Q1 2020 Earnings Call
We'll 19, Oh look for 2020 and statements regarding the company's strategies plans intentions future operations unexpected financial performance.
Actual results performance and achievements could differ materially from those expressed or implied due to a variety of risks uncertainties or other factors, including those described in the company's earnings release issued earlier this afternoon.
Which is incorporated by reference for purposes of this call in available on the S.P. plus website and the risk factors in the company's annual report on foreign 10, K. in quarterly reports on foreign tank Q. and other filings with the S.C.C.
In addition management, we'll discuss non non gap financial information during the call.
Management believes the presentation of non gap results provides investors with useful supplemental information concerning the company's ongoing operations and is and isn't appropriate way to evaluate the company's performance.
They are provided for informational purposes, only a full reconciliation of non gap financial measures to comparable gap financial measures were presented in the tables accompanying the earnings release to the extent other non gap financial measures are disclosed on a call reconciliations to the comparable gap measure <unk>.
Posted under the regulation G. tab in the Investor Relations section of the S.P. plus website.
Please note this call is being broadcast live over the Internet and is being recorded a replay will be available on the S.P. plus website. Shortly after the end as a call and will be available for 30 days from today I will now trying to call over the Mark bombing, our Chief Executive Officer.
Thank you, Chris and thank you for joining us today, everyone for our first quarter 2020 results and to discuss our current business conditions. We entered 2020 with significant positive momentum and in January and February we were trekking ahead of our plan. This performance reflected contracts one last year, it's part of our cross selling.
Activities as well as strategies that we have implemented to prioritize keyboard calls in national accounts.
But in the middle of March However, the covert 19 pandemic began to significantly impact travel and general business activity.
Dates responded to the Red <unk>.
Virus with broad stayed home mandates this brings us to the impact of covert 19 in our business and the actions we've taken to address these unprecedented times.
First and foremost the health and safety of our employees has been our primary concern to that and we implemented safety protocols consistent with C.D.C. recommendations, including strict guidelines for keeping facilities clean clear instruction on social distancing access to virus related information educated employees.
On the need for anyone infected to remain in isolation and just shift to work from home for those functions that can work remotely.
Well shelter and place orders in place across much of the U.S. in Canada and demand for our services down dramatically, we continue to support our clients needs, while ensuring adequate liquidity and preserving financial flexibility.
I think it's worthwhile to spend a little time going over the differing impact coping 19 has on us they send our various contractual operating arrangements.
Easiest to understand is or at least arrangements hundred easy green.
Oh, the revenues from the operation and are responsible for operating costs, including payroll and rent rent can be structured is fixed variable or a combination of both.
Both.
This type of contract as revenues decrease gross profit will decrease unless we're able to reduce costs. Accordingly, we have about 625 leases primarily in the commercial division.
Management type contracts have more structural their ability to variability, but generally speaking the client pays S.P. plus the management fee to provide services. The management fee can be a fixed amount per month, a percentage other facilities revenue or operating profit and hourly rate rate per transaction or a combination.
The above.
Out an incentive fee.
The way it additional complexity the operating costs, we are responsible for under our management contracts also vary depending on the contractual arrangement in most cases operating costs, including payroll or pass throughs to the client, but in some cases S.P. plus is responsible for certain operating costs in these situations the <unk>.
Stability of a contract is dependent on how effectively S.P. plus can manage those costs.
A large portion of our gross profit is generated from management type contracts and those have historically provided us some measure of protection and an economic downturn.
Where the management fee is a fixed amount the level of business activity does not generally impact to feed it S.P. plus arms. So long as a facility remains operational S.P. plus should continue to earn it's management fee.
Other management fee arrangements, we have some exposure to revenue or volume reduction so for a long period or reduce business activity could have a negative impact on our management contract business.
Now, let me speak about some of the steps we've taken to maintain our financial flexibility, while we address the current situation and remain ready to ramp up quickly as restrictions are lifted in business activity resumes.
At our front Lane operations, we were able to react quickly to reduce our payroll costs generally the largest operating expense line as the level of activity either revenues collected or transaction volumes began to decline given our concentration of management type contractual operating arrangements much of the payroll costs is reimbursed.
By our clients. So our actions had to take into consideration their desires and objectives. Some clients decided to maintain staffing levels and take a weight in c. approach, while others wanted to immediately touch staffing to minimum levels to put in perspective. The actions we've taken paid hours for hourly workforce, we're down approximately.
63% for the most recent pay period as compared to a pre pandemic baseline.
We continue to work very closely with our clients to accommodate their needs. While also being prepared to quickly respond once business activities touch the rent backed up.
We also and acted cost reductions in the support functions as it became clear that our top line gross profit was going to be impacted or a more sustained period of time. These actions included outright for lows reduced hours and cheered pay reductions across our salaries workforce. We've also significantly curtails discretionary spending.
