Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Hudson Ltd.  (NYSE:HUD)
Q4 2018 Earnings Conference Call
March 14, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Hudson Group 2018 Fourth Quarter Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Debbie Belevan, Vice President of Investor Relations. Please go ahead.

Deborah Belevan -- Vice President of Investor Relations

Thank you, operator, and good morning, everyone. Thanks for joining us. Earlier this morning, we released our third (ph) quarter results. Please note that we released our results at the same time as our Swiss-based parent company, Dufry. You can find a copy of our press release and the presentation on our website at investors.hudsongroup.com, along with our 2018 Annual Report. I also invite you to take a look at our newly redesigned company's site, hudsongroup.com.

On today's call, we'll have Roger Fordyce, our newly appointed CEO; and Adrian Bartella, our CFO.

Please note that management may make forward-looking statements regarding their beliefs and expectations to the company's future business prospects and results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. Although, we believe, these expectations are reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will be realized. We urge everyone to review the Safe Harbor statements provided in our earnings release, as well as the risk factors contained in our 2018 Annual Report on Form 20-F, which is available on the SEC's website.

During today's call, we'll refer to both IFRS and non-IFRS financial measures of the company's operating and financial results. For information regarding our non-IFRS financial measures and reconciliations to the most directly comparable IFRS measures, please refer to the earnings release.

And with that, I'll turn the call over to Roger.

Roger Fordyce -- Chief Executive Officer and Director

Thank you, Debbie, and good morning. It's my pleasure to join you on my first earnings call as Hudson's newly appointed CEO. While I'm new to this position, I'm not new to the company as I've just celebrated my 30th anniversary this past September. I've had the fortune of being an integral part of Hudson's success over the years, and I'm eager to lead our highly talented team as we continue to grow the business.

We have many exciting new initiatives on the way and great opportunities that lie ahead. I would like to start the call this morning by providing a high level overview of the fourth quarter and full year 2018. And then I'll turn the call over to Adrian to provide specifics on our financial results, as well as color on our outlook for 2019.

2018 brought many exciting milestones for our business. In addition to the IPO in February, we had a number of key RFP wins, extensions and expansions that will enhance our operations by over 50,000 square feet as these stores come online, and nearly 5% increase of our current footprint. We also recently surpassed the 1,000 store mark, a key measure of the scale we have achieved across North America's travel hubs.

Finally, we made impressive strides in our food and beverage business, growing this category to nearly 40% of our total sales. This includes product mix within our convenience stores, as well as stand-alone food and beverage operations. We are now positioned as a formidable competitor in this space, and maybe unless to capture a larger share of spend among air travelers who are looking to fuel up before a flight.

Starting with our top line, we delivered full year organic sales growth of 7%, in line with our expectations and long-term framework. Fourth quarter organic sales growth, which is a combination of like-for-like and net new business growth, came in at 4.1% impacted by a continuation of the headwinds that we discussed on our third quarter earnings call, namely the FX impacts and softer sales in our duty free and luxury business, as the result of trends with Chinese travelers. While it's important to note that these trends have no impact on our core travel convenience business, which comprises 76% of our sales, they still influenced our overall like-for-like sales growth, which increased 2.5% in constant currency during the quarter.

To help life (ph) drive sales in our duty-free business, in December, we implemented a number of compelling offers, including tier discount programs. These programs drove increased foot traffic and passenger spend leading to positive gains in the final month of the quarter. Despite these programs, we were still able to drive solid gross margin expansion of 180 basis points in Q4 2018. Meanwhile, for the full year, gross margin increased to 140 basis points, driven by our ongoing vendor negotiations and sales mix shifts toward higher margin categories, including food and beverage.

Net new business, the other component of our organic sales growth was up 3.3% for the year. As discussed, there is variability in this metric from period-to-period, given the nature of our industry, as it relates to the timing of new RFPs and project construction. In this respect, the first half of the year was stronger than the second half, as we had some larger projects coming online earlier in the year.

In terms of recent wins, in the fourth quarter, we were awarded four RFPs under an eight year contract at Salt Lake City International Airport, which includes 13 travel convenience, luxury, and duty-free stores, and doubles our existing footprint in this location to over 12,000 square feet. We also had a number of contract extensions during the quarter, including Dallas Love Field, Dallas/Fort Worth and Vancouver.

