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Atento S.A. (NYSE:ATTO)
Q2 2020 Earnings Call
Aug 7, 2020, 11:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Atento's Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions to participate will be given at that time. [Operator Instructions] 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 to Carlos Lopez-Abadia, CEO of Atento.

Carlos Lopez-Abadia -- Chief Executive Officer

Thank you very much, Cai and thank you ladies and gentlemen for joining us today. I want to cover three items, the status of our response to the pandemic, our outlook for the rest of the year and the progress of our transformation program.

After Q2 is strongly affected by the impact of the COVID-19 pandemic, we feel that the worst is behind us and we are optimistic about the rest of the year. The second half of March and April were our most impacted months and May and June show significant and progressive improvements. We exited June with profitability and volumes, consistent with last year's run rate in the same month.

I want to address the impact of the pandemic in Q2. Most of the impact we felt in the quarter was due to capacity limitations. The pandemic-related measures implemented by the authorities in various countries constrained our ability to deliver the volumes demanded of us.

During the quarter, we solved these limitations through a combination of work-at-home arrangements and better capacity management at our delivery centers. We ended the quarter with more than 60% of our delivery center employees working safely from home, while at the same time, maintaining health and safety standards at our centers, superior to those required by regulatory and health authorities. As a result, we're back to full operating capacity by the end of June.

Our non-Telefonica business continued to grow in H1, increasing 7.7% over last year. While Telefonica volumes declined in March and April, they recovered strongly in May and June. Some of the Telefonica volume decline was planned. We exited nonperforming business last year. But some was due to the reduction of nonessential services during the peak of the crisis, March and April time frame.

EBITDA margin continued the positive trend that started in Q2 of last year with a run rate of growth of 29% last quarter. Comparing H1 2019 with H1 2020, EBITDA margin improved 3.6 percentage points.

We have also improved our operating and free cash flow management, doubling our operating cash flow and turning a positive free cash flow of $44 million in the quarter. We have achieved one of the best cash flow of first half of the year in Atento's history. As a result, we feel very comfortable on our cash position and our ability to manage liquidity through the remainder of the crisis.

While we do not know for certain how the COVID-19 pandemic will continue to evolve, we are confident on our ability to respond effectively. With over half of our workforce working from home, a new permanent WAHA platform being deployed and safer reconfigured centers, we are much better prepared than we were in Q1.

I want to touch on what we see for the rest of the year and why we feel optimistic about the second half of 2020. We see the majority of our clients getting back to pre-COVID volume levels and some sectors showing significant growth. Our sales pipeline has increased 30% in Q2 with particular strength in higher-margin next-generation services, which represents 52% of the sales pipeline. As a result, we expect to double the share of advanced services in our revenue base in 2020.

While we expect to finish the year with a healthier revenue mix with Telefonica representing less than 30% of our base, Telefonica continues to be a very important client. We're exploring with Telefonica new avenues of partnership including additional programs and a possible extension of our MSA [Phonetic].

High-growth sectors which we started emphasizing last year, also showed significant strength. These sectors including born-digital companies, represent 28% of our sales. We have added 20 new clients in the first half of 2020, including an important expansion in the U.S. market, with 57% growth in Q2 year-on-year. As a consequence of the products in the commercial arena, we expect our overall sales for the year, not only to increase year-on-year, but to continue to improve in quality.

There's no question that 2020 is a challenging year for all of us, but we continue to deliver our transformation on schedule. I would like to make a couple of comments on our progress.

The progress of our sales and next-generation services transformation is already being reflected in great results as I just mentioned. We are happy to see early traction, particularly during a complicated year such as this. Let me touch on a couple of other dimensions of our transformation, operations and cost structure.

Our operations efforts in the first half of the year have been focused on those aspects that were most meaningful for the response to COVID-19-related challenges. For example, we have developed capabilities to recruit, train, deploy and manage agents and supervisors in a fully digital model using social networks, artificial intelligence, facial and voice analysis in a new integrated process. We have already deployed thousands of agents using this capability with everyone participating in the process, candidates, third parties, employees working remotely.

We continue to advance in the improvement of our cost structure. We are targeting an improvement of $80 million in -- on our run rate cost this year. Also, as I mentioned earlier, we have significantly improved our cash flow management with impact already reflected in the H1 operating and cash flow results. Jose will cover these points further in his presentation.

As a result of the progress of our transformation, we have been able to deliver EBITDA growth every quarter, starting in Q2 of last year and to make the necessary investments in transformation, health and safety, and work at home.

Near the end of the quarter, we welcomed HPS, GIC and Farallon as new shareholders and to our Board, increasing the diversity of the shareholder base and achieving a structure more consistent with the standard publicly traded company. The new shareholders have endorsed the Company's strategy and are working with us on improving our capital structure.

