Standard Parking (SP) Q1 2019 Earnings Call Transcript

Standard Parking (SP 0.06%)
Q1 2019 Earnings Call
May. 02, 2019, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Q1 2019 SP Plus Corporation earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Marc Baumann, chief executive officer of SP Plus.

Sir, you may begin.

Marc Baumann -- Chief Executive Officer

Thank you, Sylvia, and good morning, everybody. As Sylvia just said, I'm Marc Baumann, CEO at SP Plus. Welcome to the conference call for the first quarter of 2019. As you know, Vance Johnston, our former CFO, recently resigned from the company to pursue another opportunity.

I have with me Kristopher Roy, our senior vice president and corporate controller, who will be serving as interim CFO while we undertake the process to find a permanent CFO for the company. I hope all of you have had a chance to review our earnings announcement that was released last evening. We'll begin our call today with a brief overview and then Kris will discuss our financial performance in a little more detail. After that, we'll open up the call for a Q&A session.

During the call, we'll make some remarks that will be considered forward-looking statements, including statements as to our 2019 outlook and guidance, 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 in or implied by these forward-looking statements due to a variety of risks, uncertainties or other factors, including those described in our earnings release, which was issued yesterday and which is incorporated by reference for purposes of this call and is available on our SP Plus website. I would also like to refer you to the risk factor disclosures made in the company's filings with the Securities and Exchange Commission. In addition, to the extent we answer specific questions about 2019 guidance involving non-GAAP financial measures, reconciliations may be found under the Regulation G tab in the Investor Relations section of the SP Plus website.

Finally, before we get started, I want to mention that this call is being broadcast live over the Internet and that a replay will be available on our SP Plus website for 30 days from now. With that I'll start with a brief overview. As you saw in the earnings release we issued last night, 2019 is off to a solid start as adjusted gross profit, adjusted G&A, adjusted EBITDA, adjusted net income, and free cash flow all met or exceeded our expectations. Overall, first quarter 2019 gross profit grew 35% over the same period of 2018, which reflects the results of the Bags business that was acquired in the fourth quarter of 2018.

In addition to strong organic gross profit growth of 10%. Year-over-year organic growth benefited from a favorable lease contract modification that was not expected to occur until later this year, as well as the nonrecurrence of a first quarter 2018 non-cash write-off related to an early lease termination last year. Same location gross profit in our commercial division grew 7%, of which 3% is attributable to the previously mentioned Q1 2019 lease contract modification with growth across most geographic markets including New York. We continue to be pleased with the progress we're making in New York under Chris Sherman in the leadership team.

As we discussed on our fourth quarter 2018 call, due to the fact that a significant portion of the Bags businesses with airlines and airports, we believe that the majority of cross-selling opportunities will be in this market vertical. As such and as previously reported, we have combined Bags with our legacy airport business and renamed the new operating group as the Aviation Division. We plan to manage these businesses closely together. The Aviation Division continues to deliver solid performance.

Considering the many alignments and crossover between bags and our legacy airport business, we'll try to give insights into acquired versus organic components of gross profit for as long as we can. But once we start to realize a significant amount of cross-selling synergies between SP Plus and Bags, it will be more difficult to isolate organic versus acquired gross profit. Our new business pipeline remains strong. We're excited to have recently won two new deals based on leveraging our cross-selling opportunities with bags.

Cleveland Hopkins International Airport has been a long-standing SP plus client since the 1950s. Bags' Aviation Services Group was awarded a wheelchair services contract at the airport and we look forward to expanding our relationship with our client. On the other side, the Greater Orlando Aviation Authority has been a long-term client of Bags. SP Plus Transportation was awarded shuttle bus contract for services at the Orlando International Airport and we look forward to many more cross-selling opportunities in the months ahead.

Location retention in our commercial division improved to 89% for the 12 months ended March 31, 2019, up from 88% for the 12 months ended December 31, 2018. We continue to believe retention rate of 92% is a good target for our commercial division. As a reminder, our presentation of locations only applies to our commercial division. As we previously discussed, the concept of locations is less applicable to our noncommercial business.