Subsequent to year-end, we also announced a new 10-year contract win at Indianapolis International Airport, which adds another nine stores and 9,000 square feet to our portfolio. We also just announced a new contract win, an extension of an existing contract at Philadelphia International Airport, which will more than double our current footprint to over 17,000 square feet. These wins and extensions exemplify Hudson's strong industry reputation, track record for creating retail packages, and our ability to tailor programs to meet the needs of travelers.

With new contracts, come new stores. And during the fourth quarter, we had a number of new notable store openings. At LaGuardia, we unveiled five stores that were part of an RFP won last year and the new reimagined Terminal B. Included in this win was our first FAO Schwarz store, a Hudson one duty-free store, and MAC. We also partnered with local iconic New York independent bookseller McNally Jackson, offering a bookstore with a true sense of place.

At Boston Logan, where we previously won a new 10-year contract covering over 40 stores, we completed four store openings during the fourth quarter, including a Hudson Tumi, Tech on the Go and Ink by Hudson. We plan to complete another 23 new store openings in Boston in 2019.

As we've discussed in the past, airport directors are looking for operators who can not only create a custom portfolio of concepts, that will be highly productive, but also those that can deliver a local design and feel. One of the ways we achieve this is by localizing our Hudson stores in certain markets. Some examples of new stores we completed this quarter include our Ingenuity Store by Hudson in San Francisco, and two Island Market stores at Billy Bishop in Toronto. As we look ahead, Hudson has a bright future.

Overall, travel retail has solid long-term fundamental growth drivers, including continued passenger growth, ever expanding white space opportunities, as airports continue to invest in infrastructure projects. In fact, the Airports Council International or ACI just updated their forecasts and estimates that airports will need to invest nearly $130 billion through 2023 to modernize aging facilities, and keep up with growing passenger volumes. This bodes well for our line of business.

At Hudson, we have a solid foundation built upon our leading market share, decades long experience in the travel retail industry and our positive track record and relationships with our landlords. These strengths will allow us to continue on our trajectory and capitalize on the many opportunities that lie ahead. The Hudson Group management team and I, are committed to delivering value for all of our stakeholders, including our investors. My vision for Hudson over the next several years is to establish -- further establish ourselves as a preeminent airport retailer. At the same time, we want to solidify our platform to support a thriving food and beverage service, beyond QSR, beyond specialty coffee locations that we currently operate.

Expanding our food and beverage service capabilities, will allow us to bid on larger food and beverage concession contracts, with the full scope of offerings including full service sit on restaurants and bars. We will look to achieve this through our organic growth and by continuing to evaluate ideal M&A targets. As a combined operator of both retail and food and beverage locations, we can cast a wider net and pursuit a broader range of concession opportunities, including smaller airports that may currently not meet our minimum return thresholds. This is the natural evolution of our business. We are excited about the numerous initiatives under way and we look forward to reporting on our progress in the upcoming quarters.

Now I'll turn it over to Adrian for more details on our financial results.

Adrian Bartella -- Chief Financial Officer

Thank you, Roger. We are pleased with our solid financial performance for the fourth quarter and full year 2018, which highlighted our continued ability to drive organic sales growth and net new business wins and strengthen our gross profit margin. You can find details of our fourth quarter and full year performance in our press release. So, I will just provide some color in my comment.

I do want to point out that our bottom line results were impacted by recording of a non routine impairment charge of $10.4 million in the fourth quarter related to a location that had performed below our expectations. This was a non-core hotel location, location outside of our airport business. Excluding this non-routine impairment charge in the fourth quarter 2018, adjusted net profit would have been $14.9 million or $0.16 on adjusted EPS base.

Organic sales growth, which is a combination of like-for-like sales and net new business was 4.1% during the fourth quarter compared to 6.5% in the third quarter of this year, and 9.4% in the fourth quarter of 2017. For the full year, organic growth was 7% compared to 8.8% in 2017.

In terms of the two components of organic growth. First, like-for-like sales. For the quarter, like-for-like sales grew 1.6% or 2.5% in constant-currency, compared to 5.6% or 4.5% in constant-currency, last year. Q4 like-for-like sales growth was driven by robust duty-paid and convenience growth, which was partially offset by weaker duty-free and luxury sale, as a result of trends in Chinese passenger demand. For the full-year, like-for-like sales growth was 3.7% compared to 4.8% in 2017.

The second component of organic growth is net new business. The total contribution of net new business to organic growth was 2.5% in Q4, and 3.3% in 2018 versus 4% in 2017.

