Standard Parking (SP) Q1 2020 Earnings Call Transcript

Standard Parking (SP -0.93%)
Q1 2020 Earnings Call
May 07, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 SP Plus Corporation earnings conference call. [Operator instructions] I would now like to hand the conference over to your speaker today, Kris Roy, chief financial officer. Thank you. Please go ahead.

Kris Roy -- Chief Financial Officer

Thank you, Christy, and good afternoon, everyone. As Christy said, I'm Kris Roy, chief financial officer of SP Plus. Welcome to our conference call following the release of our first-quarter 2020 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, outlook for 2020 and statements regarding the company's strategies, plans, intentions, future operations and expected financial performance.

Actual results, performance and achievements could differ materially from those expressed or implied due to a variety of risks, uncertainties or other factors, including those described in the company's earnings release issued earlier this afternoon, which is incorporated by reference for purposes of this call and available on the SP Plus website in the risk factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the SEC. In addition, management will discuss non-GAAP financial information during the call. Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance. They are provided for informational purposes only.

A full reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are disclosed on the call, reconciliations to the comparable GAAP measure will be posted under the Regulation G tab in the investor relations section of the SP Plus website. Please note, this call is being broadcast live over the internet and is being recorded. A replay will be available on 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.

Marc Baumann -- Chief Executive Officer

Thank you, Chris, and thank you for joining us today, everyone, for our first-quarter 2020 results and to discuss our current business conditions. We entered 2020 with significant positive momentum. And in January and February, we were tracking ahead of our plan. This performance reflected contracts won last year as part of our cross-selling activities, as well as strategies that we have implemented to prioritize key verticals and national accounts.

By the middle of March, however, the COVID-19 pandemic began to significantly impact travel and general business activity as states responded to the rapid spread of the virus with broad stay-at-home mandates. This brings us to the impact of COVID-19 in our business and the actions we've taken to address these unprecedented times. First and foremost, the health and safety of our employees has been our primary concern. To that end, we implemented safety protocols consistent with CDC recommendations, including strict guidelines for keeping facilities clean, clear instruction on social distancing, access to virus-related information, educated employees on the need for anyone infected to remain in isolation and to shift to work from home for those functions that can work remotely.

With shelter-in-place orders in place across much of the U.S. and Canada and demand for our services down dramatically, we continue to support our clients' needs while ensuring adequate liquidity and preserving financial flexibility. I think it's worthwhile to spend a little time going over the differing impact COVID-19 has on us based on our various contractual operating arrangements. Easiest to understand is our lease arrangements.

Under these agreements, we get all the revenues from the operation and are responsible for operating costs, including payroll and rent. Rent can be structured as fixed, variable or a combination of both. For this type of contract, as revenues decrease, gross profit will decrease unless we're able to reduce costs accordingly. We have about 625 leases, primarily in the commercial division.

Management type contracts have more structural variability, but generally speaking, the client pays SP Plus the management fee to provide services. The management fee can be a fixed amount per month, a percentage of the facility's revenue or operating profit, an hourly rate, a rate per transaction or a combination of the above, with or without an incentive fee. To add additional complexity, the operating costs we are responsible for under our management contracts also vary depending on the contractual arrangement. In most cases, operating costs, including payroll, are pass-throughs to the client.

But in some cases, SP Plus is responsible for certain operating costs. In these situations, the profitability of a contract is dependent on how effectively SP Plus can manage those costs. A large portion of our gross profit is generated from management type contracts, and those have historically provided us some measure of protection in an economic downturn. Where the management fee is a fixed amount, the level of business activity does not generally impact the fee that SP Plus earns.

So long as the facility remains operational, SP Plus should continue to earn its management fee. For other management fee arrangements, we have some exposure to revenue or volume reductions. So a prolonged period of reduced business activity could have a negative impact on our management contract business. Now let me speak about some of the steps we've taken to maintain our financial flexibility, while we address the current situation and remain ready to ramp up quickly as restrictions are lifted and business activity resumes.

At our frontline operations, we were able to react quickly to reduce our payroll costs, generally the largest operating expense line as the level of activity, either revenues collected or transaction volumes began to decline. Given our concentration of management type contractual operating arrangements, much of the payroll cost is reimbursed by our clients. So our actions had to take into consideration their desires and objectives. Some clients decided to maintain staffing levels and take a wait-and-see approach, while others wanted to immediately cut staffing to minimum levels.

To put in perspective, the actions we've taken, paid hours for our hourly workforce were down approximately 63% for the most recent pay period as compared to a pre-pandemic baseline. We continue to work very closely with our clients to accommodate their needs, while also being prepared to quickly respond once business activity starts to ramp back up. We also enacted cost reductions in the support functions as it became clear that our top line gross profit was going to be impacted for a more sustained period of time. These actions included outright furloughs, reduced hours and tiered pay reductions across our salaried workforce.