I'm excited about the strong start to the year and the opportunities before us. The year is still developing, but based on the results of the first quarter we can affirm our full-year 2019 guidance on all measures. I'll turn the call over to Kris now who will discuss in more detail our first quarter 2019 financial performance.

Kris Roy -- Senior Vice President and Corporate Controller

Thanks, Marc. As in the past, our comments will focus on adjusted results. A full reconciliation of all non-GAAP measures to their nearest GAAP measures were presented in tables accompanying last night's earnings release, which is incorporated by reference for purposes of this call and available on our SP Plus website. First-quarter 2019 adjusted gross profit increased $13.8 million or 35% from the same period of 2018, which is inclusive of Bags or 10% on a organic basis.

As Marc mentioned in the opening remarks, the strong organic business performance benefited from a modification of a lease contract in the first quarter of 2019. That was not expected to occur until later in the year, as well as the nonrecurrence of a $1.7 million noncash charge in 2018 due to an early termination of a lease contract. Adjusted G&A for the first-quarter 2019 was $26.2 million, an increase of $5.2 million compared to the first quarter of 2018. G&A related to the acquired Bags business was the primary driver of the year-over-year increase.

But higher compensation and benefit costs, including costs associated with the company's performance-based compensation programs also contributed to the year-over-year increase. Resulting adjusted EBITDA for the first quarter 2019 increased $8.8 million or 49% from the first quarter of 2018, primarily due to the previously discussed factors that have impacted year-over-year adjusted gross profit growth. Adjusted EPS was $0.60 for the first-quarter 2019 as compared to $0.43 for the first quarter of 2018. I want to reiterate that adjusted earnings per share for both periods exclude amortization of intangible assets from the Bags acquisition, as well as all prior acquisitions.

The year-over-year increase in adjusted EPS was mainly due to the acquisition of Bags, as well as strong organic business performance, partially offset by higher interest expense and debt used to fund the Bags acquisition. First-quarter 2019 free cash flow was a negative $10.6 million, which was better than expected largely due to temporary working capital movements which we expect to reverse by year end. The first quarter of the calendar year is generally the low point for our free cash flow generation for the company. As such, we remain confident that we will continue to generate free cash flow in line with previously provided guidance.

During the first quarter of 2019 we repurchased shares totaling $2.3 million under our $30 million stock repurchase plan authorized by the Board in May of 2016. There is $20.2 million remaining under that authorization. Finally, on January 1, 2019, the lease accounting standard ASC 842 went into effect and had a large impact on our balance sheet. We added nearly $500 million in assets and corresponding liabilities related to operating leases that were off balance sheet under the prior accounting rules.

There was no material impact on our income statement or cash flows due to the new accounting standard and our leverage ratio covenant under the credit facility was unaffected. This concludes our formal comments. I'll turn the call back over to Sylvia to be to begin the Q&A.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Daniel Moore from CJS Securities.

Daniel Moore -- CJS Securities -- Analyst

I guess first, I think I heard in your prepared remarks the lease modification that occurred in Q1, you just quantified the impact of that, I think it was at 3% to gross profit growth. Did I hear that correctly?

Marc Baumann -- Chief Executive Officer

Well, what we talked about was actually a early termination that took place in Q1 of last year, which we had previously disclosed was about $1.7 million, and that's what we were really referring to. We had a lease modification in Q1 of '19. We didn't disclose the numbers around that. And the reason for that is that it simply occurred in Q1.

We expected it to occur in later in 2019. So when we formulated our plans for the year on our expectations for our financial results we already knew that was going to happen. It happened sooner than we thought.

Daniel Moore -- CJS Securities -- Analyst

Understood. I'm just trying to tease out and get to the true organic for the underlying in the quarter. So if you don't have more color on the quantification, what -- when did you expect to -- what quarter did you expect that to occur just so we -- from a modeling purposes perspective later in the year?

Marc Baumann -- Chief Executive Officer

Yes, I mean remember, these things relate to the accounting from the merger of Central and Standard back in 2012. We had deferred assets and liabilities we had to put up on the books. And so when a lease ends earlier than we expect it from that portfolio, we either have a P&L hit or we have a pick up. So in 2018 in Q1 we had a P&L hit.

