Q2 2020 SP Plus Corp Earnings Call
[music].
Welcome to the Q2 2020 SP Plus Corporation earnings call. My name is Richard and I'll be your operator for today's call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press star.
And one on your touched on phone I'll now turn the call over to Mr., Chris ROI, Chief Financial Officer, you may begin.
Thank you Richard and good afternoon, everyone as Richard just I'm, Chris ROI, Chief Financial Officer of SP plus.
Welcome to our conference call following the release of our second quarter 2020 earnings.
During the during the call today management will make remarks that maybe considered forward looking statements, including statements as to the impact of covert 19 outlook for 2020 and statements regarding the company's strategies plans intentions future operations and expected 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 and available on the SP plus web.
Hi, and the risk factors in the company's annual report on form 10-K, and quarterly reports on form 10-Q, and other filings with the SEC.
In addition management will discuss non-GAAP financial information during the call.
Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the company's ongoing operation and is an appropriate way to evaluate the company's performance.
They are provided for informational purposes, only a full reconciliation of non-GAAP financial measures to comparable GAAP measures were presented in the tables accompanying the earnings release.
To the extent other non-GAAP financial measures are discussed on the call reconciliations to comparable GAAP measure will be posted under the regulation G. tab in the Investor Relations section of the SP plus website.
Please note this call is being broadcast live over the Internet and is being recorded a replay will be available on SP plus website. Shortly after the ended the call and will be available for 30 days from today.
I will now turn the call over to Marc Baumann, our Chief Executive Officer.
Okay. Thank you Chris and thank you all for joining US. This afternoon to review, our second quarter results and discuss our business outlook by all measures. This was one of the more challenging quarters I faced in my 20 years with SP plus.
Nicole Good 19 health crisis that had a significant impact across our portfolio and particularly on our airport airline and hospitality client along with many of our commercial clients I'm pleased with the way we managed through it to achieve the best possible outcome and while the second quarter financial results are not what we expected when we.
We began the year they reflect both the substantial declining activity we experienced in serving these hard hit industries in the wake of Cobot 19, as well as Jane changes that charges that we incurred in the process of scaling our business to the level of demand for the services that we provide we believe that the second quarter represents the low pay.
For us and as a base from which we are building a more streamlined and profitable business.
Before going into further detail I'd like to take a moment to thank the entire team at SP plus for the commitment they've shown to our company and to our clients.
Took tremendous effort to effectively serve clients and manage our diversified operations under these unprecedented conditions and I'm grateful for their perseverance and support.
The safety of our employees and customer remains a top priority to protect our frontline team members, we put in place comprehensive safety protocols, including training daily health screening questionnaires and pre shifts safety meetings frequent risk alert communications and safety videos. In addition, we've implemented extent.
Cleaning and sanitation protocols in line with CDC guidelines that are locations.
I will now turn to review the main event for the second quarter, beginning with the tenor of our business. During the period. The actions we took to stabilize our operating results, where we stand today and how we're envisioning the future the impact of Cobot 19 tested the resilience of our entire organization in the second quarter, but the big.
I guess disruption and took place in April, which state and federal mandates to curb the split of the disease, including travel restrictions and shelter in place requirements severely reduced utilization of the suite of services, we provide at airports and it hospitality and commercial locations.
Keep in mind that even though the activities. These locations was significantly lower the parking management and mobility solutions, we provide our essential services and therefore in most cases some level of our services was still required to keep facilities operational sanitized and secure.
Thus, we remained open it over 85% of our commercial division locations and it all 70, plus airports, we serve although with reduced staffing levels and limited opportunities to gain additional volume related revenue, which severely impacted our gross profit.
The good news is that we saw a pickup in activity throughout the second quarter as clients sought our expertise to address consumer behavior changes mitigate safety and security concerns and deal with social distancing requirement. Despite the paulison gross profit, we generated $13 million of free cash flow in the second quarter, thanks to cost.
Production contract concessions and strong management oversight.