We've also significantly curtailed discretionary spending. As a result of these actions, we've already taken out approximately $3 million in monthly G&A costs, which won't be fully reflected in our results until May, and we're looking for ways to further reduce our G&A costs. We cut back our capital expenditures and are authorizing only essential investments such as technology investments that will help set us apart from our competitors. Finally, to preserve capital, we suspended our stock repurchases and worked with our existing lender group to upsize our revolving credit facility by $45 million.

And as of yesterday, we had cash plus availability under that facility of over $200 million. We believe the actions we've taken give us a substantial financial flexibility to manage through the crisis. We believe that we have ample liquidity, and we'll be able to access additional sources of capital should the need arise. Given the uncertainty as to the timing of a recovery, we've withdrawn our 2020 guidance.

What we do know is that things will be different in a post-COVID environment, but we're not able to project the pace of recovery for the broader economy in travel and leisure in particular. When we emerge from this crisis, we see a new normal with SP Plus back to the position of strength we were in at the start of the year and building out our position as a market leader in mobility management. As part of moving forward, we have not cut back our technology investments as we believe tools to facilitate remote management, online capabilities and other touch-free technologies will be critical for meeting changing consumer preferences and demands. Our aviation clients will be among the most impacted by this pandemic, and their path to recovery is likely to be a very long one.

It is more important than ever that we work together to find creative and more cost-effective outsourcing options for them. For all of our clients, we are leading the way to help them reopen for business with documented operating protocols that prioritize physical distancing, employee safety measures and screenings, enhanced sanitizing practices, reduced touch points and effective signage. We're also focusing on marketing plans to attract parkers that previously used mass transits and alternative modes of transportation, but may now choose to drive themselves and park near their workplace due to safety concerns. We have begun sharing these plans with our clients, and they've been very well received.

We've also been receiving inbound calls from potential clients where considering a shift to better capitalized companies like SP Plus who can help them face the challenges ahead. Kris will now take you through our first-quarter financial results.

Kris Roy -- Chief Financial Officer

Thank you, Marc. When discussing the first-quarter results, we will focus our comments today on adjusted results. You can find a full reconciliation of all non-GAAP measures to the nearest GAAP measures in the tables accompanying today's earnings release. First-quarter 2020 adjusted gross profit declined by $5.5 million or 10% year-over-year to $47.7 million due to the slowdown in business, in light of the COVID-19 crisis starting in the second half of March 2020.

Our adjusted results for the first quarter of 2020 exclude $400,000 for severance costs related to headcount reductions in response to COVID-19, as well as a $77.5 million noncash lease impairment charge. As a result of a required change in lease accounting that we adopted on January 1, 2019, we are required to evaluate our lease assets for impairment on a periodic basis to determine whether events or circumstances indicate that the carrying value of the asset may not be recoverable. The lease impairment charge taken in the first quarter of 2020 reflects the expected impact of COVID-19 on our leases, with the majority of the impairment related to our leases in our New York market. It is not related to any acquisition or purchase but rather relates to a facility lease arrangements we have entered into over time.

While we quickly took action to reduce our cost structure and strengthen our financial position, the tangible benefit from most of these actions will not be reflected in our results until April and not fully until May. Nonetheless, our adjusted G&A for the first quarter of 2020 was still down $6 million or 23% compared to the first quarter of last year, primarily due to lower accruals for our 2020 performance-based compensation program and long-term incentive programs, which combined, are down $4.9 million year-over-year. We expect both of these programs will be substantially impacted by COVID-19. Adjusted EPS increased 7% from the year-ago quarter to $0.64.

The lower share count resulting from 2020 stock repurchases added $0.01 to first-quarter adjusted EPS. For the March quarter, which is historically our lowest free cash flow quarter, we generated $2.8 million of free cash flow, compared to a negative free cash flow of $10.6 million in a year-ago quarter, a year-on-year improvement of $13.4 million, primarily due to working capital improvements. Looking ahead, it is hard to predict the duration of this pandemic and the possibility of a second wave and what that might mean for additional shelter-in-place mandates. Although visibility is challenging, as Marc discussed, we have already strategically taken actions to improve our financial position.

Based on what we know today, we expect the greatest impact of this pandemic-related crisis on our business to be felt in the second quarter, with progressive improvement from that low point during the second half of the year. Further actions may be warranted down the line, but we believe that we have the liquidity and financial flexibility to manage through this crisis and emerge on the other side, a leaner, more efficient version of ourselves. With that, I'll turn the call back over to Marc.

