Q1 2021 SP Plus Corp Earnings Call
[music].
Good afternoon, ladies and gentlemen, and the.
Welcome to Q1, 2021 SP plus Corporation earnings Conference call.
All participants are in a listen only mode. Later, we will conduct the question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone and as a reminder of this conference call and he'd be recorded I would now like to turn the conference over the our host city Mr. Christopher.
Roy Chief Financial Officer, Sir the floor is yours.
Thank you Joanna and good afternoon, everyone and.
And I, just said I'm Kristopher, Roy Chief Financial Officer of SP, plus and welcome to our conference call. Following the release of our first quarter 2021 earnings.
During the call today management will make remarks that may be considered forward looking statements, including statements as to the impact of COVID-19, and I'll look for 2021 and statements regarding the company's strategies plans intentions future operations and expected financial performance.
The well 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 and the company's earnings release issued earlier. This afternoon, which is incorporated by reference for purposes of this call and available on the <unk>.
P plus website and the risk factors and 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 Matt.
Management believes the presentation of non-GAAP results provides investors with the useful supplemental information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance.
They are provided for informational purposes, only and for all.
The reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented and the tables accompanying the earnings release.
To the extent and other non-GAAP financial measures are discussed on the call reconciliations to comparable GAAP measure will be posted under the regulation G tab and 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 the SP plus website. Shortly after the end of 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, Mark. Thank you, Chris I'm pleased to report that we saw of progressive improvement and business conditions and the first quarter tied to further relaxation of pandemic related restrictions and accelerated vaccine rollout. We believe that these factors have spurred consumer.
Conference and have led to a pickup and travel and other leisure activities, which of course is good for our business at.
At the same time consumers remain cautious which has translated into increased use of private automobiles, rather than mass transportation and many large metropolitan areas and short these positive factors offset the seasonality that we typically experienced in the first quarter of the year and resulted in the quarter coming in better than expected.
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We also had a $4 $8 million benefit and the first quarter related to certain cost concessions that were onetime in nature taking.
Taking net nonrecurring benefit out of the first quarter adjusted gross profit the quarter was still slightly ahead of fourth quarter 2020 levels. Despite the fact that Q1 is historically, our slowest period with the upside coming from both our commercial and aviation segments.
While it's still early in the year, our first quarter performance increases our confidence and the gross profit and G&A guidance. We provided in late February with.
With respect to G&A, we continue to closely manage our cost structure, while making ongoing investments and our technology offerings to support future growth. Our G&A run rate is projected to be 26% lower and 2021 than it was in 2019 at the midpoint of our guidance this significant reduction.
<unk> includes systemic changes and efficiencies that we've implemented throughout the company, which we believe will help us return more quickly to pre pandemic levels of EBITDA.
Additionally, once business conditions return to more normalized levels, we would expect to exceed pre pandemic EBIT of levels as we leverage our more streamlined organizational structure and G&A cost pace at.
At the same time, our operating structure and value proposition continued to improve.
First of all management contracts now comprise 86% of our commercial portfolio up from 81% at the start of last year, creating more visibility and predictability. We believed that the stability of resulting from this shift which shields us from exposure to utilization as well as increasing labor rates and other operating.
Cost is especially important now and in the post pandemic environment, while we're still open to lease arrangements with clients who require them our leases will be structured and ways that mitigate risk for example through shorter terms or built and cancellation clauses.
Second our market position has been further strengthened by the weaken competitive landscape, which has seen some operators fold altogether or suffer major financial setbacks and distractions, making them less desirable partners for facility owners SP plus has a reputation as an operator that lives up to its obligations and delivers on service.
Levels. Consequently, we expect this environment should provide us the opportunity to increase our market share.
And after a year of very challenging business trends were seeing improvements across our operating footprint.
The first take a look at the travel landscape travel is picking up for a number of reasons, including improved customer confidence and pent up demand after more than a year of quarantining and basically sheltering in place and the first quarter. We saw travel volumes progressively increase especially over spring break this is consistent with TSA.
Data that show a recovery and air travel underway with month to month sequential improvement and travel levels.