To scale our business, we took a series of actions to reduce our cost structure some of which we detailed in our first quarter communication. These actions, which included a major workforce reduction and a significant cutback in paid hours for hourly workers executive director salary cuts and work from home efficiencies enabled us to control cost of.
Services and reduce our adjusted Gionee by 30% compared to last year's second quarter.
Not all of these cost reductions are permanent but a good portion are and the speed with which we executed them it's impressive.
Additionally, we took steps to strengthen our operating portfolio in order to position the company for the future, notably in the second quarter, we were able to exit or restructure a significant number of contracts. While there were early termination charges associated with a few of these we eliminated a potentially ongoing source of downward pressure on gross profit.
And we believe that the continued shift to management contracts will provide greater gross profit visibility and less exposure to volume related and other risks typically associated with lease type contract. Despite these actions are location retention rate was 90% for the period ended June 2020, which was the same level at the second.
Quarter of last year.
With respect to where we stand today, while we continue to monitor the recent pauses to reopenings in certain parts of the country. We believe that the improving trends we saw in the second quarter are indicative of the importance of our services to clients. The gradual easing of government restrictions the ongoing expansion of our National account program and health care.
Our vertical where the recently announced new GPO agreement and improved operating portfolio and reduced GNS expense level of give us confidence as we head into the second half of the year.
We've been tracking the number of travelers screen by the TSA and its increased steadily from a low of about 110000 daily travelers in April a decline of 95% compared to April 29 team up to about 670000 travelers per day in July which is still a substantial decline of 74% over July 2019 Bose.
Five times higher than April we're seeing a similar trend across a large sample of our same lease locations for parking revenues were down 60% in July 2020, as compared to July last year, which is a significant improvement from April where revenues were down 90% year over year.
Finally, I want to touch on our technology initiative. During this crisis, we continue to make investments in technology, which we believe remains a key differentiator for us P. plus an important competitive advantage, especially during this pandemic and in the new normal that will follow.
With an operating history spanning over 90 years SP plus understands unique needs of clients and then consumers and appreciate how critical technology is to the future of our industry. Our aim is to foster end to end mobility that means we are there for the entire experience from customer acquisition to operational logistics to real time performance.
Metrics and reporting our goal is to eliminate the pain points often caused by travel from 0.8 to point be such as parking and congestion issues that often at companies such travel.
To that and I'm very excited about the recent launch of our new technology brands spear, which brings together a suite of industry, leading mobility focus technology solutions that provide our clients with greater clarity and visibility into their operations and also provide end consumers for the user friendly seamless in contact list experience.
Here's operational and analytics platforms provide industry, leading tools and insights to enhance and optimize our clients operation. Examples include sphere insight insphere valet as well as enhanced capabilities coming later this year was spear transact, which is a mobile point of sale system built to enable contact list payment fast.
Our transactions and reduce congestion.
Spears facility excess in digital commerce platforms provide streamline facility ex us and expanded digital commerce, delivering touch was capabilities through parking dot com Seer commerce provides sophisticated customer account management and cutting edge pricing engine and supports touch was payment options via prepaid reservations on demand.
Payments, Bluetooth checking and checkout QR codes and license plate recognition.
Spheres facility and data management solutions provide a centralized web console to enhance online performance and efficiencies and today's fear remote maximizes ease of use in operational efficiency via a single remote operation that provides automation and inland 24, seven remote support for over 400 facilities nationwide.
And we've seen growth in this service during the pandemic and expect demand from our clients to increase.
These are just some examples you can go do www dot sphere Dot SP, plus dot com to see the full scope was sphere.
Having all these technologies and capabilities under the sphere umbrella gives us a unified identity that we believe further solidifies our position is a leading provider of mobility technology solutions now I'll turn the call back over to Chris for second quarter Financial review.
Thank you Mark and thank you all for joining US. This afternoon as usual I will provide more color on our on our adjusted financials reported this quarter as well as our liquidity position.
You can find a full reconciliation of all non-GAAP measures to their nearest GAAP measures in the tables accompanying today's earnings release.