With improving profitability year-on-year, recovering volumes, solid sales results and stronger shareholder and Board composition, we feel confident to face the challenges and opportunities facing us in the second half of the year [Indecipherable].

With that, I would like to thank you, and I would like to turn it over to Jose, our CFO. Thanks.

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Thank you, Carlos. As you can see on Slide 9, we delivered strong Multisector growth in the quarter, especially in our flagship operation in Brazil as well in the U.S. which partially offset the decrease in Telefonica revenues across all the regions. Multisector sales were strongest in Brazil, rising over 11%. Consolidated revenues decreased 12%, mainly reflecting the discontinuation of unprofitable programs in Brazil since the fourth quarter of 2019 as part of our effort to improve profitability.

The decrease was also due to lower Telefonica volumes related to COVID-19 impacts mostly in April and part of May. Like Brazil, the economies of Argentina and Peru were also hit hard by the pandemic. However, more than 50% year-over-year increase in U.S. Multisector sales in the quarter lessened the revenue impact in Americas region. May and June were an inflection point for business conditions, including at Telefonica, and volumes continuing to improve as of today.

As Carlos mentioned, with the volumes beginning to recover during May and June, we saw sequential improvements in EBITDA month after month during the quarter with June's EBITDA back to normalized levels. Still second quarter EBITDA declined 33% with the EBITDA margin at just over 7%, down from 9.6% last year. Americas margin fared better due to effective cost management as well as an improvement in the revenue mix. Later in the presentation, I will explain what our underlying EBITDA performance was. When setting aside a very unusually impact of COVID-19 on volumes. The trend is very encouraging.

On the next slide, we have broken down again the Multisector growth among the high-growth verticals that we have been increasingly penetrating under our transformation plan. Over the last six months, sales to born-digital clients expanded 450 basis points to 6.6% of total sales. While sales to tech and media and entertainment companies increased 245% and 68%, respectively. This includes sales within the U.S. market, which rose 23% year-to-date, being 54% in Q2 '20 only when compared to Q2 '19 as I just mentioned.

Clients in each of these segments have been beneficiaries of shifts in spending patterns during the pandemic, many of which are likely to be permanent changes, such as higher levels of off-line purchase and home consumption. In addition to the growth that we have been taking into these clients, our contracts with them are more profitable and therefore, are expected to drive EBITDA higher as business conditions normalize.

Slide 11 shows where the growth in Multisector sales is coming from. Brazil remains our largest surge of Multisector revenue which is nearly 78% of revenue in the business, a 680 basis point increase year-to-date versus 2019. Multisector revenues expanded 360 basis points in the Americas and 840 basis points in EMEA, also contributing to overall 440 basis point increase in our consolidated Multisector sales.

Please turn to Slide 12. Our EBITDA growth, 29% on a run rate basis in the second quarter. Specifically, the impacts of COVID was $30 million in EBITDA in the second quarter, most of it in April, and $43 million year-to-date. Setting aside this impact, our margin expanded 360 basis points to 14.3% for the first half of this year with a run rate EBITDA increasing 36% during this period. Overall, the expansion in our underlying margin was due to improving revenue mix in terms of types of clients we are attracting and serving and through greater proportion of next-generation services.

Let's now move to Slide 13. Operational improvements are integral to our Three Horizon Plan and we have begun, implementing a new cost savings program to expand their scope as well as accelerate it. We are targeting $80 million in annualized cost savings under this program, $47 million of which has already been achieved on a run rate basis. This will be a combination of reductions in fixed and variable operating costs as well as SG&A expenses that we project will fall below our peers. In addition, we expect the reductions in our fixed costs to be sustainable as we grow revenue. We believe that if we increased sales by up 15%, our fixed costs will not rise under this scenario.

To reduce Atento's cost structure, we have been rightsizing more of our operations, which has included shifting more of them to the WAHA model. At the corporate level, we have been implementing shared services as well as adopting some of our automation technology, search, RPA or robotic process automation, to reduce internal costs including within our finance department.

With the aim of protecting our margins gains, we have also centralized pricing with a focus on ROIC, and ensuring optimal capital allocation throughout the countries we operate in. A zero-based budgeting system will also drive greater cost efficiencies which we expect to be fully implemented by year-end. Through a combination of these structural improvements, we expected to enter 2021 with a much lower cost structure and therefore drive operating leverage as volumes grow particularly among the Multisector clients.

Please turn to Slide 14. We are also becoming more efficient with capital. Additional working capital improvements drove $44 million of free cash flow during the second quarter. We obtained another $10 million in overdue collections this quarter, bringing the total to $30 million year-to-date. This helped lower our DSO by four days, while the new procurement program extended our DPO by 13 days, both on a six-month basis.

