Atento SA (ATTO) 2019 Q4 法說會逐字稿

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.

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 de Azevedo, Chief Financial Officer. Following our review of Atento's financial and operating results, we will open the call for 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 call 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.

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 '19 result.

Let me introduce the whole topic with 1 bullet point, which for me is -- describes the whole year. I am very happy with the progress that we've made in our transformation program for Atento in fiscal year '19. We -- 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 the -- our Three Horizon Plan that I shared with you in the past in our investor conference and before, we introduced this 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 blue print 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 the 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, if you look at the revenue, we have grown, not only we have grown, but we have -- we show accelerating growth. More importantly, sometimes, again I have to look underneath the numbers. More importantly, the growth comes from Multisector. Telefónica continues to be a very important customer of Atento, but we're growing in the right places in Multisector and high-growth sectors that we have chosen to target and we 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 markets that you compete. We're particularly proud of the results there. You have also some detail on sales in the next slide. Again, different metrics that we look at for sale. But if you look at the -- the one we tend to look the most closely to is the in-year revenue. These are sales that have translated into revenue in the fiscal year, show a 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 place, is growth that we have achieved across the board in all regions.

Very importantly, also a bottom line. You have in the slide the trajectory we have. There is no question that we started the year from a difficult position. I'm also happy to report that since then, we have steadily quarter-on-quarter-on-quarter improved our results. Again, this is part of the results that we are showing from the operational improvements that we have introduced. We're not done by any stretch of the 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 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 high-growth that some of them, I call them born-digital customers. These are the segments that we're targeting. We are seeing 1/3 of our sales into those customer segments.

In terms of services that we sell, we have seen 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 to, but also show very specific and tangible results. We see higher margins in these type of sectors and these type of services, 3 percentage points higher in the -- when we hit the sectors we're going after and 7 percentage points when we actually succeed in the next -- with the next-generation services.

I wouldn't like to leave without touching on perhaps 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 with you -- to you today the program that we have introduced in Brazil. We have introduced an environmental project that has already having -- 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. Now that most companies say things like these, in our case, we're a people company. They are indeed -- our employees are indeed our most important asset. And we are 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, it's 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. Those -- 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 that you're beginning to have the results that you're seeking. We've also made important progress in next-generation services, and the transformation of Atento. This will be the focus of 2020, much more than it has been in 2019. And with the results that I've shared with you, I'm facing 2020 with much more confidence and with very good momentum coming out of 2019.

Well, 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.

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 returned nonperforming client programs in Brazil and South. This combined with lower volumes in Peru, Chile and EMEA led to a 12.3% decline in Telefónica revenues. Also reported EBITDA decreased just over 41% due to $11.6 million in extraordinary costs related to our transformation program and a noncash impact charge of $30.9 million in Argentina that were partly offset by a positive effect of $17.9 million related to IFRS 16.

Excluding the impairment, 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 Telefónica volumes that I referenced before.

Our reported EPS of negative $0.42 reflects mainly the extraordinary items related to the transformation plan and the impairment 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 improved working capital during the quarter due to a positive historical seasonality and the recovery of collections from a renegotiated contract, 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. Telefónica revenues decreased 6.4% due to lower Americas volumes and the returned 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 mostly due to the nonperforming telco programs in the first half of the year that, as we mentioned, will return in the second half. Normalized EPS was $0.23 when excluding the extraordinary items and impairment charge. 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 R Brasil.

Net debt at the end of 2019 was $480 million when excluding $187.9 million under IFRS 16. Net leverage was sequentially stable at 2.6x when excluding IFRS 16, the extraordinary costs and the impairment charge from EBITDA.

Now for a review of our results in each reporting region, starting with Brazil, our flagship operation on Slide 14. As a result of returning the previously mentioned in Telefónica programs in the fourth quarter, Brazil's revenue declined 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 health care clients. This shift in our revenue mix toward born-digital and the health care 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 at 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 Telefónica revenues in this quarter. Due to the ongoing economic crisis and hyperinflation in Argentina, we booked a noncash $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 revenue 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. Telefónica 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 Telefónica volumes in Peru and Chile, and to the ramping 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 revenue decreased just over 1%, has had 8.8% decline in Telefónica revenues more than offset Multisector sales, which increased 9.8% year-over-year and 7% sequentially. High volumes from programs, one from existing clients during the year were responsible for Multisector expansion. Of note, strict control of our indirect costs expanded the quarter's normalized EBITDA margin, 290 basis points to 7.6%. For all of 2019, revenue increased 2% on a 10.3% increase in Multisector sales that were partially offset by a 3.5% decline in Telefónica revenues. As in the fourth quarter, high volumes in programs acquired existing clients drove Multisector growth. At year-end, Multisector revenues accounted for just over 43% of total revenue, an 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 Telefónica volumes throughout the year.