As a result of these actions we've already taken out approximately $3 million in monthly G.N.A. costs, which won't be fully reflected in our results until may and we're looking for ways to further reduce our G.N.A. cost.
Cut back our capital expenditures and our authorizing only essential investments such as technology investments that will help set us apart from our competitors.
Finally to preserve capital, we suspend it our stock repurchases and worked with our existing Leonard group upsides, our revolving credit facility like $45 million.
As of yesterday, we had cash plus availability under that facility of over $200 million.
We believe the actions we've taken give us a substantial financial flexibility to manage to do crisis. We believe that we have ample liquidity and we'll be able to access additional sources up capital shouldn't eat arise.
Even the uncertainty as to the timing of a recovery, we withdrawn or 2020 guidance, but we do know is that things will be different in a post kobe environment, but we're not able to projected pasted recovery for the broader economy and traveling leisure and particularly.
When we emerged from this crisis, we see a new normal with S.P. plus back to the position of strength. We were in at the start of the year and building out our position is a market leader and mobility management. It's part of moving forward, we have not cut back our technology investments as we believe tools to facilitate remote management online capabilities and other.
Touch free technologies will be critical for a meeting changing consumer preferences and demands.
Our aviation clients will be among the most impacted by this pandemic and their pass to recovery is likely to be a very long one.
It is more important than ever that we work together to find creative and more cost effective outsourcing options for them.
All of our clients, we're leaning away to help them reopen for business with documented operating protocols that prioritized physical distancing employees safety measures in screenings enhance sanitizing practices reduce touch points ineffective signage.
We're also focusing on marketing plans to attract Parker's they previously used mass transit and alternative modes of transportation, but may now choose to drive themselves and park near their workplace due to safety concerns.
We have begun sharing these plans with our clients and they've been very well received we've also been receiving inbound calls from potential clients were considering his shift to better capitalised companies like S.P., plus who can help them face the challenges ahead.
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I'll take you to our first quarter financial results.
Thank you Mark.
Park when discussing the first quarter results, we will focus our comments today on adjusted results.
Can find a full reconciliation of all nine gap measures to the nearest gap measures in the tables accompanied today's earnings really.
First quarter 2020, adjusted gross profit declined by five and a half million or 10% year over year to 47.7 Diane.
As a slowdown in business in light of the cover 19 crisis, starting in the second half March 2020.
Are adjusted results for the first quarter of 2020 exclude 400000 for severance costs related to head count reductions in response to cover 19, as well as a 77 and a half million noncash lease impairment charge.
He's also be required changing lease accounting <unk> that we adopted on January 120, 19, we are required to evaluate our least assets for impairment on a periodic basis to determine whether events or circumstances indicates that the carrying value of the asset may not be recoverable, the least impairment charge taken into.
First quarter of 2020 reflects the expected impact of Covin 19 on or at least is with the majority of the impairment related to our leases in our New York market.
It is not related to any acquisition or purchase a rather relates to a facility lease arrangements, we have entered into overtime.
While we quickly took action to reduce our costs structure and strengthen our financial position the tangible benefit from most of these actions will not be reflected in our results until April and not fully until may.
Nonetheless are adjusted G.N.A. for the first quarter of 2020, which still down 6 million or 23% compared to the first quarter of last year.
Rarely do to lower cruelest for our 2020 performance based compensation program and long term incentive programs, which combined are down 4.9 million year over year.
We expect both of these programs will be substantially impacted by covert 19.
Adjusted D.P.S. increase 7% from the year ago quarter to 20 to 64 cents the lower share account, resulting from 2020 stock repurchases added a penny to first quarter adjusted D.P.S.
For the March quarter, which is historically, our lowest free cash flow corner, we generated 2.8 million a free cash flow compared to a negative free cash flow of 10.6 million in a year ago quarter, a year on year improvement of 13.4 million, primarily due to working capital improvements.
Looking ahead it is hard to predict the duration of this pandemic <unk> and the possibility of a second ways and what that might mean for additional shelter and place mandates. Although visibility is challenging as mark discussed we have already strategically take an actions to improve our financial position.
Based on what we know today, we expect the greatest impact of this pandemic related crisis on our business to be felt in the second quarter with progressive improvement from that low point during the second half the year.
Further actions, maybe warranted down the line.
Well, we believe that we have the liquidity and financial flexibility to manage to this crisis and emerge on the other side a leaner more efficient version of ourselves.
When that I'll turn the call back over to Mark.
Thanks, Chris as we think about the future of S.P. plus we remain optimistic of course the climate today is challenging but there are signs of progress, it's governors announced plans to restart their state and local economies, while we expect that it will take some time for travel to return to prior levels, particularly with the potential for a recession.
And we like the opportunity sat in front of US 'cause I mentioned, we're already seeing inbound activity and think we will be better positioned as an industry leader to respond to new business opportunities. We also see new opportunities to start clients as they acclimate to the new normal we're maintaining physical distancing having clear sign.
