you please provide a few examples, and if there are any targets to be met? Thanks.

Carlos López-Abadía

Sure, and this is Carlos. The process is pretty simple. We have -- through 2019 we started putting emphasis on profitability across the board. We look at both the intake as I mentioned to you in terms of sales, the contracts that we write, the renewals et cetera, but also the existing contracts, we continue to take a look at the contribution margin that each one of the contracts provide. Those that don't meet our objectives, they go through a very simple three-step process. One of it is -- step one is very simple, is can we operate that at a better margin, can we improve the operation? Point two, if we cannot, can we renegotiate the contract? And if one and two failed, then there is number three, you know, can we negotiate the exit of that contract? My fundamental belief is if something does not provide us the proper return, the profit contribution margin, probably we are not delivering sufficient value to our customers, and either through a better operation or through exiting that contractor line of business, we need to solve that situation. Did I answer your question?

Pedro Salles

Yes. Well, could we be looking at this to keep continuing during the future quarters throughout 2020?

Carlos López-Abadía

Absolutely, this has to be the way you run the business. You always need to take a look at, are you providing the right value to your customers, and if you're not, why not? If the is because you're not operating things properly, then you have to improve the operation, and if it's because -- or you're operating things optimally, you are still not delivering value, then you have to question yourself, am I doing the right thing, trying to provide the service? So that's not a 2019 exercise. It's the way to run the business. By the way, [indiscernible] the things that I've mentioned in my -- when I talk about operational improvements and the Three Horizon Plan, they're not one-offs, we do this thing and then the company is fixed. We do this thing, and the results improve, but these are activities that need to continue ongoing, because again, it's the right way to run a company.

Pedro Salles

Okay. Just as a quick follow-on question on this, regarding Telefonica contracts, can we expect the return of contracts in other geographies besides Brazil?

Carlos López-Abadía

Again, there is nothing specific to Telefonica. As I mentioned previously, something we look at across the board. In fact, if anything, I would expect the case Telefonica been a very large customer, which we have a relationship, and we engage in strategic discussions at all levels, including at the highest levels, you know, in some ways this is the place where things get done faster and more effectively. It's across the board, or contracts, or customers. Again, if we're not delivering the value to our customers, we need to rethink what we're doing.

Pedro Salles

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Declan Hanlon with Santander. Please proceed with your question.

Declan Hanlon

Hi, good morning. Thank you for the call. I may have misheard it, but correct me if I'm wrong. On your guidance, your 12% or 13% EBITDA guidance includes the IRFS impact. If I'm looking at this for 2020, looking at low single-digit revenue growth contemplating a midpoint of that EBITDA margin, and then packing out the IFRS run rate similar to what you had in the fourth quarter, I come up with an EBITDA margin that's actually lower than 2019, am I looking at this incorrectly?

Shay Chor

Hi, Declan. This is Shay.

Declan Hanlon

Hi Shay.

Shay Chor

This is a difficult way of looking, because the IFRS -- I don't know how much you are forecasting IFRS, and any changes throughout time. It could be lower next year than it was '19. It depends on the average time of the [indiscernible] sector. It's difficult to look that way. That's why we would prefer you to look at our reported basis and compare the 12 to 13, the 10.8 that we delivered, because that way you won't get the problems of forecasting how much the IFRS is.

Declan Hanlon

But your 10.8 is not including IFRS benefit, right?

Shay Chor

It is including IFRS, so…

Declan Hanlon

Rather it is including, okay. Got it, got it, okay.

Shay Chor

So, quick math to help you here, if you get from the 10.8 that we reported in '19, that's around $185 million in EBITDA, you have the $30 million one-offs that we had in 2019 plus around $5 million to $10 million in savings that we will start collecting from the one-offs there to get you to that range of 12 to 13.

Declan Hanlon

Okay, understood, I got you. Okay. Second question, I know you all have 30 months or so before you have to address your 2022s, but what is the contemplated strategy at this point, or can you walk us through how you're thinking about addressing this, if another primary market is not really there for us at the moment, and uncertain when that we're going to be back into [the level] [ph] we were end of last year, but can you walk us through the thought process there? And I have one other question beyond that.