For a review of our cash flow in the quarter, we delivered a solid $41 million free cash flow in the quarter, reflecting improved working capital as explained earlier. This healthy cash flow generation helped funding our transformation plan and 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 reached $52.7 million, reflecting lower EBITDA from the transformation plan. This, combined with almost $50 million we used in Brazil to acquire the remaining stakes in Interfile and R Brasil, led to a negative free cash flow of $9.6 million.

Cash CapEx for 2019 was low 2.4% of revenue, reflecting approximately $20 million with payment terms were renegotiated to 2020. Adjusting for the carry-over payments, cash CapEx was 3.6% of 2019 revenue, in line with provided guidance of 3.5% to 4.5% of revenues. The additional share repurchases in the quarter brought the year's buybacks to 4.4 million for a total of just over $11 million.

Before presenting our 2020 guidance, a discussion of Atento's year and balance sheet on Slide 18. Our balance sheet remains healthy, and we still have the financial flexibility we need to effectively execute our growth strategy as well as returning capital to shareholders when it's advantage to do so.

Cash and cash equivalents at year-end were $125 million with implied liquidity of over $220 million when taking into account undrawn revolving credit facilities of approximately $95 million. Our net debt was $408 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 months is equivalent to 7% per annum. Our net leverage was stable sequentially at 2.6x. That brings us to the last slide of our presentation today.

For 2020, we expect low to single digit 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. This expected improvement in our -- is a result of the Three Horizon Plan and in line with what we presented in the Investor Day. We do not expect relevant changes in our indirect expenses when we compare to 2019. Finally, we're forecasting cash CapEx as a percentage of revenue to be between 4% and 4.5%.

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

(Operator Instructions) Our first question comes from the line of Tito Ferraz with Itaú.

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

Sure. 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 3-step process. One of it is -- step 1 is very simple, is can we operate that at a better margin? Can we improve the operation? Point 2, if we cannot, can we negotiate the contract. And if 1 and 2 failed and there is number 3, 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 contract line of business we need to put a -- solve that situation. Did I answer your question?

Yes. Could we be looking at this to keep continuing during the future quarters and throughout 2020?

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 it is because you're not operating things properly, then you have to improve the operation. And if it's because you are 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, a lot of the things that I 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.

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

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

Our next question comes from the line of Declan Hanlon with Santander.

I may have misheard this, but correct me if I'm wrong. On your guidance, your 12% to 13% EBITDA guidance includes the IFRS 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 backing 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?

Declan, this is Shay. This is a difficult way of looking because the IFRS, I don't know how much you are forecasting of IFRS and it changes throughout time. It could be lower next year than it was in '20 than it was in '19. It depends on the average time of the contract. So it's difficult to look that way. That's why we prefer you to look at our reported basis and compare the 12% to 13% to the 10.8% that we delivered. Because that way, you won't get

the problems of forecasting how much the IFRS is.

But your 10.8% is not including the IFRS benefit, right?

It is including IFRS.

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

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 add the $30 million one-offs that we had in 2019 plus around $5 million to $10 million in savings that we'll start collecting from the one-offs that will get you to that range of 12% to 13%.

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

You're asking about the liability management?

Yes.

So okay, I 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 we'll 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 like to be conservative and avoid taking too many risks in this front. So as long as we have a market and there's opportunity, we will be looking to do liability management sooner than later.

Okay. Last question. Can you give us any update on the developments at the sponsor level with respect to the pick, given the potential risks of change in 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?

Look, specific discussions among our shareholders and the 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 are -- 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 may be -- that is being discussed among our shareholders. And in any case, we also, in addition to that, we have some contingency plans to make sure that there is 0 impact to our operation.

Can you talk about what those contingency plans might be?

Not at this point because, again, I -- this is -- these are discussions and agreements amongst our shareholders that are not -- obviously, we are involved 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 them for that kind of discussion. But from my perspective and from a management perspective, we're doing everything to make sure there's 0 impact. And at the moment, we don't anticipate any.

Our next question comes from the line of Vincent Colicchio with Barrington Research.

Yes, Carlos. Congrats on a good quarter. You had mentioned that you'll be increasing your focus on next-generation services in 2020. Curious about what that might be qualitatively? And then I'm curious if in your expectations for 2020, do you expect to maintain the same level of incremental revenue coming from next generation services as a portion of total new sales?