At the same time, we remain disciplined with capital expenditures until the risks related to COVID-19 are well behind us. Cash capex was 2.7% of sales in the first half of the year including the costs associated with safety measures and transitioning agents to the WAHA model.

Please move to Slide 15. Better management of working capital and drawing on most of our credit lines accounted for the 27% sequential increase in our cash position, a level that traces back to end of 2016. Even when excluding the $80 million in revolvers, our cash position increased 9% during the quarter, ensuring stronger liquidity and giving us the financial flexibility we need in the current operating environment.

Net debt declined 8.2% to $424 million [Phonetic] with our leverage ratio at 4 times EBITDA, which we consider a manageable level based on current EBITDA trends and our cash position. Long term, we expect to reach our 2022 targets of between 2 and 2.5 times EBITDA. We have already initiated the process to refinance our $500 million 2022 bond, with the aim of improving our debt profile and paving the -- a way for improving our capital structure. We expect this measure to unlock additional value to shareholders.

This concludes our review of our second quarter performance. Now we are at your disposal to answer any questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Vincent Colicchio, Barrington.

Vincent Colicchio -- Barrington Research -- Analyst

Yes, Carlos, I wasn't sure, on the pipeline, it says 52% is next-generation services. Is that the total -- of the total pipeline? And if so, what portion of the incremental business was next generation?

Carlos Lopez-Abadia -- Chief Executive Officer

It is 52% of the total pipeline. And what was the second part of your question?

Vincent Colicchio -- Barrington Research -- Analyst

What portion of the business added to the pipeline was next generation?

Carlos Lopez-Abadia -- Chief Executive Officer

What portion of the business added to the pipeline? I don't -- what do you mean on this?

Vincent Colicchio -- Barrington Research -- Analyst

The new business added to the pipeline this quarter, what portion is was that?

Carlos Lopez-Abadia -- Chief Executive Officer

We can get it to you. I don't imagine it will be very different from the overall percentage. When you get the total percentage of the pipeline to be 52%, probably the ratios are similar or higher because we are growing our percentage of next-generation services, but we can get you that information. I don't know -- I couldn't tell you of the top of my head. I imagine it's similar to the 52%.

Vincent Colicchio -- Barrington Research -- Analyst

And the new business added to the pipeline, the incremental growth in the pipeline, is there any pricing pressure on that business? I would assume it's better margin if a lot of its next generation. But anyway, is there anything pricing pressure?

Carlos Lopez-Abadia -- Chief Executive Officer

Yeah. Your assumption or hypothesis is correct. It's -- I'm trying to answer what is the question behind the question, but the question -- if I answer the question, is absolutely, yes. Part of the reason is we've done a lot of work since last year, as you know, to focus both the type of business and the segments that we target. And also, we put a lot of emphasis on not only what we sell, but the quality of what we sell. And part of that, obviously, one of the metrics is contribution margin of the new business that we get.

Another -- some other criteria are -- or is the nature of the business. Is it more -- it's a type of declining business or it's the type of services and business that we see three, five, 10 years of potential. So we put a lot of emphasis on the quality. So yes, on average, we get the higher contribution margin on all the new business that we're getting.

So pricing pressure, from that perspective, no, we have not seen a lot of pricing pressures. Part of it probably is because we are focusing on different segments of the market and different types of services.

Vincent Colicchio -- Barrington Research -- Analyst

Okay. And then in the second half of the year, do you expect to discontinue any additional Telefonica programs?

Carlos Lopez-Abadia -- Chief Executive Officer

The strict -- I think let me try to answer the question behind that question as well. As you know and as I made in my prepared remarks, we disclosed last year, in the second half of last year, that we were discontinuing a number of contracts, not only with Telefonica, but in other areas as well. Telefonica was a big chunky piece of that. Contracts that were not giving us the performance that we needed. And as a result, we have negotiated with the clients to exit. So a good chunk of that was Telefonica, right?

Do we expect something of that significance? No. Do we examine constantly the performance of our contracts, our lines of business, etc.? We do. So right now, we are in business as usual. Every month, we review performance of clients, contracts, line of business, etc. And we will discontinue those that in the short or long term that we don't see as performing. But there isn't anything meaningful in the horizon now. It's just business as usual. It's just a good practice all the time, keep on looking at your business to improve it.

Vincent Colicchio -- Barrington Research -- Analyst

Thank you. I will go back in the queue.

Carlos Lopez-Abadia -- Chief Executive Officer

Okay. Shay, do we have any more questions?

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Yes, we do. I am waiting to see if we have [Indecipherable] webcast.

Operator

Shay, we have a question via audio conference from Vitor Tomita, Goldman Sachs.

Carlos Lopez-Abadia -- Chief Executive Officer

Very good.