Turning page to the income statement. During the fourth quarter, our gross margin improved 180 basis points to 64.3%. And gross margin for the full year 2018 increased 140 basis points to 63.7%. Key drivers were improved vendor terms and continued sales mix shift to higher margin categories. As we previously noted, there was a change in the structure of some vendor allowances, which benefited our gross profit margin. Starting in 2018, but retroactive to January 1st, some of our vendors support now comes in the form of reduction in costs offset instead of advertising income.

Turning to expenses. Within operational expenses, we have selling expenses, personnel expenses, and general expenses. For these line items, the explanations for the trend in the fourth quarter are similar to that for the year. For the fourth quarter selling expenses rose 2.6% to $108.6 million. For the full-year selling expenses increased 5.7% over the prior-year to $445 million. As you may know, concession fees, which compromise the majority of this line item are most variable expense driven by net sale. Despite an increase in selling expenses year-over-year, for 2018, selling expenses as a percentage of turnover improved slightly, totaling 23.1% as compared to 23.4% in 2017.

Regarding the fourth quarter 2018, personnel expenses rose 12.2% to $107 million. Personnel expenses increased 10.7% for the full year 2018 over 2017 to $411 million. This increase in personnel expenses was driven primarily due to wage increases and new hires associated with the opening of new stores location, and additional personnel expenses up on becoming a public company. In addition, as noted on our last earnings call, Q4, 2018, saw the impact of our new long-term incentive plan, which contributed approximately $1.8 million to personnel expenses. For the full year 2018, personnel expenses represent a 21.4% of turnover, an increase of 80 basis points as compared to 2017.

In fourth quarter 2018, the general and administrative expenses were down 11.6% to $34.2 million compared to last year. General expenses decreased 16.3% to $131.4 million for the full year 2018. As a percentage of turnover, general expenses decreased from 8.7% in 2017 to 6.8% in 2018. The key driver of the decrease was the lower franchise fees paid to Dufry. As you may remember from previous calls, as of January 1, 2018 we paid Dufry an average about 1% of net sale in franchise fees, which decreased from about 2% of net sales in the previous year.

Turning to our balance sheet and cash flow. As of December 31, 2018, our net debt position was $310 million, resulting in a net debt to EBITDA leverage of 1.3 times. A notable improvement of a net debt to EBITDA leverage of 2.7 times in 2017.

Cash flow from operating activities for the year were $232.7 million compared to $130.8 million in 2017. The increasing cash flow was driven by improved operating performance and timing of franchise fees payments to Dufry. Capital expenditure decreased to $69.3 million in 2018 from $87.8 million in the prior year, as a result of timing of new projects.

Lastly, I would like to comment briefing our expectations for 2019. In the first half of the year, we expect to see similar current headwinds like in Q3 and Q4 2018, due to the weakening of the Canadian dollar versus the US dollar. While our duty-paid business is robust and growing, we expect continuous softness in duty-free and luxury business, as a result of spending trend with Chinese travelers.

In the second half of the year, we anticipate that the currency headwinds and macroeconomic factors would dissipate, as we anniverse (ph) their impact. However, we will face some contra-exploration that will impact second half growth, while new stores wins come online. Specifically, we have few concessions that we will be rolling off in 2019. While unfortunate, the loss of this contract is not a complete surprise. Expired few years ago, but the timing of closures was not clear. These operations would be closing down primarily in the second half of the year. While it's always unfortunate to lose contract, this business had its ups and downs. And as we have said, our extension rate is now at 80%.

Our diverse portfolio of contacts and our ability to navigate these ebbs and flows has made us successful over the 10-years history. There has been no change in our win rate and our ability to execute on extension and new business opportunities moving forward. like those that Roger already discussed.

Given these factors, we would like to provide some color around our expectations for 2019. While we have confidence in our long-term framework, and believe that our organic growth sales will ramp up over the long-term, as currency headwinds and pressure from Chinese customers mitigate, we expect organic sales growth for 2019 to be in the low to mid-single-digit range.

We expect our gross margin in 2019 to slightly improve and to be offset by some modest deleverage on the personnel expense line, resulting in a flat EBITDA margin in 2019. This excludes the impact of lease accounting changes, which I will discuss in a second.

The effective tax rate is estimated to come in higher at about 40% for the year. Due to the non-deductibility of certain compensation severance expenses and the increase in the BEAT tax rate from 5% in 2018 to 10% in 2019. Consequently, we expect our adjusted EPS, pre IFRS-16 changes to be relatively flat in 2019.