Marc Baumann -- Chief Executive Officer

Thanks, Kris. As we think about the future of SP Plus, we remain optimistic. Of course, the climate today is challenging, but there are signs of progress as governors announced plans to restart their states and local economies. While we expect that it will take some time for travel to return to prior levels, particularly with the potential for a recession, we like the opportunity set in front of us.

As I mentioned, we're already seeing inbound activity and think that we will be better positioned as an industry leader to respond to new business opportunities. We also see new opportunities to assist our clients as they acclimate to the new normal, while maintaining physical distancing, having clear signage, emphasizing cleanliness and enabling contact-free transactions will be important factors for consumers. This is where the technologies we are building out, including Parking.com, Insight Valet and remote management make us more relevant in the post-COVID environment and improve our overall value proposition to our clients. Now more than ever, we're pleased with our focus on national accounts and healthcare, as well as the potential from hospitality as travel returns to more normalized patterns and partners, such as ourselves, are evaluated for how effectively they handle the pause.

In the interim, we'll continue to help clients find ways to manage their operations at a time when profitability is key and every dollar counts. We believe we will move up the value chain and continue to increase in importance, and we stand ready to return to full force as soon as our clients are ready. On a final note, I want to thank our employees for working for the good of our company, our clients and our customers during this challenging time. We would not be where we are right now without their continued dedication and commitment.

Christy, I'll now like to open the call up for questions.

Questions & Answers:

Operator

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

Daniel Moore -- CJS Securities -- Analyst

Marc and Kris, good afternoon. Thanks for the color and taking the questions.

Marc Baumann -- Chief Executive Officer

Yeah. Good afternoon.

Daniel Moore -- CJS Securities -- Analyst

Maybe start with G&A. You guys, you've already taken some pretty significant cost mitigation steps, obviously. The $20.2 million adjusted for Q1, how much of the $3 million monthly additional cost saved was embedded in there? Just trying to get a sense for once we get to May, what a reasonable monthly or quarterly G&A run rate would look like?

Kris Roy -- Chief Financial Officer

Yeah. Dan, this is Kris. I think as you look at March and kind of how COVID came through March, we started to get a little bit of this in terms of what this might mean to the business, probably in the mid part of March. And so we reacted quickly and started to pull the levers that we thought were prudent.

What I would say is that there's probably a little, if any, savings kind of sitting in the March month. The one thing I would say is that, and we mentioned this in the opening remarks, that there is some reversals as it relates to the PVC and the LTIP programs that did go through in the March time frame, which impacts the full quarter, which I think we quantified to be about $4.2 million.

Daniel Moore -- CJS Securities -- Analyst

OK. So that $20.2 million includes $4.2 million benefit of those reversals?

Kris Roy -- Chief Financial Officer

I'm sorry, Dan, it was $4.9 million, and that really relates to kind of the full-year impact. So that also relates to current year programs for the LTIP, but also prior period reversals. These programs have kind of a three-year cycle to them. So there's two years of expenses that we would have accrued kind of through the year-end of 2019 and then an additional quarter here in the first quarter that we fully reversed in March.

Daniel Moore -- CJS Securities -- Analyst

All right. Just to, like, not to beat a dead horse, but just to try and get everybody on the same page. When we get to May, what sort of monthly kind of normalized run rate for G&A would be looking at post the additional cost reduction activities you've announced?

Kris Roy -- Chief Financial Officer

Yeah. I think we'll be right around the $6 million mark in terms of kind of full month G&A.

Daniel Moore -- CJS Securities -- Analyst

Perfect. OK. Any sense for the level of gross profit decline year-over-year experienced in April or thus far kind of quarter-to-date in Q2? Any color you'd be willing to share there?

Marc Baumann -- Chief Executive Officer

Not yet, Dan. We haven't closed April yet. So we're in the process of beginning that now. So I would expect that it will be fairly substantial.

I think we're expecting gross profit to be at a very, very low level in the second quarter.

Daniel Moore -- CJS Securities -- Analyst

Understood. Great color, Marc, in terms of the various types of contracts. Just in terms of management within that bucket, any sense of the mix of kind of fixed fee versus variable?

Marc Baumann -- Chief Executive Officer

I think within our management portfolio, roughly half of the contracts are fixed fee contracts. And then the other half are sort of a wide variety of revenue share deals, man-hour deals, reverse management deals, the various types that we talked about and that we can allude to in our descriptions in our public filings. So those are the ones that are very hard to model and predict because the performance of individual contracts, of course, depends on not only what we do, but what our clients ask us to do. And I don't think we brought it out in the prepared remarks, but we're currently operating at about 85% of our commercial locations and virtually all of our airports.

So while the level of activity is very low, very few of our clients have opted to actually shut down their operations, at least at this point.