Vitor Tomita -- Goldman Sachs -- Analyst

Hello. Good morning, everyone. So thank you for your time. And Apologies if my question was already answered, but I had some audio issues during the intro portion of the call. So our question is if you would be able to provide some more detail on the performance in Americas, but especially in U.S. Multisector where according to the earnings release, there was significant growth. And was that related to a specific contract, if you could give us some more color on that? Thank you.

Carlos Lopez-Abadia -- Chief Executive Officer

Sure, sure, Vitor. And I hope this time, the audio problems were not on my side. I understand last time was -- my audio was horrendous. I could hear everybody well, but apparently, nobody could hear me.

So happy to address that. We're very happy with the performance of the U.S. As you probably know, we don't have -- we have not focused on the U.S. historically in this company. And I announced to you guys that from a geographical perspective, one of the markets where we're going to start putting some focus was and is the U.S. I'm happy to tell you that we've grown since then, since the beginning of last year at 50% level, including last quarter. So it's not just last quarter, but we have a relatively small footprint. Very good margins. And quite frankly, the right type of mix of sectors that we're interested in and the services. So from that perspective, this is one of the bright spots.

You asked about Multisector. The U.S. is essentially Multisector. We don't have much of Telefonica business. As you know, for us, Multisector is non-Telefonica. We don't have much of Telefonica business there. It's all Multisector. So I'm very happy with the results there, not only on the growth, but the quality and the direction of the business in the U.S.

Vitor Tomita -- Goldman Sachs -- Analyst

Very clear. Thank you very much.

Carlos Lopez-Abadia -- Chief Executive Officer

Thanks, Victor.

Operator

Our next question comes from Til Nowitz [Phonetic], shareholder.

Til Nowitz -- Shareholder

Hello. Thanks for taking my question. First one relates to what you just said about refinancing. Has there anything been done apart from the investor calls? So what's the latest here on the progress? And then on your cash flow statement, there was a repayment. I wonder if that was due to discontinued business. So your operating cash flow went from I think $41 million [Phonetic] as reported previously for 2Q '19 to $26.5 million. If you could shed some light on that, please.

Carlos Lopez-Abadia -- Chief Executive Officer

Okay. I'm going to defer to my colleagues, particularly Jose and Shay, but let me answer at the high level the -- your first question. We are planning the refinancing. We -- as I mentioned briefly in my remarks, we are -- quite frankly, I'm very satisfied to tell you that we're working with our new shareholders and Board members hand-in-hand, Jose and Shay, working with them on that refinancing and we are quite advanced on the planning. But I'm going to let them to tell you the specifics since they can tell you first hand, and I will be telling you a hearsay. So Jose and Shay?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Thank you, Carlos. About the refinancing, I will let Shay talk about it. He is the -- our leader in our project from refinancing. But the cash flow, I have a pleasure to talk about it.

In a simple way to explain, what we have done was we concentrate a lot to recover our cash flow. And we have an opportunity. It means we have some overdues from the last two years, we can say, from 2018 and 2019, that we can recover as part of it. And in terms of working capital, we improved a lot. Even that we start some programs like we have restructuring the procurement department that allow us to renegotiate all contracts, and with that, we increased our DPO.

In terms of DSO, we have efforts to, not only the overdue that we have of course, help us a lot with. But we're still ongoing. Up to now, I can tell you what will happening is we implement the finance shared service center that's allowed us to control up to date. To give an idea, we control today our accounts receivable day by day. I received the reports, we discuss that and so on. But the focus is actually be updated in order that we can financing our growth and warranty liquidity.

Carlos Lopez-Abadia -- Chief Executive Officer

Okay, Shay, the rest of the --

Shay Chor -- Corporate Treasurer and Investor Relations Director.

And just to complement, Til, on your question, we are already engaging with banks. And just for the benefit of all, everybody here, not only Til, we've got six questions on the webcast about the debt refinancing, so it's a very hot topic.

As you know, Til, we did a non-deal roadshow in early July. The idea was to collect feedback from you, investors, as we've been discussing to do it in the best way, friendly way. This is a negotiation, and there's no will from our side to put anybody against the wall. So also it should be a negotiation in good terms for both companies, shareholders and the bondholders.

We have engaged the banks. Ideally, we'll be ready for the next window. Let's see how September comes post the Labor Day, but the idea is to be ready for the next window. We have -- the questions we have are more on the cost side and structure what our intentions. So again, it will depend on market conditions. But the idea is that it should be friendly negotiation for both sides and good -- and generate value for all the stakeholders of the company.

I'll -- let me take advantage that I have -- sorry, Til, do you have any follow-up questions? Sorry about that.