Hotel occupancy rates also improved in many geographies during the first quarter based on the metrics. We monitor experts are generally predicting the Trevor will increase even more and the second half of the year.
With airports increasingly busy they are open to solutions like the ones, we provide which reduce congestion and and April social distancing. We successfully manage the influx of post Super Bowl travelers with our curbside <unk> check and at the Tampa International Airport and the outstanding performance of our team led to a new ongoing contract at the airport.
We continue to seek to provide additional service such as those for existing clients, expanding our growth potential and addressable market.
Shifting to our commercial business, we expect commuters and metropolitan areas to continue to show a strong preference for using their personal vehicles for the foreseeable future available data on miles driven and total paid support our expectation for a continuation of that trend as more people return to their workplaces and many urban locations.
Parking activity increased during the first quarter and in some cases businesses at or ahead of pre pandemic levels. We think this is a trend that is here to stay and this increased demand makes our technology offerings, even more relevant and useful.
We consider technology, a key differentiator for SP, plus and an important competitive advantage for us and retaining clients and winning new business clients value our proprietary offerings and we continue to invest and the digital transformation of our industry. We issued a press release earlier this week that highlights the great progress, we're making with our various sphere.
Our products and digital offerings, we now have almost 400 facilities across the U S and Canada that of transition to the sphere commerce on demand Gateway solution, which allows daily parkers the auction to bypass the pace station or any interaction with parking equipment of personnel to quickly and securely pay on their personal smartphone are.
Ice in the comfort of their own vehicle. We're also rolling out our touchless capabilities at gated locations and are making good progress momentum remains strong as both of our clients and parking customers increasingly adopt our digital offerings as evidenced by of 77% increase and reservation revenue on our proprietary parking dot com.
The form from Janney.
January to March of this year.
In summary, we're very pleased with our first quarter performance, our market positioning and the improving business conditions that we see on the horizon, Chris will now provide you with the more detailed financial review.
Thank you Mark I will now go I will now give a more detailed view of our adjusted results for the first quarter of 2021 and.
Adjusted gross profit for the first quarter of 2021 was $40 1 million, which excludes restructuring and integration related costs and a small impairment charge. This represents a 16% year over year decrease from $47 7 million and the year ago quarter, mainly due to the pandemic related.
<unk> and business activity over the last year.
And as Mark already mentioned offsetting the impact of the pandemic related decline was a $4 $8 million benefit this quarter related to certain cost concessions, which are not expected to reoccur.
First quarter of 2021, and adjusted G&A expenses totaled $20 3 million, which excludes $700000 and restructuring and integration related cost the.
This was just the $100 higher than the 2021st quarter.
While relatively flat this does reflect significantly higher performance based compensation accruals and 2021 compared to the first quarter of 2020, where we actually reversed out the plan to date accruals for our long term performance based compensation programs given the onset of COVID-19.
If you exclude the performance based compensation accruals from both periods, our G&A would have been well below last year.
Our cost reduction efforts are even more evident when compared to the first quarter of 2019 has adjusted G&A and the first quarter of 2021 declined 23% from that period, reflecting.
Reflecting the success of our cost actions and laying the foundation for us to operate as a leaner organization and better leverage gross profit.
Our adjusted earnings per share were <unk> 27, compared to 64 and the year ago quarter.
Both 2021, and 2020 numbers exclude restructuring and integration related cost non cash impairment charges amortization of acquired intangible assets and related tax impacts and reflect the same trends that we spoke about.
Moving to our cash flow and the first quarter of 2021 cash from operations was negative $1 million and free cash flow was negative $3 9 million.
Although these two metrics declined year over year from positive cash from operations and free cash flow of $8 2 million and $2 8 million, respectively. Our performance and the first quarter of 2021 was better than we expected and consistent with historical trends, where the March quarter is usually the lowest operating and.
Free cash flow quarter of the year and often negative.
All in all we still expect to grow free cash flow and 2021 versus 2020 as previously guided.
Based on our current results and visibility we are reaffirming our full year of 2021 guidance for gross profit of $140 million to $160 million G&A of $75 million to $85 million and a higher free cash flow euro year to year.
We continue to expect our performance and the first half of the year to remain similar to the second half of 2020 with a pickup and the second half of this year.