Adjusted gross profit, which excludes $600000 of restructuring and integration related costs.
As well as a $16.7 million non cash these impairment charge related to the write down of right of use operating assets declined to $3.9 million compared to $61.9 million in a year ago quarter.
Mainly as a result of the impact of Koby 19 on our business.
During the quarter, we increased our provision for credit losses, and potential legal settlements by $10.1 million as part of our regular review of these items and in light of the impact of Koby 19 on our business.
Excluding $3.7 million in integration and restructuring costs second quarter 2020, adjusted DNA decreased by 30% to $19.1 million as we took actions to scale. Our overall costs in light of the current business environment, including reducing accruals for the company's variable compensation plan.
Yeah.
Adjusted loss per share was 86 cents compared to net to income per share of 81 cents for the second quarter of 2019.
As a reminder, adjusted net income and adjusted income per share for both years exclude amortization of acquired intangibles, which were higher in the second quarter of 2020 due to an intangibles impairment charge.
The provision for credit losses, and legal settlements represented eight per share loss of 35 cents after tax.
Considering the current business environment, we're very pleased to report the company generated $26 million and positive net cash from operations in the first half of 2020, 22% higher than a year ago period, and first half free cash flow of $15.9 million first 14, and a half million in the same period 20.
19.
At the end of July we had 168 million of Undrawn capacity under our senior credit facility, our current availability and our expectation to generate positive free cash flow in the second half of the year gives us confidence that we have enough financial flexibility to manage through this challenging business environment.
Looking ahead, it remains difficult to predict the duration of coven nineteens impact on our clients and our business or to anticipate the timing of an economic recovery.
Based on what we know today, we expect to see improvement in adjusted gross profit in the third quarter for several reasons.
First second quarter adjusted gross profit of 3.9 million included a $10.1 million provision for credit losses, and legal settlements, which we don't expect to reoccur in the third quarter.
Second.
Our gross profit improved progressively throughout the second quarter with June being the best month of the quarter NRG in a steadily decrease during the quarter with June being the low point in terms of GNS costs.
Third we terminated or converted to management contract 80 leases during the quarter. We expect gross profit in the second half of the year will benefit will benefit from no longer having these locations structured as leases.
Also there are about 100 additional leases that will come to their contractual expiration during the second half of the year, many of which were unprofitable in the second quarter.
Regardless of whether or not we are able to convert them to management contracts. The expiration of some of these leases will naturally improve our profitability over the next two quarters.
And finally, we expect that our Q3 gionee will be lower than it was in Q2, given progressive improvement throughout the quarter and we expect and we expect to be free cash flow positive in the second half of this year with that I will turn the call back over to Mark for some closing thoughts.
Hey, Thanks, Chris as Chris mentioned, it does remain difficult to predict what's going to happen for the remainder of this year with any precision. However in the long term, we believe that clients in our target verticals will need our services, even more as they face financial and operational challenges ahead, our services help our clients improvement.
Ability adeptus, social distancing requirements and ultimately mitigate congestion.
While we recognize that new normal will be quite different than the business climate of a few months ago, we're optimistic about the opportunities in front of us to build on our key verticals and expand our national accounts program also as a public transportation becomes less desirable and many major cities Theres increased opportunity for us to help manage parking.
And control congestion, we believe the steps we've taken position us well for the long term.
To sum up we're confident that SP plus with its continuing deployment of differentiating technology will be at the forefront of the digital transformation of our industry and is well poised to emerge as a leaner more profitable competitor with improved offerings for our clients and their customers.
Now we can go back to Richard to open the line for questions.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the Q. Please press the pound sign for the hash key.
If you are using a speaker phone you may need to pick up the handset first before passing the numbers once again for any questions that started in one upon you were touchtone phone and Weve color on line Mr. Daniel Moore from CJS Securities. Please go ahead.
Marks and Chris Good afternoon. Thank you for taking my questions.
Hi, Dan.
I wanted to start with maybe kind of the legacy business, if I could mark X bags.