Til Nowitz -- Shareholder

Not on that topic, but perhaps on your guidance. Can you give any indication, because you have provided ranges as well, if you see yourselves at the top or the bottom of the guidance you gave for the year and if there is some potential for overshooting or undershooting?

Carlos Lopez-Abadia -- Chief Executive Officer

Yes. Just to be clear, we're not going to provide a formal guidance. Hopefully, you got the message from my remarks, Jose's remarks that we feel that -- we feel confident that the worst of the crisis is behind us. We feel very confident in terms of our ability to handle the -- whatever comes in the next few months of the crisis. We also see very good signs in the pipeline, in sales, in the market, in general, that -- and the recovery of volumes from customers, including Telefonica, that makes us feel optimistic about the second half of the year. But in a year that we're all living is very unique year, probably with our President. It's definitely, in my career, possible in anybody's career, it's -- I think it will be imprudent to provide a formal guidance beyond what we share with you.

Til Nowitz -- Shareholder

All right. Thank you.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

So I have a question here on the webcast. This is addressed to Jose. I see that you were able to continue declining and improving DSO. Do you expect any continued improvement, any big tickets? How do you see DSO going forward?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

The DSO depends on -- honestly, the big contracts, everybody knows that it's not so easy to negotiate the DSO. But in terms of Multisector business, that we improve a lot now. We have some opportunities. And our expectation is to reduce a bit more. It's not possible to say that I can reduce 20 days or something like that, it's impossible. But our intention is to target about 10 days. It means we have already achieved four days. We expect it to improve more six days. I think that is a reasonable level to operate.

In terms of DPO, only to accomplish, we expect it to improve more three, four days, too. It means we can have very -- a good position in terms of working capital. And we talk about between $25 million to $30 million more only with these adjustments. But as Carlos mentioned, we don't know exactly how it's going with the pandemic with this and everybody. The first request, as we have done, is pay later as you can. That is for everybody, not only for us. But our expectation is to -- going forward, it means next year, '21, with a better -- we can have a better working capital. More some days, not a lot, but something.

Carlos Lopez-Abadia -- Chief Executive Officer

Yeah. Just to complement that, Jose has been modest with -- we've introduced a DSO policy for any new contract of 60 days or less, and any deviation from that requires Jose's approval, which I know is very hard to get. Having said that, in the short term -- we're in the middle of a crisis in which some of our customers have problems. And within reason, we try to be good partners with our partners with our customers' partners, etc. So we -- as you can see, we've reduced DSO as well. But I think as the situation normalizes, I think we can probably continue improving. But right now, we try to be reasonable with our partners and customers.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. There's a question here on the webcast about -- so, congratulations on the excellent quarter. Given the circumstances and the strong full year we see for, I was encouraged to see some share buybacks in the quarter. Will you continue to pursue the buyback, given liquidity position, extremely low valuation?

Carlos Lopez-Abadia -- Chief Executive Officer

Good question. It seems like it's always is a question about the stock buybacks in every call. Look, my point of view has not changed from the beginning. I think stock buyback is a good instrument to return value to shareholders. So we will continue using that sparingly. Having said that, our number one priority is obviously, and particularly during the crisis, has been, although it seems like it was -- it's behind us. But it was not that long ago when we were very prudent with liquidity. Let's put it that way. We feel much more comfortable now, as we've described in terms of liquidity, but that's obviously number one priority.

Number two priority is the investments required to grow the company and continue the transformation plan. And then obviously, we -- I mean, the company exists [Phonetic] and we are hired to provide returns to the shareholders. So the -- clearly, the share buyback is an instrument to -- sometimes the most efficient instrument to return value to the shareholders. So we'll continue to use that. But being very clear of the priority one, the continuance of the business, and priority two, the growth of business.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay, next one here: thank you for clarifying the EBITDA impact on the pandemic. Most investors would view this as a one-off event. As such, it was really encouraging the focus on the fixed cost base of the business going into '21. Given all these cost saves you have implemented, where do you anticipate 2020 EBITDA will be relative to 2019? And should we expect this 14% recurring -- or run rate, sorry, EBITDA that you published going forward?

Carlos Lopez-Abadia -- Chief Executive Officer

I'm going to let Jose give -- amplify on the answer. But I would like to highlight that for us, some of the -- of these one-off costs, if you will, and certainly, we expect that we don't have a pandemic of this magnitude in the near future, although you can never say never. But clearly, we would expect it to be a one-off of cost.

Having said that, some of these one-off costs are -- they will be significant investments. And let me explain what I mean by that. For example, some of the investments that we made in work at home, we're deploying a permanent platform for the work at home with additional capabilities and functionality that, in some cases, we don't have in the work from the centers. That is going to be, on a going-forward basis, a part of our product mix. So there's a silver lining, if you will, in the one-off costs.