Finally, I would also like to mention that as of January 1, 2019, we have implemented IFRS-16 standard on lease accounting. We have provided an overview in our 20-F, I just want to highlight the key changes and this will bring. Under the new standard, we are required to capitalize the fixed portion of our lease, which amounts to roughly half of our total rent expense. As a result, we would bring about $1 billion on our balance sheet, as fixed assets and debt. There's also P&L impact, which is different than U.S. GAAP filers (ph), in which our rent expenses reduce and we will now -- we will recognise interest and amortization on the capitalized leases. The interest is front loaded during the life of the lease, so we expect a negative impact to the bottom line when comprised with trade line rent expense. We'll provide more details in our Q1 result.

Going forward, we plan to break out the impact of the lease accounting on our results for use of comparison. To be clear, these accounting changes will not affect the fundamental strength of our business, and we do not foresee this affecting our business decisions as we look to drive organic growth.

In summary, we saw solid organic growth in both like-for-like and net new business during 2018, resulting in a healthy year of operating results. The growth levers, we have laid out in the past, including our productivity and pricing initiatives, the resilience of our business, our distinct operating advantages and industry leading position and the temporary nature of some of the 2019 headwinds continue to give us confidence in our ability to achieve our long term three to five year framework. We look forward to building on our progress in 2019.

And now I will turn it back over to the operator to open it up for Q&A.

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) And our first question will come from Seth Sigman of Credit Suisse.

Seth Sigman -- Credit Suisse -- Analyst

Thanks, guys. How are you all? Thanks for taking the question. My first question is around the sales guidance, so low to mid-single-digit organic sales growth in 2019. What's the assumption embedded here for the contribution for -- from new stores, new business ads? And if you could just sort of speak to any more color around the stores that are coming up for renewal in 2019, how that compares to 2018? Thanks.

Adrian Bartella -- Chief Financial Officer

Hi, Seth. It's Adrian. So from -- from a split from organic between like-for-like and net new business, we expect the like-for-like to be somewhere between low to mid-single-digit, primarily because of the pressures we see in the duty-free and luxury business. And the net new business as two contracts I mentioned in the call earlier, starts to close down. The net new business for the year would be around flat.

Seth Sigman -- Credit Suisse -- Analyst

Okay, understood.

Roger Fordyce -- Chief Executive Officer and Director

Hey, I'm sorry, this Roger. I just wanted to complete the part of the second question that you asked on the -- I guess the pipeline and the outlook for the stores opening this year. You know, part of the reason why the sales forecast is slightly for a long term framework is the timing really of store openings, and we've constantly reminded the market of the variable nature of the RFP wins and when stores actually come online. And you know, this year we have -- what we've already reported some great wins, The Salt Lake City, as well as the Indianapolis one earlier this year, a lot of that is very late this year or early 2020, which just pushes out the results of those wins beyond some of the waiting of the loss of the contracts that Adrian mentioned.

Seth Sigman -- Credit Suisse -- Analyst

Okay. So just to sum that up in the context of the low to mid single-digit guidance. When you think about the cadence, should the first half and the second half look similar, because they're separate, I guess, headwinds in the first half and second half?

Adrian Bartella -- Chief Financial Officer

I mean, the first half, would have exchange rate headwinds. I think the first quarter would be probably around 1% headwind from exchange rate. The second quarter should go somewhere between 0.5% to 0.8%. And then we should see the exchange headwinds to go away, as we get through the fourth quarter, but then we will get pressure from some of the contracts which expire before the new contracts get online. So I would say, they would be probably somehow balanced.

Seth Sigman -- Credit Suisse -- Analyst

Okay. My follow-up question is around the gross margin, which has been just a great story this past year. Can you just help us better understand the guidance for up slightly in 2019? Mix should continue to be a benefit, I would think, is there conservatism in here or are there negative offsets that we should be thinking about? Obviously you have a difficult comparison, but just help us better understand some of the puts and takes? Thanks.

Adrian Bartella -- Chief Financial Officer

So this year was really successful. We were really successful in negotiating some of our big vendor agreements. And of course, as you said, the comparison of the comps are pretty, pretty tough. So we expect the phasings to continue. There may be some upside potential, but we're still working diligently on renegotiating our vendor agreements. But I would not see anything to the extend we've seen in 2018. We will probably see a support coming from our sales mix change, which as we -- as we always communicated, would be probably 20 bps.

Seth Sigman -- Credit Suisse -- Analyst

Okay. Thank you.

Operator

The next question will come from Michael Lasser of UBS.