Emphasizing cleanliness and enabling con tax free transactions will be important factors for consumers. This is where the technologies. We are building out including parking dot com insights L.A. and remote management make us more relevant in the post covert environment and improve our overall value proposition to our clients now more.
Than ever we're pleased with our focus on national accounts in health care as well as a potential from hospitality travel returns to more normalize patterns and partners such as ourselves are evaluated for how effectively they handled the pause in the interim will continue to help clients find ways to manage their operations at a time with profitability is key.
And every dollar counts.
We believe we will move up the value chain and continue to increase an important and we stand ready to return to full force as soon as our clients are ready.
And a final note I want to think our employees for working for the good of our company our clients in our customers. During this challenging time, we would not be where we are right now without their continued dedication and commitment.
Christy all now like to open the call up for question.
Yes, I would like to remind everyone. If you would like to ask that question. Please press start any number one on your telephone keypad.
Are you a question price to pound key you stand by by the compiled the Q. and a roster.
Hi, first question custom Daniel more away C.G. and securities.
Mark Christian good afternoon, thanks for the color and asking the questions.
I don't know.
Maybe start with G.N.A. you get so you've already taken some pretty significant costs medication that steps obviously, the the 20.2 million adjusted for Q1, how much of the 3 million monthly additional costs saved it was embedded in there are just trying to get a sense for.
You know what was once we get to May what a reasonable monthly or quarterly G.N.A. Runrate would look like.
Yeah, Yeah, Dan has crashed I think as you look at March.
And kind of how <unk> kind of came through March yeah, we started to get a little bit of this in terms of what this might I mean to the business probably in the mid part of March and so we reacted quickly and started to pull the lever. So we thought were prudent what I would say is that there's probably a little.
If any savings kind of sitting in the March March month I'm. The one thing I would say is that we and we mentioned this in the in the opening remarks that there is some reversals as it relates to the P.D.C. and the and the L. tip programs that didn't go through and the March time frame, which is.
Packs before quarter, which I think we qualified to be about 4.2 4.2 million.
Okay. So that that 20.2 includes 4.2 million benefit of those reversals.
I'm, sorry, yeah, and it was up for 4.9 million and now that really relates to kind of a fully or impact. So that also relates to current year programs for the <unk>, but also prior period.
Reversals <unk>. The these programs have kind of a three year cycle to them. So there's two years of of expenses that we would have accrued kind of through the year round of 2019, and then the additional corridor here in the in the in the first quarter of that we fully reversed in.
And Mark.
Alright, I I'd just too I.
Speeded dead horse, but just to to try and get a everybody in the same page eight when we get some may what sort of monthly kind of normalize run rate for G.N.A. would be be looking at <unk>. The you know the additional.
<unk> cost reduction activities you've announced.
Yeah, I think I think we'll be right around the you know 6 million Mark in terms of kind of full month G.N.A.
Perfect Okay.
Any sense store the level of gross profit decline year over year experienced in April or Enough's far you know kinda quarter to date and q. to any color it'd be willing to share their.
Not yet and we don't we have a closed April yet. So you know one of the we're in the process of beginning that now so I would expect that it will be fairly substantial you know I think we're expecting you know cause puppet you know to be at a very very low level in the second floor.
Understood [noise] and interim third grade Gray color Mark in terms of you know the the various.
Types contracts just in terms of management within that bucket any sense at the mix of kind of fixed fee versus variable.
I think within our management portfolio roughly half of the contracts are fixed the contracts and then the other half are the sort of a wide variety of revenue share feels a man hour deals reverse management deals. The various types that we've talked about in that we can't elude too you know and our.
Descriptions in our public filing so those are the ones that are very hard to modeling predicts because that the performance of individual contracts of course depends on not only what we do but what our clients ask us to do and you know I I don't think we bought it out in the prepared remarks, but we're currently operating it about 85% of our commercial locations.
Unfortunately, all of our airports so while the level of activity is very low you know very few of our clients have opted to actually shut down their operations at least at this point.
Perfect. That's helpful. Lastly, eat you know, they're obviously will be some some opportunities coming out of this can you elaborate on.
You know maybe some examples of opportunities to share gain share coming out prior recessions or some of the dialogues that that you may be having as a result of this thank you again for the color.
Sure sure glad to do it then well I think you know the most important thing that we've pointed out in our prepared remarks, and I want to build on that a little bit is that we've not curtailed any of our investments in technology and we talked for a long time about the fact that we believe that as a key to our success. Both in the current period and also in the future is.
Offering up differentiated technology to solve problems for our clients and to offer technological solutions that other people can't do and so is we've talked before particularly about parking dot com and we're adding new functionality. In fact additional functionality is being beta tested right now and will be going live in the next couple that.
Weeks.
Really enables us to make parking dot com and more full functioning tool for people to find parking online and pay for parking one of the limits that parking dot com had before is that every time you want to use it you had to come in as a guest and and set up your credentials all over again and that that's a huge impediment you know.