What retention rates look like in your core management contracts.
Exiting the quarter.
If we were to exclude fax business.
Well as as you May know when we talk about location counts and and retention, we're really talking about our commercial division. So thats already without bags and debt. We had very high retention I think we mentioned that our retention was 90% which was actually the same as second quarter last year and.
The good news on that of course is that we've been actively looking at a lot of our lease locations as Chris described so the fact that our retention was as high as there was actually a nice thing to see the other thing is that on during the second quarter. The commercial division added 48, New management location. So while we have been actively.
Reducing our lease accounting the ways that Chris described at the same time, we're building our portfolio management locations.
Very helpful. Sorry, if I missed that stat. Thank you.
Cash flow really impressive in in light of.
All the challenges here.
How much of the free cash flow you expect in H. to reflects unwind of working capital.
If any at all.
Hey, Dan I'd say that very little in terms of kind of unwinding of any sort of working capital I think from what you saw.
Receivables was down significantly strong collection on receivables.
There's very little in terms of.
Unwinding that will happen in the second half.
And was there a cash flow.
You know sort of a measurable or material benefit from customers terminating contracts.
Into you during the quarter or that you might expect in the risks in the back half the year.
No nothing material in Q2, and don't really see anything in the back part of the year.
Got it.
And then maybe one more just you gave some good color on the cadence was both gross profit improving throughout the quarter and exiting in gross.
And.
Gionee declining.
If we put that together can you maybe give us a little more cadence on the level of gross profit from monthly and what we've seen in July.
Yes, I think as you look.
All all of this really depends on what our recovery curve looks like and I think that's.
So difficult for us to really kind of put in terms of what that might look like and our kind of thinking about what I can say is we feel really confident about the second half of the European free cash flow positive, which we mentioned that are.
Prepared remarks.
Very helpful.
All right I'll jump back in queue with any follow up thank you great. Thanks, Dan.
Thank you. Our next question on line comes from Kevin Stein, Keith from Barrington Research. Please go ahead.
Hey, good it.
Hi, Kevin.
Yes, I wanted interesting that.
We will too.
So success.
Well.
Okay.
Brent lease is.
Please.
So.
Sure.
And then.
Hello.
Yes.
Hi, Kevin.
Kevin This is.
Kevin This is Chris you're breaking up a little bit from a cellphone reception standpoint.
I'm sorry about that.
In the letter better now, yes, yes, yes. Thank you.
Okay.
Maybe I'll just start over Isis.
Looking about.
I was I was intrigued by the fact that you were able to.
So successfully convert a sizable number of.
Leases the management type contracts in a relatively short period of time.
You know you've typically talked about how.
The type of contract is dependent on.
Client preference, so what made clients amenable to switching to.
Contract types and does that kind of.
Change your thinking longer term about you know.
The mix of lease versus management and how how much further down you can drive that lease contract portfolio.
Thats a great question, Kevin I'd say.
First and foremost when we enter into lease contracts, we try hard to put some provisions in there that protect us on the downside in a lot of times debt takes the form of if revenue drops by AXT, we can terminate the lease or renegotiate the rent terms et cetera, and so clearly when this epidemic unfolded we.
Face those sorts of situations and we analyzed all of our leases and looked at our opportunities for improving the financial terms of those leases for the company and in some cases, we had the right to terminate and we executed those termination.
Right and what we found is that the landlords came back to US and said Hey, we just love the job you do and we think that your best position to generate the maximum amount of revenue.
Out of this facility of anybody we can think of so would you be willing to stay here under any terms and in some cases, we've said we will be glad to stay but we're going to have to have a management contract form and maybe someday in the future when things are more predictable we might be willing to enter into a lease again, but at least for now this is going to be the way that.
We would do it in and we had a lot of positive response to that as far as are our general desire to do leases we've had a long term.
Focus on trying to serve the builds wants and desires of clients are landlords and of course as you mentioned, Kevin some people do like the lease form and what we have been doing over the past few years.