Shay Chor

You are asking about the liability management?

Declan Hanlon

Yes.

Shay Chor

Okay, got your question. Yes, actually as a similar strategy that we did back in 2017, when we issued the current outstanding bond, we are already looking into the market and opportunities and will be opportunistic when there is a chance to do a liability management, we definitely will not wait until we are closer to the maturity. That's not the way we operate. That's not the way we do things. We would like to be conservative and avoid taking too many risks in this problem. So as long as we have a market and there is opportunity, we will be looking to do a liability management sooner than later.

Declan Hanlon

Okay, thanks for that. Last question, can you give us any update on the developments at the sponsor level with respect to the [indiscernible], given any other potential risks of change control and the impacts to the company? I know we have a few months before that as well. But can you give us any new information on that front?

Shay Chor

Specific discussions amongst our shareholders and their financial partners, I would have to refer you to them for that, but I'll tell you that we're working very closely with them. And we have the plans to make sure that there is no impact to Atento. At the moment, we've seen no meaningful impact to any transaction that is being discussed our shareholders, and in any case, we also in addition to that, we have some contingency plans to make sure that there is zero impact to our operation.

Declan Hanlon

Can you talk about what those contingency plans might be?

Shay Chor

Not at this point, because again -- these are discussions and agreements amongst our shareholders that are not always we are invoked to the degree that we need to make sure that there is no impact to Atento, but I would feel very uncomfortable talking about somebody else's business. I think I need to refer you to, to them for that kind of discussion.

Declan Hanlon

I understand.

Shay Chor

But from a management perspective, we do everything to make sure there is zero impact, and at the moment, we do anticipate any.

Declan Hanlon

Okay, thank you very much. That's all I have.

Shay Chor

Okay.

Operator

Thank you. Our next question comes from line of Vincent Colicchio with Barrington Research. Please proceed with your question.

Vincent Colicchio

Yes, Carlos. Congrats on a good quarter. You had mentioned that you will be increasing your focus on next generation services in 2020. Curious about what that may be qualitatively and then curious in your expectations for 2020 due to expect to maintain the same level of incremental revenue coming from next generation services as a portion of total new sales?

Carlos López-Abadía

Yes, thank you. The increased focuses got multiple dimensions similar to what we've done on the operational improvements has to do with everything across to from governance, acquisition of technology, adding talent and fundamentally, also the focus of management and the company on these dimension. It has multiple dimensions. I will be happy to discuss with you guys if it's of interest, some of the details of the plan as that unfolds, but it's a very much what I discuss from the beginning. It's a Three Plan Horizon is not that we are going to do things sequentially, but clearly the focus is going to be shifting from one to the next. The next as we get traction on the previous front, and we feel very confident that we are beginning to get the right traction on the operational improvement front, a lot more work to do, and we find very far from where we need to be, but we get the confidence that the initial initiatives are getting that practice and we shifting the focus to the second one, in terms of the mix of services and customers, we expect to continue the improvement in fact probably, we will be pushing to have higher content in terms of the right sectors, getting much further than 50%, it's a good aspiration, but I want to be clear that there are 50% is not that is maybe more traditional services, but as traditional services that come at a higher margin then that we have had historically, because we were putting the focus, sometimes we love to talk about digital and the next generation all that, but some of the improvements that we making in the portfolio of services that we are providing, it applies also to traditional right. So I don't want to minimize or [indiscernible] saying I think 50-50 is probably a good mix. We will move to it higher potentially, but he is not really 50. Don't get the impression that is not attractive concern, maybe more traditional, but they are also attractive.

Vincent Colicchio

And one big picture question for you. I'm not familiar with the virus situation in Latin America. Is coronavirus on your radar screen any issues or concerns there?