The increased focus has got multiple dimensions, similar to what we've done on the operational improvements, has to do with everything across from governance, acquisition of technology, adding talent. And fundamentally, also the focus of management and the company on this dimension. It's got multiple dimensions. I'll be happy to discuss with you guys, if it's of interest, some of the details of the plan as the year unfolds. But it's very much what I discussed from the beginning. It's a Three Plan Horizon. It's not that we are going to do things sequentially, but clearly, the focus is going to be shifting from one to the next to 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're very far from where we need to be. But we get the confidence that the initial -- the initiatives are getting that traction. So we're 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'm not -- I want to be clear that the 50% is not that is may be more traditional services, but the traditional services that come at a higher margin than we have had historically, because we're putting the focus. And sometimes, we love to talk about digital and the next generation, all that. But some of the improvements that we're making in the portfolio of services that we are providing, it applies also to traditional, right? So I don't want to minimize or cast aspirations on the other 50%. When I'm saying I think 50-50 is probably a good mix, we moved higher potentially, but it's not -- the other 50 don't get the impression that it's not attractive contract. They may be more traditional, but they are also attractive.

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?

Very much in our radar screen. It's difficult these days to not to do that, even if you were 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. Finding that I was last week -- last -- a week ago, 10 days ago, I was in Madrid. I don't remember exactly, I think there was either no cases or maybe 1 case. And a week after I left, I think they're in excess of 100 cases or 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. As I said, we're the 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 this weeks ago even before this was top of the news. For us, we have a number of contingency plans. We have -- we're acting in 3 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. We also have put in place over the last few weeks a number of additional measures to promote hygiene and a number of behaviors that should in fact 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 in the case that there is service disruption in the future in our country, god forbid, goes into China mode, so to speak, what will be the sequence of steps with different customers. So we're acting on all those preparing, as you would imagine, 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.

Our next question comes from the line of Diego Aragão with Goldman Sachs.

Actually, as a follow-up to you related to your strategy to divest from low-margin businesses in 2020. Can you be more precise, let's say, on the threshold that you are taking into consideration for these projects that you are looking to divest, let's say, in terms of revenue, margins and also on the number of contracts and customers that could be affected by it?

I'm not going to give you any specific numbers. The number is actually in all fairness also defer. But you can do the math, it's pretty simple. We are committing 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 will be wrong if you look at this, as I mentioned earlier, so there is a one-off, these guys are going to clean up the portfolio and this is the way to run business. There's nothing unique or a 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're in the right line of business or whether that particular service to that particular customer adds much value. So we work with our customers, 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 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, taking a look at the value they deliver to the customers and the value those contracts provide to the company, to the shareholders.

So I guess, on Telefónica, quite quickly, they recently decided to review strategically their portfolio in LatAm. They started selling a few operations in Central America. So I don't know if -- 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.

Sure. Not a material impact to us. Clearly, when the clients make decisions, be it structural, such as those in Telefónica, sometimes it's practical changes in their approach to the way they use CRM and they use provider like us, that they have an impact. So I think Telefónica wants may be more visible because of the press coverage, but those particular structural plans have not had a significant impact on us. As you know, we have an agreement with Telefónica that guarantees certain volumes. So from that perspective, we have an additional protection in that regard. But to be honest with you, my approach with Telefónica and every customer is to earn every dollar that we make, making sure that we're better than the competition in everything that we provide. So far, that has not been -- there hasn't been a meaningful impact to us. Although everybody seems to pay a ton of attention to those particular announcements, not a big deal so far.

(Operator Instructions) Our next question comes from the line of Tito Ferraz with Itaú.

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's any targets to be met, that you could guide us through, please?

Yes. We thought -- I was trying to be as sneaky and not answer that question, but José here was just kicking me under the table. He really wants to address that. I'm just joking, sorry, I gave you a long answer, and we forgot about the second part of your question, but José you can...

Thank you. The first thing that I want to mention is Atento worked a lot in the last year in the above EBITDA, doing a very, very good job, as we see in Q4. We changed the kind of revenue, the search of revenue. We started the transformation 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 procurement, we started already a program to renegotiate almost all contracts, that is what you want to do and in 2 ways to get more discounts and to increase the DPO. That is one of the initiatives.

Another initiative is about clients. We -- as you know, we work with some amount in working in progress with that's -- we started already to reduce the days. That is the first thing that you want to do because without that, we cannot invoicing. Plus our DSO that we started 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 healthy working capital by us, it will be around $60 million.

Our next question comes from the line of George Melas with MKH Management.

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

George, this is Shay. Actually, if you look at what this industry does, if you look at all our peers, so teleperformance (inaudible) 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 a slightly higher amount than we spent in 2019. Part of that is related to the transformation and some CapEx that is still required in order for us to deliver all this transformation. But other than that, there's nothing different you should expect from our CapEx. On a normalized basis, it should be between 3% to 4% of revenues going forward. We're not expecting any changes in this regard.

Yes. In that respect, let me add to Shy. I think in the past, in my opinion, we probably have 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, associated with the transformation, but things that are going to make us a more competitive company. In the long term, however, so we had a bit of a spike on -- in our budget for this year, 2020. On a going-forward basis, I underscore what Shy has said. We don't see as necessarily concern me any more CapEx than the industry average.

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

I don't have anything to add to. Thank you guys again for your questions and meeting today with us. We're looking to 2020 of continued improvement 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.

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