People wanting to use it to find you pay for parking where the the capabilities that are invaded tests now enable you to actually create your own permanent credentials you know that remain in the tool and that way, you'll you'll be incentivised I guess to come back time and time again, because you won't have to start over so those are the kind of things that we're doing.
And I think if you think about human behaviour, everybody is looking for ways to they don't want to touch anything they don't want to interact with other people and we're gonna have social distancing you know as part of our daily routines, probably for many months to come and I think it a lot of our technological solutions enable people to.
To do that and so we'll be able to bimonthly parking online and not have to come into an office will be able to you know conduct transactions that parking facilities, where the client has made the investment in the right technology there without touching anything we offer up not just low friction options for.
Clients, but also for the traveling public but also touchless solutions and I think in in the future environment that we have people are going to be more careful about what they're interacting with and of course over it bags.
Number the technologies that we've deployed whether it's remote management check in or that delayed it technologies that drive or delayed baggage delivery services actually can support social distancing programs and so our our bags payment then and ongoing contact now with with airlines in airports about.
What the new reality is going to look like and how can we use these technologies to enable people to not not be touching things to maintain social distances to check in at a curb as opposed to you know in a long queue inside the terminal no I think we recognize that air travel will have a slower curve of recovery.
And perhaps other parts of the economy, just given what happened in the recession in <unk> nine what happened after 911, but we have a very small market share in terms of some of their services that we provide and I think we're well positioned to try to capture a larger <unk> share because of our investments in technology.
Yeah, how Paul jump out scan q. with any follow ups. Thank you marking Chris.
Thanks.
Yeah next question comes from Tim Maloney.
This is my Mommy.
Hello.
Hello, Yeah.
Yeah can you hear me Mark.
We can now.
Okay, sorry, I don't know I don't know what happened cut out there. So you can hear me okay now.
Yep.
Hi.
Okay. Good afternoon, I, I guess I hadn't thought enough about a secular chef.
Away from mass transit and toward individuals driving more again I I. Appreciate your prepared remarks March yeah. How are you guys thinking about that secular shift internally and how are you positioning yourselves for the potential for.
An increase demand for parking spaces in a post cold whoa.
Well I think that we're already seeing some indications that people are avoiding mass train [noise].
So it's a it where some of what we might do is speculate on the future of what we're seeing is that right now in cities, whether it's in New York or other cities that have big mass transit operations that people are saying you know maybe if I have the option of going in my own car I'm going to do that and we think that'll be especially true for suburb.
Commuters you know who generally do have cars and so I think you know clearly we'll see an uptick in you know people driving because of that and you know look I don't think there was a capacity limitations in most places in fact, I I think that you know if there there are where there are that we'll probably.
Drive up parking rates, but I think in general you know most major cities have ample parking capacity now one of the things. It's happening is that we're getting inbound requests from large employers and number of cities, who are saying, we don't want our employees on mass transit because they're going to come into our office and potentially you know bring.
Infection with them and so we want to if you want to facilitate our employees driving in and the way that we wanted to do that as we want to arrange parking for them that we're going to pay for.
And of course, there's all sorts of nuances to this as you might imagine, including you know <unk> everybody might not be in every day. So we want to we want we want to access them spaces, and we'll pay you a monthly parking rate for that but we'd like to let more than one person share that space on different days a week. So fortunately all of our technology that we develop.
Is fully enabled for those kind of activities I think we'll also see that people. Some people will say well I'm not going to come in every day. So I don't why mostly parking, but I don't want to pay the daily rate. So would there be some sort of a pricing bongo that I could have you know that would enable me to maybe by 10 parking passes at a discount all at once.
And it and once again, we have the technology that enables that so I think I think we're well position for those sorta changes expected changes in consumer behavior.
That's that's all really interesting, it's it's yeah and increase need for parking management in the future <unk> that'll be interesting to see how that plays out in the coming months. Thank you for that detail monkey Yep, if I could switch gears for a second.
You know bag is a pretty big acquisition for you guys.
But I think some investors are still a little unclear about.
Well D. exposure is here he used to talk about the n. market break down at bag between the airline hotels and cruise ships. So we can all kind of get a better understanding what the overall profile the businesses.
Sure. We can do that you know I think primarily their prime business client base. Our airlines you know they they serve 17 airlines and the array of services are delayed luggage delivery, which means that they're your bag doesn't come out of the baggage Carousel then they need to get the only needs to get it to you then also couldn't.
Include managing the baggage off service office that you go to and and so that so that that's kinda didn't mean legacy part of their business. They also do skycap checking services at the curb front for airline.
For individual their lines and they move people in wheelchairs, you know for airlines. So there's a there's a sort of an airline you know central focus you know for activities that take primarily at airport. The other thing they do as they move bags between airports and cruise ship terminals or resorts. So obviously.