Especially in the face of congestion caused by ride sharing and other things going on is to avoid making long term fixed rent lease commitments. We have some of those kind of leases in our portfolio and many of them are burning off now, but the leases we have been entering two more recently give us to kind of provisions that I was just disks.
Driving but also.
Provide for more of a percentage rent structure. So even in this environment today, if a landlord said look I really would like a lease structure and we can structure. It is 100% percentage rent after covering our operating costs were happy to look at AAD and see whether there is enough revenue there to justify it so I don't see us.
Eliminating leases from the portfolio in the future, but clearly.
We've talked many times about our desire to make profit at every location and if the contract structures that are there for that location don't enable us to make profit we look for away to not be there.
Okay great.
That's helpful.
So.
Okay can you talk a little bit more about the.
Launch of beer and.
Is that just like you said it kind of a unified brand strategy going to aggregating.
Everything Youre.
Please from a technology perspective, or does that signal and even more of a ramp up in technology investments longer term and maybe accelerated new product development and made what can you just talked about strategy there in the outlook.
From that spear technology perspective.
Glad to do it I think as we indicated last quarter. While we were very very actively looking at our organization and looking for cost we could reduce then things we steps we could take to bring down gionee one of the decisions that we made was too.
Not touch our technology development process and in fact to accelerate.
The execution of our technology strategy, which we completely revamped at the beginning of 2019.
And that strategy.
Has led to a number of new capabilities that we are introducing and just just in this some past couple of months, we've rolled out our on demand.
Payment programs for non gated surface slots and so.
Via the mobile web you can now paid a surface slot with QR code tax or on our mobile app.
By entering year zones, so thats, a huge innovation for us and it's it's not commonly seen out in the parking industry at the same time, we've been working on and rolling into pilot phase a friction free touchless.
Option for gated environment codes in some places you do want to have gates to ensure that there are people are paying or there may be needs to control access to the facility.
And so those are major development center and that we've been working on for some months now that have come to fruition and we're now starting to roll out into our business. So and we will continue to develop additional capabilities and roll those out throughout the year, which spear does is it takes those things.
It also gives a unifying brand identity to all of the other technology that we've been doing for some time and I know, we put out a release earlier in the week that kind of details all of that but what you see there is a mix of some existing capabilities that we've rolled out over the past couple of years.
And then other things that are in the process of being rolled out right now, but I think it a reemphasizes our desire in our belief that we were at the forefront of the digital transformation of our industry and we want to make sure that we have a very clear and effective way of communicating to both our existing clients into perspective clients with those.
Capabilities are and Thats, why we decided to introduce the new brand.
Okay, great and.
I noticed when you're talking about the 2020 outlook in the.
Press release that.
You are going to continue to focus on high value verticals, which include hospitality.
Issue you mentioned there so.
Yes, I guess the takeaway there is that the.
The longer term strategy is.
Mostly unchanged I guess despite this.
Interruption in that you still see.
Hospitality in aviation is.
Good long term verticals to be and.
We do and I mean, I don't when we highlight certain verticals that doesnt mean that we're not interested in other verticals. So our goal is really to rollout our whole technology enabled suite of capabilities across all verticals, where people are moving from 0.8, a point b and so that clearly remains to.
Focus of the company, we've talked about aviation and hospitality for some time in part because our penetration is low and we think there's opportunity for growth and so in hospitality for example.
We have maybe 300 400 hotels that we operate and there is over 3000 hotels in North America that could benefit from our services and most of those hotels have outsourced parking to somebody out in our industry. So one of the ways that we can get growth even if volumes are lower at individual properties is too.
Spanned the footprint of hotels that we serve like.
Likewise in the healthcare space, there's thousands and thousands of hotels and Thats why our hospitals, rather and Thats why weve been actively trying to line up additional gpos in the healthcare space and the one that we announced just in June has 16000.
Properties that are part of that GPL and so the idea that we could grow from our 150 hospitals that we serve today throughout North America to literally thousands in the years ahead is a realistic ambition and I think given that hospitals today are facing both added congestion because of patient volumes with the key.