Carlos López-Abadía

They're very much in our radar screen. It's difficult these days to not do that, even if you are not running an operation such as ours. So far, Latin-America has been one of the least affected regions. Spain has been already has a number of cases. Funny enough, I was last week, a week ago, 10 days ago, I was in Madrid. I don't remember it starting, but I think there was either no cases, maybe one case and week after I left. I think that in excess of 100 cases, maybe 200 by now, I don't know. So, this is something that is evolving very rapidly, as you know. In terms of, we take it very seriously to say with people business, and a lot of our communities depend on our services and a lot of our clients depend on our services. So we have put in place, we've been working on these weeks ago.

Even before this was top of the news, for us, we have a number of contingency plan, we have we're acting in three dimensions. One is to make sure that we exceed all the health and safety regulations across the board in all regions, that's table stakes, and they also put have put in place over the last few weeks, a number of additional measures to promote hygiene and a number of behaviors that should impact or be beneficial for to avoid the impact and the spread of the virus. And the third one is the number of contingency plans with our clients to make sure that indicates that there is service disruption in the future country got forbid, goes into China mode, so to speak. What will be the sequence of the steps with the different customers? So we are acting on all those preparing, as you would imagine that the contingency plans for business continuity at the moment, we have not been affected in any measurable way. But I think we have the responsibility to our employees to our customers and to the communities where we serve to make sure that we do everything we can to prevent the spread of the virus.

Vincent Colicchio

Thanks for the color. I appreciate it.

Carlos López-Abadía

Thank you.

Operator

Thank you. Our next question comes from the line of Diego Aragao with Goldman Sachs. Please proceed with your question.

Diego Aragao

Hi, everybody. Thank you for taking my question. Actually, it's a follow-up queue related to your strategy to divest from low margin businesses in 2020. Can you be more precise, let's say you're on the trifold that you are taking for consideration for these projects that you are looking to divest, that's in terms of revenue margins, and also one, the number of contracts and customers that could be affected by it. Thank you.

Carlos López-Abadía

I'm not going to give you any specific numbers. The numbers actually also differ, but you can do the math. It's pretty simple. We've ATTO meeting to you guys, to our shareholders to provide certain returns and the portfolio of contracts that we have need to provide returns consistent with our external commitments, right? So those contracts that are not consistent with that we as I said, we need to take a serious look at. I think it'd be wrong if you look at this, as I mentioned earlier, so there is one-off. Oh my God! These guys are going to clean up the portfolio, and because this is the way to run business. There's nothing unique or one-off on this exercise and we're doing this in conjunction with our clients, we don't just drop contracts that will be the wrong thing to do from a business perspective, from a client relationship perspective, from our perspective, right? So, we as I mentioned earlier it's my fundamental belief that in all cases, where we cannot humanly get the return that we want to get, doing all the improvements that we know of to the operation, you have to question whether you are in the right line of business or whether that particular service to that particular customer as much value so, we work with our customers and okay, if the value is not there, how do we transition, so this is not affecting customers in any sense of creating any disruption that service to our customers is a paramount consideration to us, irrespective of the -- whether they contract at the moment is performing the way we expected. Don't look at it as a one-off. And this is the way I believe serious companies run their business. They can look at the value they deliver to the customers and the value those contracts provide to the company to the shareholders.

Diego Aragao

Thank you, Carlos. Thank you for that. So I guess on Telefonica quite quickly, they recently decided to review strategically, their portfolio [indiscernible], they started selling a few operations in Central America. So I don't know you shouldn't. Maybe if you can comment on the initial impact, if any, from telecom consolidation in Guatemala and El Salvador, I guess that would be great. Thank you.

Carlos López-Abadía

Sure. Not a material impact to us clearly, when the clients make decisions with the structural such as those in Telefonica, sometimes it's tactical changes in their approach to the way they use CRM and they use provider like us, that they have an impact. So I've seen that Telefonica once maybe more feasible because of the press coverage, but those particular structure plans have not had a significant impact on as, you know we have an agreement with Telefonica that guarantee certain volumes. So, from that perspective, we have an additional protection in that regard, but to be honest with you, my approach with Telefonica and every customer is to earn every dollar that we make, making sure that we better than the competition in everything that we provide. So far, that has not been. That hasn't been a meaningful impact to us. Although everybody seems to pay a ton of attention to those particular announcements, another big, deal so far.