That at least went away in 2019. We modified the lease and we're continuing with that lease. And so I would say it would have been sort of pro rata over the next two quarters probably.

Daniel Moore -- CJS Securities -- Analyst

OK, helpful.

Marc Baumann -- Chief Executive Officer

The benefit, if anything.

Daniel Moore -- CJS Securities -- Analyst

The benefit right, right, right, understood. And I guess, it seems like we're starting off the year on an organic basis with some pretty healthy growth even adjusting for that. And the guidance for the full year by my calculations is a little bit more conservative. So I guess net-net, do you feel like you're right where you thought you would be, running a little bit ahead of expectations? How should we sort of think about this quarter?

Marc Baumann -- Chief Executive Officer

Yes, I mean, there were other timing issues in the quarter that things happened a little sooner than we expected. And so that certainly factored into our thinking about not adjusting our guidance. So things that we again anticipated would happen in 2019 are relating to some of our insurance programs. So I don't think there is a basis for us to say now is the time to be of higher expectations than the guidance we already created for the year.

But I think certainly it's always good to be off to a strong start. And it certainly makes us feel good about reiterating our guidance for the year.

Daniel Moore -- CJS Securities -- Analyst

Understood. And you called out a couple of new contracts for Bags, could you update us on the pipeline of opportunities for Bags? And specifically with a large number of airports currently SP customers, any sense for what type of conversion rates you might hope to achieve over the next couple of years?

Marc Baumann -- Chief Executive Officer

It's so hard to predict -- the speed of decision-making. What I can tell you is there are a very large number of opportunities from a cross-selling opportunity, primarily to bring Bags' capabilities to SP airport clients and to some non-SP airport clients -- prospective airport clients for us. And the challenge in predicting -- there's a -- it's a very long list. And we are opening a lot of doors and having a lot of meetings and starting to put together proposals.

And I think -- I would say that the reaction from the people that we're speaking with is very positive and encouraging. That being said, we're selling primarily into government. They have structured processes for evaluating things that they want to do differently, for getting proposals and making decisions. And so the harder part for us is to sort to say how quickly -- will these things come to fruition? But if I take a two- or three-year view, I have high expectations that we will have achieved a number of the items on our list.

And we certainly are, it's a major focus to both the Bags' management team but also the other, the folks that oversee our airport business. And so within aviation services this is a prime focus for growth for the company over the next two or three years.

Daniel Moore -- CJS Securities -- Analyst

Perfect. And lastly for me, the number of managed facilities ticked higher sequentially to, I think it was 2,546 at the end of the quarter. That function of the facilities you acquired in the Bags transaction and do you -- if so, do you happen to know how many facilities came in with Bags?

Marc Baumann -- Chief Executive Officer

No, I think -- and I need to draw your attention back to last quarter where we talked about the difficult challenge of applying the location concept of Bags' business. And quite frankly, we historically had some of the similar challenges with our airports. So when we talk about locations we're talking about our commercial division. Where our Aviation Division, which includes the legacy SP airports business along with Bags were not publishing location information, primarily because it just wouldn't be meaningful.

We don't even look at it ourselves. And so it's not just that I don't think investors would find it useful, we don't as management find it useful. We do pay attention to our commercial division locations because, as I said before. We can't get long-term sustained growth in that division without adding locations.

And so it's important that it goes up -- I think we're happy to see it pick up. We've had a few quarters over the past year where it's been going another direction. As we talked, we did lose some locations in prior years where we weren't making a lot of money. But there were a large number of locations in the commercial group.

Some of that is starting to burn off. And at the same time we're starting to add more locations through our new business activities.

Operator

Your next question comes from Tim Mulrooney from William Blair.

Tim Mulrooney -- William Blair -- Analyst

Congratulations on a nice quarter. So I'm going to try this gross profit question one more time because I think it's important for everyone to be on the same page. So excluding the write-off of the lease termination last year and excluding the benefit from the lease contract modification this year, would organic gross profit growth have been positive in the quarter?