David.
Disease, but also in some cases financial pressures because of the reduction in may be elective surgeries and other higher profit margin type activities at hospitals that makes them receptive to looking for somebody like us to come in and bring technology and capability and drive additional.
Profitability for their operations I think in the aviation space, we have strong relationship with 17 major airlines, where we provide.
Baggage handling delay luggage delivery and other services and yes. There is severe distressed on air travel right now, but once again, our footprint with individual airlines is small and may be that for a given airline we provide wheelchair services or for Skycap services or.
Check in services for just a handful of their locations throughout the country and so our discussions with them are really around expanding that footprint and enabling us to do more for them on the airport side, you know as we've talked about the fact that not only do we continue to operate at all of our 73 airports that we've operated.
For some time, but airports are actively putting out RFP, either because contracts are coming up for renewal or because they are unhappy in some way with what's going on there right now in their operation and so we're actively pursuing those in bidding on those types of opportunities. So while there is an overall.
Downward pressure at the moment in terms of air travel in the like I think in particular airports are taking a long view and recognizing that eventually air travel will resume they have congestion problems and service problems that there has the curbs in normal times and they're looking to find a partner who can help them.
Solve those problems.
Okay. Thanks, that's all I had for now great. Thanks, Kevin Thanks, Kevin.
Thank you.
Our next question on line comes from Mr., Marc Riddick from Sidoti. Please.
Please go ahead.
Mark.
Hey, Good afternoon afternoon, I was wondering I was wondering if you could.
A little color around the and thank you were mentioning as far as the.
Hi, good contracts will upper Escalations little multi year I was wondering if you could talk a little bit about you also mentioned however, the new locations that were adding that you said there were 48 or new management.
Things are added during the quarter and I was wondering to get touch a little bit on that as you mentioned during the first order commentary around and down contacts and those that we need or outsourcing I was wondering equal color around.
What those new management contracts like that that where that came in the numericable follow us around that.
Yes, what we're still getting those inbound requests and I think.
Increasingly as people see that this pandemic is not going to end right away. There is maybe ongoing worry about whether or not some of our competitors are going to survive financially. Many of them are dropping the ball in terms of not getting the job done there've been a couple of smaller operators have gone bankrupt.
Left and so the people that that that they serve are becoming concerned about who's going to manage my operations successfully and so we continue to get those inbound requests they are frequently.
People that have freestanding parking garage is or other.
Parking surface parking lots and the like.
Theres not a lot going on in in a lot of.
Office building parking in many cities right. Now is people are working from home, but there's a fairly robust amount of activity as people are reducing their use of public transit in most major cities in driving in and so in some cases driving volumes in cities are are quite significantly up from what you would expect given.
The level of business activity, it's going on so.
Expect that we will continue to hear those kind of inbound requests and of course people owners of properties are managers of properties have added anxiety around health and safety, social distancing protocols, using and deploying technology, that's either low friction or touch list and we have all of our.
Cobot.
Operating plans developed for sharing them with our clients. Many of our clients are asking us if they can take our our Kobe plans and use them in their own organizations because they like what we've put together for them on the parking side of things until I think a larger more sophisticated operator like SP plus you know is going to be a better partner for for me.
Any property owners and managers during these uncertain times.
Okay. That's very helpful. Then actually just one quick.
Bookkeeping question.
The one if you do you have an update as to capex expectations for full year.
Yes, we don't typically break that out by quarter I think.
Where we've been in their historical basis will probably be slightly I think I mentioned this on the first quarter call will probably be slightly less than that.
And so far this year, we have about 8 million in Capex.
I mean, just to add one thing that we could sustain.
Probably half of our Capex expenditure, it's been on technology, and so we're where we don't want to trim netback at all if anything we see that cobot crisis that opportunity for us to not only complete new technology developments, but to actually roll them out in our existing organization when volumes of activity our lower it makes for easier into.