With that I'll turn the call back over to Mark for some closing thoughts.
Hey, Thank you, Chris we believe SP, plus is well positioned to emerge from the pandemic as a stronger company with an expanded addressable market greater visibility and and improved cost structure, we believe our ability to reduce congestion and improve mobility will accelerate demand for our services and a post pandemic environment and.
We expect that the catch up and travel and other new trends and commuting and return of the workplace has the potential to be multi year business drivers for us now.
Now I'd like to go back to the operator to open the call up for questions. Thank.
Thank you so much ladies and gentlemen, if you have a question and at this time, the French size and the number one on your Touchtone telephone is your question and asking and answering and you remove yourself on.
Thank you ladies and gentlemen.
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Your first question comes from the line of Mr. Yang from T J and Securities. Your line is open.
Thank you and good afternoon, Mark and Chris how are you.
Doing well.
Thanks for taking the questions.
You indicated Q1 was driven by improved conditions, obviously, despite the seasonality.
Typical seasonality and the conditions improve sequentially through the through the quarter given that the.
It reasonable to assume too cute.
<unk> gross profit and EBITDA.
To sequentially improve barring some significant change and momentum in May and June.
While we would have expected Q2 to be a little better than Q1 any way because as we said Q1 is our seasonally weakest quarter, but I think if if.
And if business conditions continue to improve on a sequential basis, and obviously our business will improve and the same sort of way I think we mentioned and our guidance that our guidance is based on the first half of 2021 being comparable to the second half of 2020.
From a gross profit point of view and there were obviously some very strong months in 2020 as well and the later half of the year. So I think we're encouraged by what we saw and we certainly are seeing an increase and business activity month to month.
Very helpful and then taking that a bit further and kind of taking into account obviously the.
The customer concession that you pointed out.
The.
The guidance starts to look a little bit conservative Im wondering if theres investments are expensive expenses contemplated in the <unk>.
Back half of the year that we should be thinking about or is it simply a function of just wanting to remain conservative.
Yes at this stage of the year.
No Theres no big investments contemplated I think that and when we when we were looking at the year and bear in mind, we only formulated and gave our guidance of about six weeks ago. So not so much happens in six weeks debt gives us greater visibility into whats going to happen and the latter part of this year I think we expected.
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Gradual ramp up and very little improvement and performance in the first half, but then our guidance contemplated more significant ramping up and movement and the second half we don't have any new insights now that let us.
<unk> see that the second half is going to be any better than we thought it would be six weeks ago. Now obviously, we're getting new information of all the time and as we move into the second quarter, we will get a little better picture of of the second half of the year, but I think at this stage, we obviously feel better about our guidance and we did when we gave it because we've had a great first.
But I think it's premature for us to be thinking about increasing our expectations for the year.
Very helpful on the sneak one more and if I may just focusing on the aviation segment or sort of portions of your business.
How does that gross profit perform year over year.
On the quarter and and with air travel bookings clearly picking up.
At least in terms of leisure.
And even back to pre pandemic levels and some cases, how quickly do you think we can get back to 2019 of pre pandemic gross profit on that side of your business and.
And if you don't want to get the timetable.
You mentioned in the prepared remarks, so we can.
<unk> debt.
For the overall business is that the application and aviation and set the case and aviation as well and it was a mouthful, but I appreciate any comments, it's a lot yes I mean.
I don't have the.
The segment information in front of me, but I'd be surprised if aviation performed better than a year ago and the first quarter.
But the.
The reality is is that as we've talked before our aviation segment.
Has our entire base business and it and net business was severely impacted during COVID-19 is travel and leisure really ramped down and so that business will come back with travel and leisure resuming and I think there's some great indications I see the number of the airlines are going to be running fairly.
The robust schedules and the summer for travel and leisure. This year I think they are talking about getting back to pre pandemic levels overall in 2023, including business travel so we're expecting to see continuing.
The improvement and travel and as those as those.
As those things improved and the base business will will follow that along and come back and.
And you didn't ask the question, but kind of related to that.