Clearly, some of the one-off costs are one-off and they're gone [Phonetic], things that are related to -- very specifically to health, safety, etc., in the centers and so on and so forth. But some, like the work at home, are true investments. We can, and we believe that we'll be able to -- out of the flexibility that the work at home will give us -- to get efficiencies on the going-forward basis. That will be a great upside. We also believe that the work at home give us a lot of flexibility, not just cost efficiencies, but a lot of flexibility in terms of hiring different skill sets from wider areas, etc. We also can offer additional capabilities to customers. So we expect in the long term to give us a number of advantages, not just potential cost savings. So, some are really one-offs. Some of the one-offs are interesting -- can open interesting possibilities and efficiencies.

Jose, you want to comment?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Yeah. No, very, very quickly, Carlos. The most important thing for us is to maintain an equilibrium between growth and costs. That is what we want to do. In terms of costs, when we talk about the $80 million that we found in terms of opportunities, we have about $50 million in structural costs. That's -- we believe that will be ongoing. It means that it's like a rightsizing that we have done even though we increased the revenue. And I tell you, the relationship between both is, we can grow more or less 15% in terms of revenue and maintain the same cost structure that we -- the new cost structure that we have.

And costs, I talked to Carlos once, that it's like nails we cut every month. But we cannot cut without intelligence, because if we look for our capex in the last years and we compare against the peers, we see that we -- we can see that we have invested 50% that they have invested. And that makes us a difference in terms of digital and what do we want to do in terms of new product and so on. And that is what we want to maintain, is the equilibrium.

The main thing here, and that is the math that we do every day is, first of all, to maintain the margins. That is very important. Maintain an increase, of course, and that is our expectation ongoing. But we cannot simple sit here, we cut, cut, cut, and we stay in the same level in terms of products and so on. The main thing is exactly that, is to increase profitability. That is what we want, and that is what we will do ongoing.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. We have more questions on cash flow. I'll try to summarize and bundle them for Jose. Questions are related to, how sustainable is this cash flow? I see that there are some one-offs coming from the improved DSO and from the improved DPO. How much of this will become a cash burn in the second half if you have delayed some payments? And what are the risks of receivables increasing if your clients get into financial trouble? How do you see this trend?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Yeah. So the first one, our cash flow ongoing, the strategy was more -- what we have done is, we want to warranty the liquidity, first of all, and that is why we work a lot to recover. In the meantime, we'll start to improve the EBITDA in the second semester. And with that, we will have an equilibrium.

In terms of ongoing free cash flow, our intention is to have between $30 million to $40 million in the next year. This year, we have some commitments to achieve like we have postponed some payments and taxes. It's not a lot, but I can tell you, about $25 million, that we have postponed. But we have postponed in a way that we can end the year with a very, very healthy cash flow. That is what we have done. And we extend a bit to the next year, but it is to gain some time to recover the EBITDA. As we will recover the EBITDA, we are very, very comfortable with the cash flow.

As I mentioned, we implemented a lot of controls. We are up to date. Of course, we have some risks in terms of some clients. But in our case, I can give you some insight on that. We have maybe two or three clients that they are not able to pay us. And we're talking about $1.5 million to $3 million. We haven't lost that. But we have already included in the bad debt. But in fact, we are very, very close to our clients. In some of them, we can anticipate some revenue. We can -- we work very well on that and very close to our clients. That is why we -- I can tell, we are very comfortable with, and we are very close to our clients, and the risk is minimum. If you compare our bad debt risk against our revenue, it's very, very low. We talk about 1%. I mean, it's very low.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. Carlos, a question for you on the new shareholders and the relationship, basically to provide a overall view on how things are going, how the dynamics have been and how do you see there are plans for the next two years, given that they have a lockup around this period.

Carlos Lopez-Abadia -- Chief Executive Officer

Very good. So far, very good. And I have to tell you that sometimes when I get this question, I think the implicit is -- the implicit assumption can be that we sort of met recently. The reality is some of us, particularly you and I, Shay -- Shay and I have been interacting with the shareholders for over a year. So they're not unknown to us. When we communicated to all of you that the shareholders supported the strategy of the company and the management team, it was not done in one meeting. It was done over a year of getting to know each other. So, there is no particular new news for some of us. The Board is -- has a new composition. So, like any collection of human beings, we need to get to know each other. And not everybody knows everybody in person. Now we know everybody on video conference. So I'm looking forward to our first dinner and happy hour together. So from that perspective, I'm looking forward to that upside.