Marc Baumann -- Chief Executive Officer

Yes, it would have. And by the way, I happened to see your note this morning that you put out. And I think you're moving down a good track.

Tim Mulrooney -- William Blair -- Analyst

OK. Thank you. Moving on then, I wanted to ask about your dynamic pricing efforts. Are you still in the pilot testing phase here? It's been a couple quarters since I have asked you about this have.

Or have you moved it to some commercial locations?

Marc Baumann -- Chief Executive Officer

Well, when we started the pilot, and I guess it's a little over a year ago that we actually went live with it. We identified a number of locations and we were attempting to understand our ability to influence volume, in other words people's decision-making around whether to park with us or not by changing the pricing in three areas. One, drive up transient customers. These are just the people who drive down the street and they make a decision to go park here or park there.

Some of those people may plan in advance, but they may or may not have made any decision-making. They plan in advance their trip but they may or may not have made any advanced plans about where they're going to park. And then there is another group of people who are going to drive up but they decided to plan it ahead. And so they go and do some research.

They look around at what is available. They figure out what they want to do, maybe they even want to prepay or reserve parking, etc. And so we just call those online transient customers. And then there are people who want monthly parking arrangements.

And those people do plan ahead and they often shop competitively between locations and try to find a location that suits them but also, yes, a price that they feel is appropriate. What we are -- what did in the pilot is we're trying to understand our ability to influence all three of those groups. And quite honestly, the groups that are the easiest to influence, and you would not be surprised about this, are people that are dealing with you in an online fashion. And so if you look at other industries like airlines and hotels essentially it is a preplanning kind of decision-making that most of the consumers are using and they're now of course in the online space looking at options and alternatives.

They're not just arriving at the airport -- in hotel and saying I need a ticket or a room. I mean, there are some, but it's small. In the parking space that we operate in most people are not doing that, they're really just driving up. And so I think what we're finding is that we can influence online behavior whether it's for monthly or transient.

And so we're expanding our efforts there. We made a number of investments in expanding the use of parking.com, putting other technologies behind our website and getting ourselves in a position to fully take advantage of that. And that sense, I wouldn't say the pilot is over but we've learned what -- we continue to learn and we continue to do new things that help us get growth in those areas. And we're seeing that growth take place throughout the country.

As far as drive up transient, we have the pilot continue. We're still learning. And we do believe actually that using data in the right way can help us influence those kinds of decision-making too, although more difficult because people are often making that decision on the fly, if you will -- I think that that's how I would describe it. This is a long-term multiyear effort.

I mean, airlines and hotels have been added in some cases for decades. And so in some ways we will continue to do research, continue to test, and continue to try to get the data that's in the parking facilities and use it to make more optimal decisions about pricing. And I think as it relates to ourselves versus our competition, we're really only one of two companies probably that are really in this space. So we think that it ultimately will give us a competitive advantage in acquiring location for clients.

Tim Mulrooney -- William Blair -- Analyst

Yes, it sounds like an exciting opportunity. Maybe one more from me, just staying on the pricing idea. With wage rates up quite a bit over the last several years, I'm wondering if you could give us an indication of your pricing trends, not on the pilot, but the pricing trends generally across the business.

Marc Baumann -- Chief Executive Officer

Well, I think first I would just comment a little on our business model. You know we have, more than 80% of our locations are management contracts. And so whether it's increases in wage rates because of just that's what's going on in the economy or minimum wage ordinances or other things that drive up costs of employing people, you know those things for the bulk of our portfolio are passed on to our clients. And certainly that's a concern when costs go faster than revenue because that can obviously reduce the bottom of a parking operation.

But it doesn't affect us in the same direct way that it would at a lease location. I think it's safe to say that we have seen upward wage movement. Minimum wages are that we seem to be heading toward the $15 in most places over time. And we fortunately it is over time, so it gives us the opportunity to try to mitigate some of the impact.

But it's really on the lease locations where those things are happening. Now maybe in a different era you would say wages go up by X and will put up prices by X in everything is kind of absorbed. It's not like that now. We're in a -- we try to do what we can to manage efficiently and use technology to control overtime and keep our cost base under control at a facility but our ability to put up prices either for our clients or for ourselves at leases is really a function of the competitive set around -- and so, there is a bunch of forces, some are good and some aren't that are going on there.