That's part of the business will be impacted you know it just like the airline part will be based on whether people are going on cruises are cruises are sailing or or where resorts are reopening and I would say you know what what we're seeing is that for the most part you know <unk> Airlines are flying planes, although with very few.
People on them now and and of course, a lot of that resorts have scaled back or or temporarily clothes and there's no cruise lines sailing right now that being said you know I think most of these organizations are preparing for what they're recovery and restart it looks like and and and despite all of the challenges that some.
People in travel and leisure have for the most part the people that we deal with that our client at the airline clients are actually not for low they're they're working because they're very eager to explore new ways to drive down the cost model for providing service with the airlines are expecting now is an increase need for clean.
Eating and sanitation in the cabin and so we're actually having some conversations with some of the airlines about providing those services. There also saying that we may want to discourage carry on luggage because it slows down to process, they're already going to be enough things involved in clean a cabin and now you bring new elements into the Kevin So there may be.
An increase in check baggage and that means there will be more delayed baggage that'll needs to be delivered we're talking to airlines about consolidating some of these functions such as baggage services offices or even wheelchair services. So that we can provide under one contract those services for multiple their lines so things.
It weren't considered before where everybody was take take going their own way and we were entering into individual contractual arrangements I think there's a new receptivity because they realize that outsourcing these activities to somebody like us or in this case bags is a way to deliver a high quality product that's been enabled by.
Technology at a lower costs than doing it themselves and one things for sure I'll all of our client base not just the ones in travel and leisure are going to be thinking about how to drive costs down and of course outsourcing to somebody like US is the number one way that you can drive costs down in your business.
So.
The Corona virus pandemic, not just creating new opportunities for you on the parking management side, but also within the baggage handling business.
Exactly because I think you know you have everybody is going to be thinking about all of it challenges of how do I navigate potentially especially travel leisure that ramp up to let's just call. It. The levels. We were at last year, you know it might be a multi year proposition I mean, it certainly was in the Oh wait Oh, nine period and and there.
It was 90 fish ramp up after 911, so anytime you have a recession, there's gonna be an impact on travel and I think you know it wouldn't be surprising that being said, it's like we've talked before about the hospitality space and the impact of ride sharing and hospitality and how that reduce the number of people.
Parking cars and so that has an impact on the level and scale of operations that an individual hotel, but with S.P. plus we have I don't know three to 400 hotels that we operate across North America, There's 3000 hotels that need our services and so well the the impacts might occur at at at a put one or two.
Places or even across the board for some of the locations. We haven't a vertical there's lots of other locations that we don't provide service to at all and and the same is true and the airline space. We may do skycap for one airline and but we don't provide skycap for any other airlines had that same airport or we might only provide skycap services.
As for that airline had some of their reports and nodded. Other airports. So there's a consolidation of activity opportunity here I think for the airport airlines, which can actually drive down costs on the the other side of this is that some of our competitors.
Have walked away from some of their deals or not or not fulfilling their obligations to their clients and so we're getting bound requests from some of those people, saying, Hey, X.Y.Z. company just walked up the job when you guys come in.
The answer is yes, so I think once again or we have other people call and say you know I'm not I'm concerned about the financial strength of that.
Parking operator, I have now and so you know like to talk to you by doing some providing some services to us. So so well there are plenty of negatives that we've been talking about is as a this pandemic kind of runs its way through our economy. You know, we're trying to position ourselves to be able to take advantage of the opportunities that we think are.
There are now for growth, but also as we move out of these you know very sort of draconian stay at home period.
Yeah. Thanks for all that color Mark I think that's that's.
Gray color and good consideration is particularly for.
Longer term investors maybe.
Maybe if I could ask one more on your mind, if we could.
Dive into your managed contracts just a little bit more the says implications for my model, but I want to talk about specifically how you have contract terms are structured.
So what's your approach to contract enforcement.
During this period now if this is for managed contracts now if a facility is closed would you still be collecting a management fee.
And if not if the contract extended by the duration of the shut down or is that just lost revenue can you can you help us can you walk us through how to think about your managed contracts structure. During you know during periods, where some of these facilities are completely shut down. Thank you.
Right sure well I mean bear in mind.
You know when the commercial group, you know only 15% or so ago locations are actually shot and they're the ones that you might imagine a lot of them are hotels, and sports stadiums and and things things like that convention centers, you know the places where literally there's no activity going on at all and I would.
Say that same thing I've said, many times about contract structures. They they vary tremendously, but bear in mind for the most part management contract you know our terminable by the client on 30 days notice I mean, that's been in our you know disclosures for a long long time, and we look at a contract.
Not so much at the client locking and we're locked in it's a written description of are working in business relationship and it describes what we provide it what services, we provide and Howard compensated. So clearly when a client comes to US and says Hey, you know I'm under financial duress and I need to <unk>.
From my contract you know what we look at is can we restructure their contract in a way where it's still make sense for us to operate there. You know are we going to make money you know, we'd all we're not into less leaders and so if we can restructure the contract to try to accommodate the clients requests we are going to do it and and of course that means in a time like this.