Mark Carden -- UBS Investment Bank -- Analyst

Good morning. It's actually Mark Carden on for Michael Lasser. Thanks a lot for taking the question. So in recent quarters, there's also been some softening in your like-for-like growth. Now I know there's some unusual headwinds built into your forecast. But what can we expect Hudson, to return to more normalized growth levels on this metric? Thanks.

Adrian Bartella -- Chief Financial Officer

I would expect somewhere in Q3, Q4 to see a normalization, on these metrics. As I mentioned, the like-for-like is primarily impacted by the softening in luxury and duty-free business, and we have seen the softening started sometime in Q3 last year. If you dissect the business between duty-free and duty-paid, the duty-paid business is pretty stable, the like-for-like is very robust, and there was no big fluctuations, The key driver of the softening is the duty-free business, and as we get to the comp period sometimes late in Q3, we should see stabilization on the metric.

Mark Carden -- UBS Investment Bank -- Analyst

Great. That's helpful. And then also there's been news much of the 737 Max fleet has been grounded in the US. Now, historically, how have these kinds of disruptions impacted your business? Do leisure passengers get spooked at all and fly less? Would you expect to see any prolonged decrease in air traffic growth or passenger growth rates remain relatively in line with what you've seen historically? Thanks.

Roger Fordyce -- Chief Executive Officer and Director

You know, I think it's a little early in this new story to identify the actual long-term impact. I mean, what we do know is that there are about 70 of those planes that were flown by domestic US airlines, primarily United American and Southwest. News reports this morning was that obviously because of the advanced notice of this, they were already rebooking passengers and trying to accommodate them to the extent possible. And I would expect because, you know, those of us who fly frequently know that it's the unannounced cancellizations that are the ones that are more problematic. If an airline has an opportunity to know in advance of a possibility of a reshift of a flight, they have the opportunity of trying to re accommodating passengers. So I think the impact or we're hoping the impact to be very minimal, but it's very early in this story to know if there's going to be anything significant.

Mark Carden -- UBS Investment Bank -- Analyst

Great. Thanks very much.

Operator

And the next question will come from Vincent Sinisi of Morgan Stanley.

Vincent Sinisi -- Morgan Stanley -- Analyst

Hey, great. Good morning, guys. Thanks very much for taking our question. So, just wanted to go back to the, you know, the duty-free part of the business and obviously the still soft Chinese consumer. Are you seeing anything kind of different in the baskets today that lead you to believe that, you know, anything may change as we go through this year, as it can be more a case of, you know, kind of starting to lap the softness from a couple of quarters back?

And then also I now, you said in the past, that you were starting to kind of broaden the duty-free assortment with some more mid tier merchandise. Can you give us an update, how that's going?

Roger Fordyce -- Chief Executive Officer and Director

So, you know, to answer a few components of those questions. I think, you know, the softening that we experienced in Q3 and Q4 will obviously have some impact on the current results and will kind of, I think, bring it to a more level comparative situation for us in the current situation. So I do think that we will see some moderation of the impact as we hit that Q3, Q4 comp period.

In regards to changes that we've seen, it's a little early in Q3 to really identify any significant changes. We just kind of completed a little bit of an offset of a Chinese New Year. We're still evaluating the overall results for the first quarter of the year. I think we have a better handle on that in a few weeks, once we can look at -- because of the holiday actually fell about 10 or 11 days later this year. So the offset periods were -- are actually just completing right now. So we'll have a little bit better handle on, on how that trended.

In regards to additional promotions, we obviously, we talked about some discounting, fewer discounting programs, we did at the end of last year, which were very successful. Those did end in December. But we also had additional discounting that we did during the Chinese New Year period to continue to help drive and take advantage of that heavy travel period for the Chinese passenger. So we did see some positive results that came out of that.

And lastly, we are continuing to look at, for example, we just opened up Moncler shop in Vancouver, and we're continuing to look at other brands and continue to evolve the mix as the change in the Chinese passenger continues to develop. So it is something that is an ongoing process.

Vincent Sinisi -- Morgan Stanley -- Analyst

Okay. All right. That's helpful, Roger. Thank you. And then maybe just as a follow-up, this is going to be more, obviously more kind of a longer-term strategy. But as, of course, food and beverage is more and more of a focus. As you mentioned, you can open larger contracts, if you do have a more established food and beverage offering. Any thoughts, I know it's still early, but any thoughts on kind of how much more opportunity will ultimately be open to you, within the industry versus with your current food and beverage offerings and when we can see more of a notable move to that side of the business?