But from the perspective of the support of the shareholders working with us, it's fantastic. It's been there before they joined officially. And as I mentioned, right now, the first -- very specific, very specific and very important for us, a project that we're working very closely with the shareholders is in the refinancing. So I'm very happy, I'm very pleased.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. Two questions for Jose on the cost savings. First of all, very impressive cost savings. How much do you expect -- or are there any specific one-off costs such as severance to deliver that $80 million cost savings you are foreseeing for 2021?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

No. What we -- I wanted to be clear, the severances that we have done or we have paid will not include in our cost savings program, to be clear. We have some dismissals [Phonetic] that we have done already in terms -- and I speak about WAHA [Phonetic]. Hence, we include the cost inside WAHA. We do not put on the site on the $80 million program. That is what we have done. And that's -- the reason is to be conservative on that. Because the WAHA -- if we increase the revenue in the future, some of these costs, for example, people cost, will come back because we need to operate [Technical Issues]. That is why we were very, very clear on that, and we separate the WAHA programs.

In terms of rightsizing in the company, we start the project, the zero-based budgeting. That we have done the Phase 1 because the COVID is coming, and we anticipate some work on that. But in fact, we work in the ZBB for 2021 budget. And of course, we expect it to have some adjustments, like we have, for example, in finance area, we expect it to extend to another areas, but it will be nothing so big because almost of the opportunities we have implemented, and we expect to implement the other amounts that we have, and we talk about $34 million in the H2. It means ongoing for 2021. And as I mentioned, we'll have about $50 million in terms of cost reductions. Maybe we have some opportunities with some improvements in terms of implementing the zero-based budgeting. But I don't see a high relevance on that. The big improvement for us will be in terms of revenues. We still improve operational excellence, we still implement and so on. Maybe we have some efforts on that. But in fact, in terms of costs, ongoing, it will be more or less $50 million.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. And two additional questions actually here is a mix for Carlos and Jose on cost savings, but related to WAHA. Carlos, can you tell us about what's the level of WAHA? Because you have around 60% now of your agents working from home, what is the expected level post crisis? And then to Jose, how much you expect to save in costs such as leasing and power utilities and other costs by implementing a permanent WAHA model.

Carlos Lopez-Abadia -- Chief Executive Officer

So, with a 60% now, we could increase that. Right now, 60% gives us a very good mix between the people we have at home and also low density in the centers that also give us that flexibility. What I mean by low density, I mean low density of people. Particularly in the current pandemic, it's very important to maintain, as you know, safe distances. Also, we do a lot of monitoring of employees and all kind of health and safety measures. So it's a good mix. We feel it's a good mix right now. We could increase it. It's not that complicated for us. Also, some of our customers have specific needs, particularly in the area, particularly in some of the finance sector applications that security and other considerations require to do it from a secure location in the center. And interestingly enough, we found out that more cases than I would have thought. Our employees have requested actually to work from the center. So we're trying to balance all the needs of the business, our employees and our customers. So, we feel it's a good mix right now.

Going forward, well, that's going to depend on a couple of factors, as I said earlier. After the crisis, we -- I expect a number of sectors, particularly those customers that have started with us during this crisis -- I mentioned I had in the slides that 80% of the business that we have taken on had been fully, fully digital onboarding. What I mean is being completely at home, completely online, completely digital, recruiting, training, onboarding, deployment and management. So I expect that quite a number of the new customers that have started in this model will continue on that.

I expect that some of the customers that are now on an at-home model may return partially for a variety of reasons. But one of them, very important, is the force of habit, what is more comfortable for us. So although it's difficult to predict the level that we have in -- at the end of the pandemic, whenever that is, I would expect to be north of 20%. And I expect also that percentage to increase over time. That's midterm. Why? Because the at-home model provides a lot of value to all parties involved, employees, customers and Atento. But those numbers obviously are my crystal ball. It's very difficult to see what the trend -- sorry, the trend is easy to see. The trend is to increase. But it's very difficult to see what the specific number would be next year or the year after.

What was the other part of the question, Shay?

Shay Chor -- Corporate Treasurer and Investor Relations Director.

It was on the -- what cost savings we expect from this permanent WAHA model in terms of leases and power utilities or fixed costs that are related to the sites.

Carlos Lopez-Abadia -- Chief Executive Officer

Yeah. I'm going to let Jose comment on that. But we are looking -- we have different models, again, difficult to predict exactly, but we have already earmarked a number of centers, areas where if we get additional flexibility, we could consolidate. And the number -- we're trying to be very conservative. The number is in the low double-digit number of centers. But it's a bit premature to know. As I mentioned to you, it depends on the uptake that the services have post crisis and the regulatory environment that we get in the different countries. If that comes to pass, it would be a very good upside to our forecast and the numbers that we've been sharing with you. Jose?