Clients are saying I closed my location and I need to suspend.
The management fee for a period of time till I reopened we're going to work with them and and see whether that makes sense now sometimes the clients like well I want us to spend a fee, but I want you to keep in current cost and we're like well we can't do that.
I think so I think I think the answer the answer is and this is what we say to them look we have a we have cultivated a management team and infrastructure and a set of capabilities at the facility. We may have scale down all the hourly workers, but you really want to lose that you know because then when it comes time to start up you know.
We're starting from scratch and the people that might not be there may not be available. So I think most of our clients get that and they realize that maintaining our fee structure. Our our our management organization. You know makes a lot of sense, because they want to be prepared to reopen and <unk>.
Sure the up business opportunities that are there when things come back.
Okay Mark. Thanks, appreciate all the color as always thinking.
You're welcome.
Hi next question comes from <unk> with parents shouldn't be search.
[noise] hi, good afternoon.
So.
Kevin.
Hey.
So you know you you really establish some momentum here over the last four quarters in terms of.
New manage locations added the continue to in the first quarter.
I'm just wondering how much we can tie that too.
<unk> relationships I mean did you continue to add.
Locations through those national account relationships in the first quarter.
Or you know where there are other sources, maybe you got to loot patients through as well.
Yeah. That's a great question, Kevin Yes, we did and I can say that you know when we look at sort of first core new business and compare to 2019, we actually had an increase in new business you know in the low low it was but I don't know a little over 10%. So we.
Sleep generating more new business in the first quarter. This year than we did in the first quarter of last year in our commercial group and that takes into account you know the fact that delayed or half a march wasn't so good so and of course, we're adding new business. Now is we've just described in our conversation with you, but that increase in new businesses all coming.
From National relationships, now and I think that I think the strategic focus on national accounts as I indicated in our my prepared remarks is absolutely the right thing to do because it's these large complex organizations that we'll have the most demanding standards for restarting and.
And and so if you think about what do they want to do they want to have you know, whether it's special protocols about social distant, saying extra sanitation and cleaning protocols in their lobbied special protocols for cleaning around elevators and other public spaces in parking facility.
<unk>.
You know protocols for employee determining whether employees are ill or not including temperature checks and the like and keeping records of that and deploying capabilities around those things having proper signage. I mean these are the kind of inbound request that we're getting from some of our larger national clients now and we've.
Created multi multi page very complex you know plans that address their desires for the operation of their facility, which includes parking and they're very eager to have us implement and we're starting to implement in places that are reopening you know those protocols and so I think it conveys to them.
That working with somebody like us on a broader basis than simply the those locations, where we currently serve them as making a lot of sense. So I'm, hoping that as they see our response to this in our and our creativity on helping them I'll manage through this daedalus lead to more opportunities with some of these national climes.
Okay, great. So it sounds like.
Even in this environment.
You can still continue to develop.
Expansion of existing national account relationships or even.
Continue to pursue new national account relationships or is there some sort of impediments.
To developing those new and existing national account relationships in in this environment.
Well you know that that that's a interesting question I think if you to ask me two months ago, where do I think of the idea of everyone working from home, where they can I would've been negative on it because I would've thought that it would people would not be as productive working remotely and I guess whether.
Zoom or Google meets or whatever a tool people are using I think we've all had an eye opening set of experiences around the fact that we can be highly productive working from home and that maybe a lot.
A lot of lie meetings aren't even really all that important are valuable and what we're hearing from many of our clients now because we're having a video meetings with them, even including pitching new deals there like Wow. This is really great. It's a great way to do it and so I think we're actually I'm surprised to actually see that a number of.
Current clients or prospective clients are going ahead with R.P. processes and the like you know during this time, because they're they're they really feel that it makes sense or more than ever maybe to get new creative ideas on how to deliver these services in a more cost effective way. So we actually have a number of.
Proposals and development right now for for National type clients and hopefully we'll be successful Atlantic some of them.
Okay that that's really interesting.
In in his you were the discussion about bags said it was going on here.
Obviously, you know that the near term negative impacts, but yeah, but you mention maybe some opportunities around baggage handling it so I thought.
Given all the conversations you're having with.
Airport clients <unk> would there be.
Even more interest in the remote check into service going forward, because there's a service that would <unk>.
I think in in some ways redo or increase.
Social distancing you know reduce.
Touch points, because you won't have people standing in line to check bags and so is there perhaps some momentum for <unk> checked in coming out of this environment.
I think there will be but you know once again you know you know travel volumes are very very low and I think I I you know we get data theirs is publicly available data that the T.S.A. puts out I mean passenger trailing passengers being screened just down like 90 plus per se.
<unk> 19 pandemic too so the number of passengers travelling is very low.
So the need for you know remote check in or other social distancing type checking arrangements at the moment is not great. Because obviously, there's just not a lotta people even in the terminals, but I think as things started to come back that will be an important ingredient because the airlines are saying look we can't.