Our bags business was able to expand their delayed luggage business by getting a new contract with Hawaiian Airlines during the quarter, where they are now going to be delivering delayed luggage for Hawaiian Airlines and 21 market. So there's been a lot of activity.
Caring for the resumption, but the pace of debt resumption is really going to follow the the amount of leisure travel that people are doing.
Very helpful. So any I'll circle back with any follow ups. Thank you. Thanks, Dan Thanks, Dan.
Your next question comes from the line of Jim Maloney of Indian moving your line is open.
Good afternoon, Mark Good afternoon, Chris Thanks for taking my questions and Tim F&I.
Right.
So the guidance question was asked so I'll ask something else the euro.
Sure.
And on the commercial side of your business have you downtown commercial customers, particularly and office buildings and they approached you about their changing parking needs.
As a result of more employees choosing to work from home. If so can you talk about how those needs have changed and how that might impact your business.
Well I'd say, yes is the answer and not just recently I mean, I think also of COVID-19, we've been and ongoing discussions with our commercial office building clients and the property managers that often represent them because they were very interested in our protocols for managing through COVID-19 do we have.
All of it playbook to keep people safe and our technology accommodate social distancing and limited congestion and all of the touch the stuff that we've talked about on these calls and also was in our press release earlier in the week of our sphere. So we've had a lot of ongoing conversations, but I think more and more of companies are.
Recognizing that this work from home thing while it has been a good stock GAAP to get us through the pandemic and in general people of Coke pretty well that there is something missing and loss from the from the effectiveness and the productivity and the corporate world and so I think most of the clients. We're talking to you were talking about.
Getting people back hopefully have time or more and some of that will depend on local regulations around capacity and the like but many markets now and cities are raising those capacity limits I just saw on New York was raising theirs and other cities are as well. So I think I think more people will be working in the.
The office than maybe we would've imagined even a few months ago and there's a lot of companies are talking now about bringing people back in the summer or sort of of labor day and not kicking the can down to 2022. So I think we're going to see a resurgence of that our technology can accommodate any variables. So if people want monthly.
<unk>, obviously, we can provide debt if they want of daily parking and we can accommodate debt, but many of our clients are saying can we offer of multi day pass it E.
The discount from the daily rate, but.
Not as discounted as the monthly rate and the answer to that is yes, so with our sphere suite of technologies, we can really accommodate whatever the demand situation might be or whatever sort of pricing regime of the client might want the one thing I should remind you of though is that for the most part of our management contracts are.
Skewed toward our commercial space and so we are less susceptible to fluctuations in volume and so while it will be great to see people coming back and parking and office buildings, we didn't get a lot of downside and our business when they when they cut back on doing that and started working from home and we're not going to get a big upside when they return.
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Always a good reminder.
The.
Overwhelmingly managed contracts, thanks for tomorrow and that and their Mark appreciate that.
Yes.
Just staying on along this thread a little bit.
So your office building customers, they're not asking to restructure contracts at this point and the face of more employees working from home, you're not having overwhelming conversations along those lines.
Because I think are our clients for the most of our realized debt the fees. They pay us on a very very small percentage of the revenue that we handle on their behalf and the scope and scale of the operation. So they are really saying to us what can we do to bring technology solutions.
How can we if demand is lower and general how could we bring more partners to our facility and so we have our data analytics team thats using technology tools that we've created to number one scrape the web and find out and know on a regular basis, what the competitive pricing is so that we can optimize.
And the rates that we're recommending to our clients and we're also of given additional tools to our local teams to be able to.
And do marketing and promotional programs to try to draw customers and we have expertise and yield management and pricing and so a lot of our clients are saying give us the marketing package the digital strategy and the analytics package all of which is part of our sphere.
Umbrella to optimize both the rates charged but also the actual revenue generated at the facilities. If thats. The client's goal. So if anything and a world like this where there may be more competition for cars.
There may be there is a greater need for our services than there might have been in the pre pandemic world.
Okay, well you and you anticipated my last question along the line of thinking which is okay. So you're protected from the downside what about the upside scenario are you hearing from your clients that they may be wanting they may be having more employees that want to drive and that there might be more competition for the limited number of Parker.