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Yes. Only two to accomplish, we separate in two. The variable costs, we have already, in the first model of the new WAHA, if you can say it, we have savings we expect between 2% and 3% in terms of variable costs. In terms of fixed costs like rentals, for example, if we can close all centers, we will save between $55 million and $60 million per year [Phonetic]. That is what we can do. But of course, we know we cannot do that. We cannot close 100% of the centers. And when -- we cannot give a date for that because we're still fully using the centers -- because of the pandemic, we have to use all of them. We have to respect distances and so on. And what we see is in the next 12 months, it's very hard to close a big amount of centers. But the fact is that variable costs between 2% and 3% in the first step. And the reason is, as you know, in the center, we have, for example, one computer, we can operate with three agents more or less. If we have them at home, we need three desktops or three laptops. That is why we have an equilibrium on that. It's not a simple cutting, and that's it. And the variable, as I mentioned, depends a lot always going first with the pandemic; and second, which clients allow us to work from home. As Carlos mentioned, we have some clients, for example, banks and so on, it's not so easy. We have a lot of challenges to operate, for example, in Brazil, cybersecurity and so on. We have a lot of things that we still study on. But to resume is, we know that is -- a cheaper model can give us a better margin in the future. The question is timing. We have to still work on it, very hard on it in terms of pricing and so on. And we expect to give you more guidance on that in the next quarters.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. Carlos, we have three questions about Telefonica. The drop in revenues based on the programs that you decided to discontinue, should we continue expecting this to happen? You mentioned potentially renegotiating the MSA. Do you -- can you elaborate on any expected changes and impacts? And finally, how do you see the relationship with Telefonica, assuming some news that we read in the past that Telefonica would be willing to divest from its Latin America business.

Carlos Lopez-Abadia -- Chief Executive Officer

Well, let me start with the last first. The relationship with Telefonica is very good, and we expect it to continue to be very good. In terms of the volumes, as you mentioned -- I mentioned and you reflected back, the -- we chose to discontinue some businesses last year. I don't see -- as I also mentioned earlier, I don't see anything significant in the future. I think we have a very good understanding of Telefonica of what -- our perspective on the business and as of our client in Telefonica. So from that perspective, the conversation we've had with Telefonica after the -- as we both, or everybody is coming out of the worst part of the crisis, is on additional lines of business, [Indecipherable] additional lines of business with Telefonica. Too early to disclose anything or to see where that is going to go, and also, too early to give you any specifics about any potential extension of the MSA other than we are discussing those possibilities. But quite frankly, those are more the reflection of a relationship. By the way, we are -- we continue to grow as a percentage of Telefonica's share of wallet. Today, we are higher than a couple of years ago, which is a reflection of what I said at the beginning, a very good relationship that my expectation is that will last way beyond the any MSA or any contract. I fully believe that the relationship is based -- it may be reflected in a contract, but it's based on providing value to your partners, and that's what we strive to do with every customer. And obviously, with Telefonica being one of our most important customers.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Okay. And I have a final question here, which I'll take myself on the refinancing. Asking if our goal is extending the maturity or going for a cheaper cost? And again, what structure are you looking at?

We have not decided yet what is the structure and what is the right way to go. Again, it will depend a lot on market conditions. What I can tell you is that the main objective at this point is to extend the maturity. This is very important to us, so we can gain time in order to continue improving our capital structure. And the final goal is always aiming at unlocking value for the shareholders. Obviously, there is a cost to refinance the debt. But in no way, the company will go into increasing a lot the financial expenses. Again, it should be something that -- should add value to both the bondholders, the company and the shareholders. So it has to be done in a balanced way between extending the maturity at what cost.

We have no further questions on the webcast. I'll turn it back to the operator to see if we have additional questions on the line. Paula, any further questions on the line? I'm assuming no. So Carlos, I'll turn back to you for your final remarks.

Carlos Lopez-Abadia -- Chief Executive Officer

Only to thank everyone. This has been quite a first half of the year for all of us, not only for us in Atento but for everyone. We are very happy in the trajectory. And as I mentioned to all of you, we feel that the worst is behind us. But clearly, we still have a lot of work ahead of us. I want to thank you guys for being here today. I want to wish everyone the best, and I want to take the opportunity to thank my whole Atento team in what has been pulling out a very difficult and -- a very difficult set of circumstances in the countries where we operate, a very good result, keeping our employees safe, the business operating and continuing the transformation of Atento. So thank you to the whole team, and thank you to you guys, ladies and gentlemen, for being here today and your very thoughtful questions. Thanks a lot.

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Thank you, all. Bye.

Duration: 65 minutes

Call participants:

Carlos Lopez-Abadia -- Chief Executive Officer

Jose Antonio de Souza Azevedo -- Chief Financial Officer

Shay Chor -- Corporate Treasurer and Investor Relations Director.

Vincent Colicchio -- Barrington Research -- Analyst

Vitor Tomita -- Goldman Sachs -- Analyst

Til Nowitz -- Shareholder

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