We have these giant congested you know checking areas and of course, even the T.S. say, where a lot of baggage is being processed to T.S.A. and brought on board I think there's this is what I indicated earlier, there's some discussions around maybe we need to discourage carry on luggage you know because it it will you know it we we don't.
Want to hear that congestion, we want people to be able to sort of bugs right through security screening and so <unk>, which is not easy to do if people have lots of luggage that has to be screen. So I think I think the expertise that bags has in this area. Both on the inbound front in terms of checking in remotely or at a curb or in a parking garage.
Some other place or or also also <unk> alleviating congestion and ask the baggage claim because they they have obviously clients where they pick up the baggage from bag claim and take it to the traveler or take it to take it to the travel at home if they're returning from a trip.
I also we bags also has a service called begs V.I.P., where individual travelers can pay to have their luggage deliver it to their house, it's something that I I pay for to use all the time when I'm traveling so I don't have to wait for my check luggage. So you know hopefully there there's an appetite for sponsored models for these sorts of things in that <unk>, because that's the best model.
I think for us in terms of generating volumes and it'll be lots of good solutions around helping people maintain social distancing on the way in and also on the way out on their journey.
Okay. That's that's a interesting color thanks for taking the questions.
Okay cutting you're welcome.
Hi next question comes on the line of Mark Riddick, what's it how many.
Hi, good afternoon, everyone.
Mark good afternoon.
Good afternoon.
Such a little bit out just to follow up on National a time I I was wondering if you could give a update as to where we are as a percentage of revenue ballpark I I think there's something that's been mentioned before but I did one the ship that had been been updated or if that's something you could share at this point.
No it's not really something that we we have readily available and and we haven't I I'm pretty confident we have never put that out there before.
The the one of the challenges that when I talked about our national account focus I I know I mentioned this before that we identified about 25 organizations that we thought were candidates for what I would call a national account relationship and and what is anything that mean that we can offer up there.
Boards, so that they can see data.
Aggregated or or drill down data and the performance of their facility. We can hold quarterly business reviews with them through a view performance metrics and creative ideas from our marketing teams and and and obviously give them you know more special focus attention you know commensurate with a larger type of a relationship with.
And when we identified those 25 organizations, probably now is close to 24 months ago. It was really with a view that their organizations that we already served somewhere.
And that what we want to do is take a relationship that might exist in a couple of places in turn it into a national relationship because that organization has a footprint of oh across the country and that spending the strategy and that's worked out very very well. We've made a lot of progress we've talked about some of our big wins and of course, we.
Well, so you know gotten into the group purchasing organizations in the healthcare space, which has led to a number of new opportunities for us and that space, but there are lots and lots of other organizations, where that we sort of that have locations that we don't serve for them and so really the the.
Universe of potential National account candidates is way more than at 25, there's probably 100 or maybe even more and so you know our our goal <unk> and of course in the absence of designating somebody a national account, we still have the same goal and that is in every market that we operate understanding who's who's who's using.
Type of services, who has a need for our type of services and cultivating relationships with them on the local level because all of our success in the end in adding new clients and new location comes from a two prong approach one is at the local level, where our local teams of people go and cultivate relationships and then the other is.
Working with those organizations or the large organization on a national account basis.
Okay. So that's very helpful and actually part of your answer kind of beard into what my next question isn't that one actually get to spend a little bit on more so as to what the maybe what the dialogue has been like which premiered given to you know given what they're dealing with in what their numbers are dealing with us when it <unk>.
A little bit of of how that's evolved into I mean, it's only been a few months since the busy or arrange it was originally signed but it certainly is probably taking the different definitely charming and and daily. They function also wants to talk a little bit about about that particular engagement.
Sure I mean, it's there's there's a tremendous amount of activity obviously going on in hospitals. These days and and a lot of it you know it's banning them a logistics models, you know that hospitals I've had in place for a long time in in many hospitals are not allowing visitors and on the other hospitals are in.
Cities are dedicated to co. It 19, patience and they're not accepting other patients and then and then other hospitals are not accepting covin 19 patients and some of those are in the same.
Medical Center groups, if you will or hospital groups and so so there. So there's the need to move staff patience and other employee you know doctors and others you know between campuses. So in many cases with healthcare, we're seeing an increase in requests for shuttle bus activity to move people around.
Obviously, we've been we've we've gotten request for additional staffing because as we've talked before we operate yeah I I think about 130 hospitals now most of them are seeing as surgeon activity and so they're asking us to send more staff. So some of the staff that maybe it wasn't as busy or wasn't needed and places that.
Senior reduction in activity, we redeployed over over to the health care to meet that need. So I think I think honestly you know from from the specific point of premiere I mean hospitals are conducting R.P. is right now for our array of services and it's that same reason you know that that.