And spots at the William Blair building for example than they were pre pandemic because folks don't want to ride the metro and things like that are you hearing things like that from your office clients and in some cases and that's what's happening and I think as we said and our prepared remarks.
And at certain day parts, which is the the morning commute and some markets and some locations we're seeing volumes that are above.
2019 levels or above and I drove into Chicago today from four of this call and I was just shocked at the amount of rush hour traffic that I was stuck and at eight o'clock. This morning. So.
I think I think of lot of people are driving the are still are avoiding public transit we expect it to continue but.
Regardless of what the each client's local needs are we have tailored solutions that are customized for them to help them.
Their objectives, and that's I think something that everybody can use and needs and and.
That's why I feel very good about.
And the interest in our services and of course, as we indicated in our prepared remarks.
The the number of transactions flowing through our parking dot com reservation system are up 77% just from January.
Seeing more people requesting and buying monthly parking through our digital systems and so I think there is definitely a growth and volume going on right now and we expect it to continue throughout the year.
Okay, Alright, I appreciate all the color. Thanks for taking my questions. Thanks, Tim Thanks, Tim.
Thank you once again, if you would like to ask the question you May Press Star then the number one on your Touchtone telephone and your next question is from the line of Kevin Spanky Barrington Research. Your line is open.
Good afternoon and.
And wanted to follow up you mentioned again there.
On the.
77 per.
<unk> increase and parking dot com.
Revenues from January to March and.
And I assume that's just kind of <unk>.
Following the.
The rebound and business activity Youre seeing here and increased usage of the personal vehicles, perhaps but.
Is there anything specific you are doing internally to drive greater awareness of.
Parked and dot com or I guess and any of your other.
Digital solutions I E gate lists et cetera, among among consumers.
We are and although.
Because of lot of the the.
The initial selling of these technology capabilities are really in the business to business environment. Our main focus is trying to make sure that our current clients and prospective clients are aware of our capabilities under the sphere umbrella. So during the past six to eight months, we have created and addition to the new technology.
But.
A whole array of videos and other marketing and communication materials that we put out on to Linkedin and other social media platforms to try to gain visibility for our capabilities in these areas and obviously, everybody who accesses those platforms not just the <unk>.
Potential clients or existing clients. There are also people like you and me or just going about our daily lives and we see these things out there. So that's been our main means we've obviously put a number of press releases out about this stuff and hopefully.
And a key focus for us is really signage at the facilities and so we really made a push to make sure that people are aware of parking dot com and and downloading that app and the capabilities that they can take advantage of because obviously everybody wants the low friction.
Very efficient.
No touch kind of experiences and we can provide those to the traveling public.
Okay great.
And and also obviously with the rebound and travel.
Youre seeing.
Increased business businesses activity, but specifically to.
Biggs.
Is there any evidence early on that.
The remote check in services is gaining in popularity kind of.
Above and beyond what you're just seeing in terms of the.
The rebound and.
And.
Passenger travel.
Well.
The what we need to go back a little bit pre pandemic. We spent 2019, introducing sps over 70 airport clients two bags capabilities, particularly around remote check in and I would say virtually all of those clients were very very interested and how that technology.
<unk> could be used to create a better travel experience and reduce congestion and friction now as we were about we launched a couple of actual.
The expanded operations using that technology, which we've talked about before and then the pandemic came along and all of those things went on pause. So what's happening now is that a number of those conversations are re energizing and a number of places that had.
Scaled back the <unk>.
AG services, either at airports or airlines because of the pandemic are now getting ready to or have already started to turn those things back on so I think youre going to see both the ramping back up of what was ramped down.
But also our ability to go capture some of those business synergies between SP, plus and bags in the months ahead.
Okay got it and then.
And you continue to talk about.
All of your market position is strengthened as some other competitors kind.
Struggled this and this environment and.
And longer term I think right now you are kind of and debt pay down mode, but longer term do you think that maybe create some acquisition opportunities for you and the parking space of May.
Competitor, who has been weakened or would you rather just kind of continue to take share.
Organically I guess.
Well, we never say never to anything that might make sense for us if we can acquire something and create value, but right. Now we're laser focused on our strategy of for growth and also the rollout of our technology strategy and Thats got and our main focus and I think given the successes we've had over these past few more.