Obviously, a good thing is that doesn't seem to be a lot of building of parking garage is going on. In fact, there is a lot of building taking place on where parking garages once sat. And if you happen to be in that neighborhood with an operation, there is now no less demand for parking, but there is a lot less supply. So that's helpful to pricing.

On the other hand, you have things that go the other direction. Like for example, as people shop online for parking and it's still very, very small, I mean, we're talking about way less than 5% overall. You know, there is going to be more price transparency and people are able to compare and contrast what they would pay here versus what they would pay there. In general when that happens in industry that puts downward pressure on prices -- and it's more of a mixed bag and that's why we've had to investment in technology and the capabilities in our revenue management team to capture all opportunities that are out there to market different segments -- to manage the allocation of inventory across channels, to ensure that the inventory we sell online is the inventory.

We want to be selling online and it's not inventory that we could sell to drive up customers where the margins are going to be higher. So you have to become, let's just say, more sophisticated in that space. And once again, there is only a couple of national players who have the capability of doing that sort of thing, if any, beyond us. And as a result, we think that gives us a competitive advantage for the future.

Operator

[Operator instructions] Your next question comes from Kevin Steinke from Barrington Research.

Kevin Steinke -- Barrington Research -- Analyst

So the contract that you talked about in the press release for Bags' Aviation Services Group to provide onboard airline check-in services for Norwegian Cruise lines, just want to make sure I understood the mechanics of that. Is that the cruise line that's sponsoring the cost of that or is it the airport? Just trying to get a sense of what the opportunity set is beyond airports.

Marc Baumann -- Chief Executive Officer

Yes, that is the cruise line. And I think one of the legacy things of the Bags business is that they have worked with cruise lines in various places, primarily in Florida, but also in Seattle. And actually in the case of Florida, their work is primarily with the cruise lines. In Seattle they started out working with the cruise lines.

But then they ended up with a sponsored model the port, because the port saw the value of people offloading their luggage, not having to worry about it, being confident that it would get safely and securely to the airport. And then they could spend the time before their flight after they left the ship to go to restaurants or tourist attractions, spend money in the Greater Seattle port area. So there is a really compelling economic case for sort of creating a luggage-free zone and encouraging people to be transiting through an area to actually spend time there and spend money. And that's part of the value proportion of what Bags brings.

What's exciting about the opportunities to New Orleans, it's really their first entrée into that market. Now as it happens, SP Plus does with partner manage the airport parking there and has for many, many, many years. We also have numerous other parking operations in and around the Greater New Orleans area. And I think the combination with us enables us to be talking and for Bags to be talking to the airport about implementing remote check-in there.

You may know, if you're familiar with New Orleans, they are building new terminals, they are building new parking garages. And as we're seeing, there is a trend in airports toward we don't want congestion at the curb, we don't want congestion in the lobby of the terminal with luggage lines and all of that. And the Bags' offering of remote check-in is very, very appealing to them as a solution of those problems. So I think as we look to try to help Bags grow and to help Bags cross-sell with SP Plus, we're certainly looking at everybody, who touches luggage.

So whether it's a cruise line, a port terminal, a cruise ship -- or sorry, an airport that is a feeder for travelers going to cruise lines, for hotels in and around the port that travelers sometimes fly to and stay at rather before they get on their ships, these were all candidates for the creation of a luggage-free zone and reducing congestion and improving the travel experience for the people who are guests of those cities.

Kevin Steinke -- Barrington Research -- Analyst

OK, yes. That makes sense. That's helpful. And I think you've also talked about in the past, rental car centers perhaps as a point where precheck-in could be done through Bags in luggage pick up.

I mean, would that also be an airport-sponsored model for a rental car center or a parking garage I assume.