Roger Fordyce -- Chief Executive Officer and Director

So I think you'll see throughout 2019, some movement in that area. Obviously, we continue to look at a whole range of potential opportunities within the food and beverages, as we we've reported to the market in the past, and those drivers are driven by, us continuing to expand and look at additional brands to improve our portfolio. We continue to grow the brands that we've started to develop throughout 2019. We also are continuing to look at potential acquisition targets to help accelerate that.

We are looking at that broader range we've reported to the market, the breadth of Whitespace on the food and beverage side. I think the three drivers of the potential really is the opportunities for us to expand our portfolio and improve our skill sets organically. But then how quickly an acquisition can take place and accelerate that overall view. Obviously, an acquisition would significantly change the size and scope of what we could look at in the RFP pipeline.

Adrian Bartella -- Chief Financial Officer

And just to put it in the context, I think the food and beverage pipeline is probably double the size of the retail pipeline. So there's a lot of room and opportunity for growth.

Vincent Sinisi -- Morgan Stanley -- Analyst

Okay. Very helpful guys. Thanks very much. Good luck.

Operator

(Operator Instructions) Our next question will come from Marisa Sullivan of Bank of America Merrill Lynch.

Marisa Sullivan -- Bank of America Merrill Lynch -- Analyst

Good morning. Thanks for taking my question. Just wanted to ask about the expense line. I know you're expecting some personnel expense deleverage, but can you just give us some further color on the quarterly cadence? And then the key drivers there and then whether you see any offsets elsewhere in expenses or both in personnel and then elsewhere? Thank you.

Adrian Bartella -- Chief Financial Officer

So we would see a probably bigger deleverage in the first quarter. The key driver of the deleverage is the new equity plan and also the additional overhead we had to hire because of being public company. And in December, most of our overheads were in place. So in Q1, we see some deleverage, Q2 is slight and then as we go into Q3 and Q4, we see some leverage. So overall for the full year there will be slight deleverage, offsetting impacts will be the gross profit margin where we expect some improvement. On other expenses, sale expenses, we expect them to be pretty flat compared to 2018 as a percentage of sale.

Marisa Sullivan -- Bank of America Merrill Lynch -- Analyst

Actually, that's very helpful. And then just on the commentary about the concession losses. Can you just give us a little bit more color on the reasons for that loss? And have you seen any changes in the competitive environment? And then as we look to 2019, how is the pipeline shaping up as it compared to previous years? Thanks so much.

Roger Fordyce -- Chief Executive Officer and Director

Thanks Marisa. Again, I think, you know, our -- the pipeline remains extremely robust as we continue to -- both on the retail side as well as the expansion of us having the opportunity of looking into food and beverage as a component of that pipeline. You know, the concession losses, we've reported to the market are success rate of 80% of retaining contracts over time, that remains intact, that was through in 2018. The outlook for that I think remains going forward into the future. So 80% means that we do lose contracts from time to time. It really just comes down to the timing of the loss of those contracts against our ability to put new wins and new additional square footage against that.

That's why it isn't always necessarily as evident as this particular -- the next few quarters for us. And again, it is all about the timing. As I said, some of the -- we have some great wins already on the table, but much of that does not come online until late 2019, early 2020. So it really is about that this is a normal course of business. There is nothing unique about those losses. They do happen from time to time. We don't have 100% success rate, I wish we could on each of our contracts. So I would say it's a normal course of business and we're just really about a matter of timing to be able to offset those losses.

Marisa Sullivan -- Bank of America Merrill Lynch -- Analyst

Sure. Thank you so much.

Operator

And this concludes our question-and-answer session. I would like to turn the conference back over to Debbie Belevan for any closing remarks.

Deborah Belevan -- Vice President of Investor Relations

Thank you operator. That concludes today's call. And just a reminder, you can find a replay of today's call on the Investor Relations section of our website. Thanks, everyone, for joining us, and have a great day.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 35 minutes

Call participants:

Deborah Belevan -- Vice President of Investor Relations

Roger Fordyce -- Chief Executive Officer and Director

Adrian Bartella -- Chief Financial Officer

Seth Sigman -- Credit Suisse -- Analyst

Mark Carden -- UBS Investment Bank -- Analyst

Vincent Sinisi -- Morgan Stanley -- Analyst

Marisa Sullivan -- Bank of America Merrill Lynch -- Analyst

More HUD analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.