And some of the feedback were getting when we win new deals about the value proposition around our technology and the other things that we do I think thats going to be our major focus but.
Some things came available and at the moment.
The worth looking at I mean, that's been our practice for many many years, but I'd say right now our key focus over the next 12 months is really driving the organic growth and having that be led by the by the digital investments that we've been making and and while we've talked about a lot of the new capabilities. We're.
We're not standing still so it's not as though we created a bunch of digital capabilities and now we're and implementing them. Obviously, we are doing that but at the same time of our development teams are working on new digital and additional digital capabilities that either respond to new opportunities, we see in the marketplace or things that were already.
And on the to do list, because we think that they can accelerate our growth. So we have now really of two pronged focus one is to rollout the stuff that we have developed the net we are making excellent progress on and at the same time continue to rollout new capabilities and so you'll hear me talk later in the year about additional technology capabilities that will be.
Rolling out to the market then.
Okay, Great and then just last for me.
Are you able the variety.
And any additional color just on the cost concessions.
Concessions you.
Called out there and also does that benefit the management contract gross profit or the lease.
Gross profit or was it kind of split between the two.
That'll be that'll be all lease type contracts.
And that really is something that we called out and this quarter just because as you kind of go back and tie and some of these negotiations that we work through with our clients. Some of them are a little bit quicker on the happened a little bit faster and so we're able to kind of get that recognize some of those take a little longer conversation journal.
A little bit.
The longer in terms of getting to a resolution and so we called out this one just because of <unk>.
Early too.
2020, and so we just wanted to make sure we called it out debt it was.
Just a little bit unusual for this quarter and it was out of out of period.
Okay got it thanks a lot.
Thank you Kevin.
Thank you. Your next question is from the line of Mark Murphy from Sidoti. Your line is open.
Hi, good afternoon.
Afternoon.
So I wanted to touch back on the technology side of things and I wanted to sort of.
Sort of delve into a little bit about maybe the demand we've seen so far.
And particularly the commentary around the facilities that you've worked with and and the opportunities that you've seen since the rollout I was wondering if you could talk a little bit about maybe what that customer makeup looks like I mean, you did make mention of aviation and commercial operations, but is it if you were to look at the folks who of initially.
The embrace the technology offerings is it similar to the customer makeup that you've seen up to this point or of some certain segments or areas of little more active and aggressive and others.
Sure I think that.
It depends a little bit about what part of the sphere umbrella.
And portfolio of capabilities, we're talking about if you, but if you talk about the sphere gate.
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And on demand, that's really for surface parking lots and other facilities that generally would have just ahead of pace station and if those exists and the aviation segment and we probably have some airports I'm sure. We do that have those the net solution can be implemented and the aviation segment, but it would be predominantly.
And in the commercial segment, where you would see of freestanding parking and facility. The gated solution, which we are in the early stages of rolling out could really apply to any parking facility across any of the verticals and the idea is really to try to create the same.
No touch low friction transaction experience for the Parker that doesn't involve them getting out of their car of waiting in line at a pace station and an environment, where there are going to be gates and parking equipment with Kate So it's not really going to be skewed toward.
Any one vertical or any one segment obviously.
Those technologies would it be used.
At our special events or or valet locations, but then we have talked in our press release about our our mobile solution for event parking, where we can capture credentials and people's payments for sporting events and other big events and while those events have been on hiatus or at very.
Low levels during the pandemic.
We have not been on hiatus, we've been working on our development capabilities and we've now been able to test, our new tools out and those environments and youll see us rolling them out there. So I think mark the answer is regardless of the verticals.
<unk> be some element of our digital strategy, our technology tools on.
And to the sphere brand and that we're actually able to rollout and utilize and so that's our we want to grow and all of our verticals and they all need to be supported by technology capabilities, but those capabilities and we'll have to be tailored and some cases to the needs of those verticals.
Okay, Great and then switching gears I was wonder if you could talk a little bit about kind of where we are as far as the.
The national accounts and activity and maybe sort of what that the mix may look like now and maybe the takeaway and.