Marc Baumann -- Chief Executive Officer

It can be both. And there is certainly a trend toward consolidated car rental operation because from the point of view of an airport it's a huge way to reduce congestion because if you have each car rental company bringing buses into the core and loading and unloading at the curb, that's a major source of congestion in and around the terminals. And so airports are saying, gosh, we really want to embrace the idea of consolidated car rental because you can put everybody on one -- all the traffic of dropping off and picking up cars doesn't take place right there at the main, at the curb if you will or in the parking garage that's adjacent to the terminal. So it reduces traffic congestion in and around the airport.

So that's a long-term trend. SP Plus operates a number of these in various cities. We have for a long, long time. And in some cases, our clients is the car rental companies who form a consortium together to sponsor a service like this because they see the cost advantages for them as well.

And then in other cases that our client is the airport. And so in that case they just say this is a valuable thing for us and we want to make sure that -- take our steps to reduce congestion and encourage people to have less hassle when they're traveling. So once again, you're right in your comment. It's actually a great opportunity for remote check-in.

And as you might imagine, at the -- I think it's the five consolidated car rental operations that SP operates. I think it's four, and we're about to open imminently at New Orleans. So that's -- though we've operated the parking there for many years, that we've now -- yes, that is now expanded and we're going to be operating consolidated car rental shuttle and running all the buses. We are in conversations with all of those, whether it's the car rental client or the airport client and other cases, about the value of remote check-in.

And so I really do believe that ultimately we will see that become a future of the operations of consolidated car rental operations.

Kevin Steinke -- Barrington Research -- Analyst

OK, great. And you also mentioned that Bags, the Bags' Aviation Services Group was awarded a wheelchair services contract in Cleveland, what -- I think remote check-in is a big point of emphasis for growth for Bags. But how much emphasis is being placed on some of the other services? I think those other services are more penetrated than remote check-in. But is there a still a good deal of emphasis on selling Bags' other services as well?

Marc Baumann -- Chief Executive Officer

Absolutely. And I think if you look at the future, remote check-in is an emerging capability. And Bags has the unique technology that they've developed that's basically proprietary to them. It gives them an advantage to go sell something that hasn't been done on a large scale before.

Now they've gotten a lot of nice client relationships with remote check-in, primarily the resorts, cruise ship terminals and alike, and at a few airports. But I think as we go forward, as I've been saying, that's going to expand a lot. There's another base to their business, which is -- it involves wheelchair services, sky cab services, other services, we'll just call them airport services, that involve interacting with the public, providing trained and well-supervised workers to provide those services. And it's been an important part of Bags' business for a long time.

There's no doubt that there are more competitors in that space. But I think the good news is that the airlines see the value in outsourcing what to them is a noncore activity to somebody like Bags. Because just like in the SP Plus client, say, parking management is noncore to them, we can hire an expert in this who can do a better job at -- then we can and in be very cost effective as well. I think the airline that value their business relationship with Bags kind of see it the same way.

So all I would say is while there are competitors to Bags to provide those services, we -- and they do very, very well, and are prepared to compete in that space, and so we think that there's growth opportunities there too.

Operator

Your next question comes from Marc Riddick from Sidoti.

Marc Riddick -- Sidoti and Company -- Analyst

I wanted to switch gears a little bit and ask about the new business wins that were noted in the press release. Just wanted to get a little color on that because there seem to be quite a bit in hospitality space and I was wondering if you could sort of give us a little bit of an update there and maybe what you're seeing momentum-wise that's causing that.

Marc Baumann -- Chief Executive Officer

We've clearly talked for a while about the hospitality vertical. It's being one that's very attractive to us. I think we've said before that we have more four and five diamond parking valet operations than any other company. We clearly focus on delivering high-end valet experiences to people, both at hotels but also in the healthcare space.

And so it's been a focus for a while. And despite the size and success and that area, it's a -- there's still a lot to go at. So we have a lot of opportunities to capture additional growth in hospitality that we don't have yet. Most of our -- and probably the preponderance of our hospitality business historically has been in the Greater Chicago area, in the Greater New York area and in Florida and we even get growth there.

I mean, we're adding properties in those markets all the time as you see in the release. But we have not had as much growth in other cities as we think we are capable of having, and we've been adding resources to try to bring that about. We've also brought in some new resources to our national business development team with special expertise in hospitality. And that's opened the door to the opportunity for us to be bidding on some portfolio opportunities, and so we're working on those now.