Limitation in transition so if anything we're trying to step on the gas on some of that stuff. So that adds business comes back we've already made the transformation throughout our business.
Okay. That's that's perfect. Thank you that's helpful that I was wondering if you give a quick update around the.
Pardon vendor efforts that taking place and was wondering if you could share with us or weather.
The current challenges of maybe accelerated that are decelerate or maybe what you're experiencing there and if it's similar to what you were expecting going into the year or what that then what that looks like now.
Yes, there is the one the one relationship that we entered into was relating primarily to commercial office space and I would say that that's a little quieter right now and I think it's partly because so many people are working from home and so there is theres not as much focus on that in the property management world, but as I was indicating a few minutes ago.
Mark the in healthcare space.
Those clients for prospective clients are feeling financial pressures, they're dealing with congestion and a lot of challenges that that the covert pandemic is bringing to their facilities and so as a consequence, Tom that's where we're getting more of the interest from those TPL arrangements that we put in place and we're now actively respond.
During two RFP and meet making having other meetings with prospective healthcare clients as a result so.
Clearly when we have some wins that are notable will end up talking about those but there's a lot of activity in that space right now.
Okay, great in the last one for me as far as the the the lease contracts that are up for exploration between the into the year I was when do you have current visibility as to what that volume might look like for the 2021 or is it too early to sort of big about those.
It's probably a little early in terms of what that could look like I think where we're working on a variety of different initiatives.
Internally around leases in inbound in terms of new inbounds contracts that are coming through so I think it's a little early on that.
But as you look at what we're trying to do for the back part of the year and I mentioned 100 contracts that will kind of naturally expire at the back part of the year certainly that's going to have some significant gross profit for the back half of this year, but also benefit 21.
Okay, and I forgot one one last thing up.
I'm wondering to give a bit of an update as to.
National account activity and maybe what their engagement is like I think you've touched on some of the some of the cost savings efforts that they might be pursuing but I was wondering if you could give maybe maybe a broad overview as to where that might where we might be going with that for the remainder of the year in where you see that going going forward. Thank you.
We really believe that that that strategy makes an awful lot of science, and particularly with some of the technology capabilities around.
Sphere insights, which is our technology platform and dashboards, where we can not only use those tools to help us optimize our management of the facilities, but we can share with our clients in real time, what's going on in their facilities and nobody else has been able to bring together all the data that's in the parking equipment itself and.
And the equipment, that's the data that's not in the parking equipment for example around payroll and other costs that are being incurred to operate the facility. So our initial reactions from some of our larger national clients event that they love. These tools and of course, we can only presented to them information for the facilities that we are.
Great and to the extent that they have other facilities operated by others that don't have tools like that they are sort of blind as to what's going on there. So I think we're really trying to continue the conversations around letting us expand our operational footprint with those large national clients. So that they can not only get the advantages of the of our SKU.
Sales and operating but also they can have greater visibility into what's going on and their facilities. So that is just an ongoing process.
We were having more zoo meetings.
With our larger clients and small clients as well as opposed to making trips and visiting them in person, but I don't really think the the pandemic as interrupted our focus on national accounts.
Thank you again for any questions on the line that Star then one and you touched on following our next question on line comes from Pam has fallen from William Blair. Please go ahead.
Hey, guys my comment there all right Yep Yep Canadian push them go ahead.
Great.
Good expected to be with us at least for near term are you expecting to may be more importantly theme people use parking lots of public transportation.
Well that's for sure happening I mean, if you if you get that data on mass transit ridership, whether it's in New York or Chicago or even in Los Angeles, where there's quite a bit of mass transit not as much as cities like Chicago, New York. It is down way way way down I mean, you're talking 80% to 90% down and I think it's because at least.
At this point people are concerned about being environment in close proximity to other people. So what's happening is when you look at business activity down by accident as city.
Traffic is not down by that same number so there's clear evidence that people are driving more and pecked christened averages tuck in the other day about the fact that there are a lot of first time buyers buying cars and so I think we're going to see EBITDA uptick in car ownership as well. So I think I think people are preparing for a period of time at least.