Mentioned, a few minutes ago, you know, while while hospitals are seeing a surgeon activity, they're seeing a lot of pressure on them financially and you know elective surgeries have been cansler postponed you know a lot there maybe a surgeon patients that are either on Medicaid or Medicare, which which have lower reimbursement rates than private insurance.
And so so the the hospital you know Oh, you know the the C.E.O. and C.F.O.s of hospitals are going Oh, My Gosh. My financial motto is upside down I may have a surge of activity I might even have more costs because of the of this pandemic and what I really need if somebody that's going to help me managed to logistics and is changing world.
Bring their technologies in but also at the same time helped me drive down the cost up providing those services because my own business model is Ben disrupted and we stand I think well ploys to provide those type of services.
Great and then one last thing.
Thing for me and it goes back to the technology investments that are ongoing which are which I. Appreciate the color on that I was wondering if there or if if there have been a shifting priorities as to you know what projects to focus on it or or anything like that you should be maybe six months ago or so that that that are kind of at the top of the list.
I want to get done sooner rather than later thanks.
<unk> Yeah. That's a good question and you know, it's one of those times, sometimes you're you're good and sometimes they're lucky you know I think we've been both good unlucky on this front 'cause about a year and a half ago. We said what are the right technology investments for us to make.
That can either a drive differentiated capabilities that are going to help us when new clients and or or keep clients that we have because we're offering up cutting edge things that no. One else can do and that's where he's investments in parking dot com inside the L.A., which is a whole array of dashboards that are used for men.
<unk> valet operations, we have our remote management center, you know <unk> that was where we can remotely monitor facilities. We've made investments in capabilities for low friction transaction processing and and indeed, you know no tucks transaction processing. So these were all part of our technologies.
Energy Yeah, we've been working on a really for the past that's on our focus for probably puts 18 months now and so the good news is because we decided to do those things and those are exactly the things that are needed right now a lot of those projects are coming to completion and we're going to be able to begin deploying some of these as I indicated earlier.
The other part of our technology investment tends to be around driving cost out of our business. You know, we we have a lot of transactions millions of transactions that day, we have thousands and thousands of clients thousands of employees all over the place and so the more we can automate the things that we do the more that we can take the manual.
Dub side of things, there's greater accuracy and faster speed of processing and so we we have a number of initiatives underway that are designed to drive those kind of efficiencies in the business and again those are underway now so I would say no you know there's really there's really no need to change our priorities from a techno.
As you point of view, a few new things have popped up you know because of all of this and and so we're we're making sure that we addressed those you know as we always do when new things pop up but I'd say, we we laid out are the right technology strategy for the business about 18 months ago, where executing well on it and I think it's perfectly aligned to the times that we're in.
And what's going to come next.
Okay Grand and then just one more for me I latched when I promised.
Given the the the end you touched a bit on the stress of competitors and you're seeing some folks come to you that that it worked with competitors that they're worried about their their financial status structure. At this point I was wondering how you might you thinking about the possibilities of potential opportunistic acquisitions, if they were too up here.
Yeah, maybe be accelerated due to the the challenges that we all see thank you.
That's a great question you know I mean, you never want to say never but I think given the fact that what's going on is going on we're seeing competitors are shutting some talented people were senior competitors are dropping the ball in certain places and giving us the opportunity to come in so I think realistically you know at this point.
Focuses more on are there is there any talent that we would want to pick up that could help us or or or are we able to just take away some operations and grow organically or in a way that we normally do which is to offer a compelling value proposition to somebody and say, we can do it better than the people that you're with.
Now so I think I think given these sort of uncertain time that we're in right now our main focus is going to be on that for the next you know at least the next.
You know several months.
Okay, great. Thank you very much for all the flow Mark.
You're welcome thank you.
We do have a follow up from Daniel more what C.G.I. securities.
Hey, <unk>. Thank you <unk> most of my follows that might.
<unk>, we're just covered but you have obviously at very low you know capital intensity business to begin with but you talked about you know controlling a expensive maybe just soon updated view <unk>.
Yeah, I think as we start to locate cap accent, Mark mansions kind of continuing to ramp up on a and continue with the investments that we're making in technology I would say.
And I think this was in their release early or from today, but we're really trying to make sure that were strategically focused on <unk> I would say that cap actual will come down pretty significantly this year will be much more focused on the technology related investments.
Perfect Alright, Thank you again for the color.
And then dad I just wanted a clarify real quick just in case it didn't come across real clear there, but just as it relates to G.N.A.
You know from from a G.N.A. run rate for May I would I would.
Look at 6 million I, just wanted to make sure that I clarified that.
Did that was perfect. Thanks, Chris.
Yep.
Hi, this time during our friend that question sound now like kind of call back over to Mark bombing for any causing remarks.
Hey, Thanks, Christie and thanks to all of you for joining us today. During these very very unusual time, we appreciate your time and listening to us and interest in our company and just wish you Oh, well you say be healthy we'll tucking next quarter. Thank you.
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Participating you may now disconnect.
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