And that's something that we've not done before. So I think often we've tried to grow in our geographies by going to individual prospective clients trying to convince them to let us give them a proposal and demonstrate to them that we can be better than their current providers. But we have not spent as much time or very little time really in the past, looking to pursue national opportunities, and we are now very, very focused on that. And I hope that over the next coming 12 months we'll be able to announce some developments in that area.

Marc Riddick -- Sidoti and Company -- Analyst

I'm glad you sort of mentioned that because it seems as though the national -- that there seem to be a national gain there. I think you've mentioned percentage of sales that national constitutes. Is there a general update on that? I'm trying to remember if there was like a percentage that you had mentioned in the past that might be updated?

Marc Baumann -- Chief Executive Officer

No. And it's very difficult because you start to get into -- there's no way to totally define what's a national relationship and what's a local relationship. But I think it's probably better for me to just make mention of what our game plan is. And our game plan is really to try to look for people where we do something for them in a local area.

It might be in a city or a region of the country and where they have similar needs for the type of services we provide in other areas. And as a company, historically, we pursued few of these, and we've had for many years some wonderful national relationships where we were able to provide an array of services to people in multiple cities. And so that's a long-term sort of legacy of the company. But I think we've not necessarily even scratched surface on what the opportunity there is, because we have many-many other companies in hospitality space, in the healthcare space or in the commercial office building or property management space where we have a very solid relationship.

We're doing an exceptional job for somebody in, say, Los Angeles or Chicago or New York. And that same company has interest in other -- all -- other major markets or many of the other major markets in the country and we really aren't doing anything for them there. And I think that's just a -- probably a little bit of a legacy of the fact that our business has grown geographically and we focus our business development efforts on our local operating team to do a fine job of operating our facilities but also are expected to go out and sell new business. Yes, what we've done over the past, let's call it 18 months, is we've expanded our national business development team, we've added new resources.

And while it's still a relatively small team, I think the focus that that's brought to working with on national basis with prospective clients is going to start to bear fruit in terms of opening the door to taking the relationships that we have in City A and turning them into actual opportunities in City B, not only in hospitality but also in healthcare and also in some of the large property management companies.

Marc Riddick -- Sidoti and Company -- Analyst

OK. That's great. And then I guess one last thing from me. I know you made -- mentioned ongoing review of the Bags opportunity and you were looking at, like, maybe a mid-year timeframe.

I was wondering if that's the same general time frame you're looking at and that's something that might be ready to be announced to the public, if you will, to review results maybe by next quarter or what type of timeframe we're looking at there?

Marc Baumann -- Chief Executive Officer

Yes, I don't want to commit to exactly it will be three months from now on the call. But I did make that commitment last time and -- our certain attention is to put some targets out there about long-term opportunity. We are making excellent progress on that project that you're referring to and starting to get some great feedback now on what we think the growth opportunities could be for Bags, the interplay between Bags and SP and the like. And what we need to do some more work on now is to say, OK, here's the opportunity which we think is very significant, how do we do that? Do we have the organizational capacity to actually capture that opportunity quickly over a two- or three- or four-year time period or do we have to make some investments in capacity and capability so that we can capture those sort of things? That's the part of it that we are now turning our attention to.

And before I lay out some targets, I want to make sure that I fully understand it. So we create realistic expectations about what we can realistically attain in a reasonable time period as opposed to putting something out there that would be a nice aspiration but we don't really feel we can achieve.

Operator

And I saw no further questions at this time. Mr. Marc Baumann, you may proceed with any closing remarks.

Marc Baumann -- Chief Executive Officer

[Audio gap]

Duration: 42 minutes

Call participants:

Marc Baumann -- Chief Executive Officer

Kris Roy -- Senior Vice President and Corporate Controller

Daniel Moore -- CJS Securities -- Analyst

Tim Mulrooney -- William Blair -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Marc Riddick -- Sidoti and Company -- Analyst

More SP analysis

All earnings call transcripts