Where they're they're looking for alternatives to mass transit to get to work.
Great on have you had conversations with holding patients may be on offering both partying range wins for those are trained employees, absolutely and I think a number of large companies are trying to figure out.
Is it are they looking to facilitate the efficient purchasing a parking are they looking for shared arrangements, where maybe they don't want a monthly parking arrangement. That's just allocated to one person, but could it be shared.
Between more than one.
One commuter because people aren't going to be in everyday 40 people look for in alternative to monthly parking that maybe not as cheaply discounted as monthly parking, but it's not.
As expensive, it's paying the daily rate and the good news is that our technology platforms can enable all of those sorts of capabilities and so we were continuously talking to companies large and small and all the places where we operate about how we can serve them during those times.
Great appreciate the color Thats lumpiness quarter to yep. Thanks, a lot I appreciate it.
Thank you we have a follow up from Dan Moore. Please go ahead. Your line is open.
Thank you again appreciate it.
I think I heard you were able to keep your commercial locations relatively flat sequentially.
Is that correct and what are your expense expectations for each to.
Given that those dialogues and pipeline of opportunities that you have typically can get back to little bit of sequential growth from the back half year.
Well, we like to we'd like to hope so Dan we we as you guys know that have followed us for a while we went through a period, where we were seeing sequential decline in our commercial applications and we put a major focus on that over the past two years to go out and aggressively acquire new locations from clients. So I was very very pleased to see.
The 48, new management locations in the commercial division in the quarter and our hope is that that will continue and my belief is that we have the capability to expand our commercial location footprint in the in the management contract area.
Perfect. Thank you and.
In terms of competitive wins, you mentioned some competitors, even going out of business clients turning to you for solutions any more color Mark you know just the dot the balance between.
Competitive opportunities versus any incremental pricing pressure might be seeing from competitors.
Yeah, I think right now you know in terms of the pricing of the services, we provide to clients.
I think most of the clients uses a current clients are prospective clients are more focused on.
Can we operate safely in an environment like is can we make sure that the public fields.
Comfortable using our facilities do you have the right cobranded protocols in place and of course, a lot of the technology offerings, we've been talking about us facilitate that because people don't want to touch things and they don't want to interact with other people. So that is probably a more important focus right. Now then can I get the service for a little bit less money.
And of course, a lot of the people to competitors that are having financial trouble. They are not able to do the things that we can do in terms of technology for health and safety protocols and the like so they are turning to us that when I say, they I don't mean that competitors I mean, the owners are managers that property are turning to us because thats really what they're looking for right now.
The other thing that I didn't mention earlier is that some of our competitors are just walking away from lease arrangements and end defaulting on leases and so we're hearing from some of those people to four now desperate to find somebody to kind of step in and help them out and as we talked earlier, we're willing to do leases on the right terms, but we're all.
So saying in some cases some media in may of at least with that other party, but we're not prepared to do lease, but we will do a management contracts with you.
Perfect last one I'll give it a shot any metrics you can provide on July performance from a financial perspective gross profit EBITDA.
No no Dan This is Chris site, we're right in the midst of.
Kind of close in the month, so it's probably a little early for us to be able to giving sort of color around the month of July yes, I think the only thing we did give you in that in the comment was about volumes in July and so we indicated that volume set at a large sample as same store leases were down 60% in July versus about 90% of.
In April so we have some rays of light there in terms of those same store leases in and continue to give us confidence that there is some growth in activity going on out in the world.
Okay, I cant blame me for trying but that's good color. Thank you. Okay now it's fine [laughter].
Thanks.
And at this time actually we've no further questions I'd like to turn the call over to Mr., Marc Baumann for closing remarks, great. Thanks, Richard and thanks to all of you for being with US today I. Appreciate you taking the time to get an update on what's going on at SP, plus and we look forward to speaking to you again next time have a good we'll now take care.
And thank you ladies and gentlemen, this concludes todays conference. Thank you for participating you may now disconnect.
And.
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