Diego Aragao

Okay. Thank you very much, Carlos.

Carlos López-Abadía

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from line of Pedro Salles with Itau. Please proceed with your question.

Pedro Salles

Hi. Thanks for taking my question again. I was just wondering if you could provide us with a few examples of initiatives to improve cash flow and profitability, I mean, other initiatives, not mentioned previously, and if there are any targets to be met, if you could guide us through, please.

Carlos López-Abadía

Yes, I was trying to be sneaky and not answer that question, but José here was just kicking me under the table, he really wants to [indiscernible]. Sorry, I gave you a long answer, and we forgot about the second part of your question, but José isn't. Go head.

José Antonio de Souza Azevedo

Yes. Thank you. The first thing what I want to mention is I tend to work for last -- in the last year in the above EBITDA doing a very, very good job as you see in Q4, we change the kind of revenue, the source of revenue, we started the information plan, and that is all things that will be very, very important to the cash flow, because at the end, we'll increase the EBITDA. But we have some initiatives, for example, in procurements we started already a program to renegotiate almost all contracts. That is what he wants to do, and in two ways to get more discounts and to increase EBITDA. It is one of the initiatives. Another initiative is about clients, we, as you know, we work with some amount in work-in-progress week. That's we started already to reduce the days. That is the first thing that we want to do because without that we cannot invoicing, plus our DSO that we start already to -- a program to renegotiate and reduce too. Hence our accounts receivable, that is, with all these initiatives, we have opportunity to increase our working capital, and that is our target for 2020 is we want to increase, because honestly, it's simple to do the accounting, but [hopefully] [ph] working capital it will be around $60 million.

Pedro Salles

Okay, thanks a lot.

José Antonio de Souza Azevedo

Thank you.

Operator

Thank you. Our next question comes from line of George Melas with MKH Management. Please proceed with your question.

George Melas

Thank you. Thanks for taking my question. It's also in regards to the cash flow. I'm trying to understand your CapEx. You're going to a lot of transformation, and I imagine from a capacity perspective, there is quite a few changes in transformation, and I'm trying to understand your CapEx level that seems slightly elevated. That's my question.

Shay Chor

Hey, George, this is Shay. Actually, if you look at what this industry does, if you look at all our peers, so Teleperformance, [indiscernible], Sykes, they all spend around 3% to 4% of revenues every year in CapEx. So, our CapEx is not far from what our peers do. In 2020, exceptionally, we guided for slightly higher amount than we spent in 2019. Part of that is related to the transformation, and some CapEx that are still required in order for us to deliver all this transformation, but other than that, there is nothing different you should expect from our CapEx on a normalized basis, it should be between 3% to 4% of revenues going forward, I'm not expecting any changes in this regard.

Carlos López-Abadía

In that respect, let me add to Shay. I think in the past, in my opinion, we probably have an underinvested in certain areas of the company. We don't intend to spend more than the average in the industry, but a number of things that we want to invest on in the short-term, again, [indiscernible] transformation, but things that we are going to make us more competitive company. In the long-term, however, so we have a bit of a spike on -- in our budget for this year, 2020. On a going forward basis, I underscore what Shay has said, we don't see as necessarily consuming anymore CapEx on the industry average.

George Melas

Okay, very good. Thanks for the answer.

Operator

Thank you. [Operator Instructions] Thank you. There are no further questions. I'd now like to turn the call over to Mr. Carlos López-Abadía for closing remarks.

Carlos López-Abadía

So I don't have any anything to add. So, thank you guys again for your questions, and meeting today with us. We're looking to 2020 of continued improvements from 2019. In 2019, we started from a tough position. We are in a much stronger position starting 2020, and we're looking at our Q1 from a position of good momentum coming out of 2019. Again, thanks a lot and I appreciate all your questions and your presence in the call. Thank you.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.