Activity levels that you're seeing from national accounts versus.
It's just the us.
Very major focus as we've been talking over the last year and I would say.
COVID-19 has definitely impacted I think the pace at which certain clients are making decisions we have clearly.
Clearly a major focus on healthcare and I think we have just seen net for the most part of many of our hospital clients and prospective clients are have been grappling with the surgeon and patient and the other things that go on during COVID-19 and so the pace at which they have been making any kind of decisions has been very very slow. So it's not like we're seeing.
Competitors, and winning hospital and healthcare deals and we're not but the we have the status as the preferred parking operator from three group purchasing organizations, we are working on bids and proposals for them.
But it's been a little.
Slower process than we would've liked but I think the the value proposition that we can bring to health care.
Strong and so I expect that as they come.
Climb out from some of their other backlogs around COVID-19 that they'll get back to it I think and the commercial office building space as I was commenting earlier on one of the earlier questions.
As a keen interest by property managers and owners for how do you both managing the post COVID-19 environment, but also how do you capture Parker's who may be.
And there may be fewer of them potentially and certain markets are around certain buildings and so how do you capture of higher share of those and of course, our our general technology.
Capabilities are going to help with that but I think what we're really seeing now is as and interest in greater visibility into what's going on at the facilities and so within our sphere IQ suite of dashboards.
Can provide drill down capabilities to see what is going on at the facilities C. All of the key metrics, whether it's revenue or costs of operating and I think theres been a renewed interest and net and in fact, we're looking now, adding some resources to our national accounts team and capabilities because.
The amount of inquiries and the amount of interest that we've generated around particularly around sphere, but also of the data analytics and the sphere and the IQ capacity is really causing I think and uptick and interest for us from a national account point of view, so hopefully as the year progresses, we will be and are positioned to bring some.
Some of these things home and be able to talk of item on future calls.
And yes, the data part of it is really really intriguing and I'm looking forward to that overtime. The last thing for me is just the touch a little bit of around the <unk>.
Management contracts.
And thank you for providing leading up to 86 per cent of the commercial.
Net locations there of general thoughts on answers as to what the ceiling of debt may be.
Yeah.
Is it.
Is that something that you think is attainable and whatever that fueling may end up being.
And that something that again would be attainable by the end of the year. Thank you.
Oh, you mean, the retention rate for if youre talking about the retention rates for commercial management contracts is that what you're asking about.
And then on the the management contract and just wondering as far as the percentage of the commercial segment locations, but yes the.
And the Senate sorry, Yes got it got it and if you wanted to mentioned something about retention rate that would be great too.
So I can do that too I was just thinking about I was thinking about that when you said when you were quoting percentages wonder what he was talking about exactly.
I think naturally you will see that percentage growth and thats, because even without the pandemic. It was growing primarily because of the owners of real estate more and more of preferring that contract form they want to have control over their properties and they.
They are moving away or this is an industry trend away from leases.
So that was already growing I think obviously the steps we took during the COVID-19 to evaluate all of our existing leases look at whether we were entitled to.
On the payments or other concessions.
Or whether some of the leases might terminate we tried to do all we could to take advantage of those things during the pandemic and so clearly our percentage of on.
And the absolute number of leases has come down from over 600, a year ago two of little over 400, now. So I think that will continue to be the natural outgrowth of the things, Chris and I are very disciplined around.
What commitments, we're willing to make on leases just given the general difficulties of predicting.
Will there be future Pandemics, what will happen too.
The wage rates and the like and so.
I think youll see the size of our lease portfolio, not really growing and may even contract further in the years ahead and.
<unk> management will be the main focus.
As to where it will be at year, and who knows but I'm sure someday it could well be over 90%.
And we've had times and our past before we acquired various companies, where we were over 90% because of those same trends.
Alright, okay.
Great. Thank you very much thanks, Mark Thanks, Mark.
Thank you and.
Showing no further questions at this time I would like to turn the conference back to Mr. Marc Baumann for closing remarks.
Thank you very much and I just wanted to say thanks to all of you for joining us today and spending time with us talking about our performance and the first quarter and we look forward to talking again and a couple of months take care.
The speakers, ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
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