Daniel Moore -- CJS Securities -- Analyst

Perfect. That's helpful. Lastly, there obviously will be some opportunities coming out of this. Can you elaborate on, maybe, some examples of opportunities to share -- gain share coming out of prior recessions or some of the dialogues that you may be having as a result of this? Thank you again for the color.

Marc Baumann -- Chief Executive Officer

Sure. Sure. Glad to do it, Dan. Well, I think the most important thing that we pointed out in our prepared remarks, and I want to build on that a little bit is that we've not curtailed any of our investments in technology.

And we've talked for a long time about the fact that we believe that a key to our success, both in the current period and also in the future, is offering up differentiated technology to solve problems for our clients and to offer up technological solutions that other people can't do. And so as we've talked before, particularly about Parking.com, and we are adding new functionality. In fact, additional functionality is being beta tested right now and will be going live in the next couple of weeks, that really enables us to make Parking.com a more full functioning tool for people to find parking online and pay for parking. One of the limits that Parking.com had before is that every time you wanted to use it, you had to come in as a guest and set up your credentials all over again.

And that's a huge impediment to people wanting to use it to find and pay for parking, where the capabilities that are in beta test now enable you to actually create your own permanent credentials that remain in the tool. And that way, you'll be incentivized, I guess, to come back time and time again because you won't have to start over. So those are the kind of things that we're doing. And I think if you think about human behavior, everybody is looking for ways to -- they don't want to touch anything, they don't want to interact with other people, and we're going to have social distancing as part of our daily routines probably for many months to come.

And I think a lot of our technological solutions enable people to do that. And so we'll be able to buy monthly parking online and not have to come into an office. We'll be able to conduct transactions at parking facilities, where the client has made the investment in the right technology there without touching anything. We offer up not just low friction options for clients, and for the traveling public, but also touchless solutions.

And I think in the future environment that we have, people are going to be more careful about what they're interacting with. And of course, over at Bags, a number of the technologies that we've deployed, whether it's remote management, check in or the technologies that drive our delayed baggage delivery services actually can support social distancing programs. And so our Bags team have been in ongoing contact now with airlines and airports about what the new reality is going to look like and how can we use these technologies to enable people to not be touching things, to maintain social distances, to check in at a curb as opposed to in a long queue inside the terminal. Now I think we recognize that air travel will have a slower curve of recovery than perhaps other parts of the economy, just given what happened in the recession in '08, '09, what happened after 9/'11, but we have a very small market share in terms of some of the services that we provide.

And I think we're well-positioned to try to capture a larger share because of our investments in technology.

Daniel Moore -- CJS Securities -- Analyst

Very helpful. I'll jump out in queue with any follow-ups.

Marc Baumann -- Chief Executive Officer

Thanks a lot, Dan.

Kris Roy -- Chief Financial Officer

Thank you.

Operator

Your next question comes from Tim Mulrooney. Mr. Mulrooney?

Tim Mulrooney -- Analyst

Hello?

Marc Baumann -- Chief Executive Officer

Hello, Tim?

Tim Mulrooney -- Analyst

Yeah. Can you hear me, Marc?

Marc Baumann -- Chief Executive Officer

We can now.

Tim Mulrooney -- Analyst

OK. Sorry, I don't know what happened. I cut out there. So you can hear me OK now?

Marc Baumann -- Chief Executive Officer

Yeah. We can.

Tim Mulrooney -- Analyst

All right. OK. Good afternoon. I guess I hadn't thought enough about a secular shift away from mass transit and toward individuals driving more again.

I appreciate your prepared remarks, Marc. How are you guys thinking about that secular shift internally? And how are you positioning yourselves for the potential for an increased demand for parking spaces in a post-COVID world?

Marc Baumann -- Chief Executive Officer

Well, I think that we're already seeing some indications that people are avoiding mass transit. So some of what we might do is speculate in the future. What we're seeing is that right now, in cities, whether it's in New York or other cities that have big mass transit operations that people are saying, maybe if I have the option of going in my own car, I'm going to do that. And we think that will be especially true for suburban commuters who generally do have cars.

And so I think, clearly, we'll see an uptick in people driving because of that. And look, I don't think there was a capacity limitation in most places. In fact, I think that if there are or where there are, that will probably drive up parking rates. But I think in general, most major cities have ample parking capacity.

Now one of the things that's happening is that we're getting inbound requests from large employers in a number of cities who are saying, we don't want our employees on mass transits because they're going to come into our office and potentially bring infection with them. And so we want to facilitate our employees driving in. And the way that we want to do this, we want to arrange parking for them that we are going to pay for. And of course, there's all sorts of nuances to this, as you might imagine, including everybody might not be in every day.

So we want to access some spaces, and we'll pay you a monthly parking rate for that, but we'd like to let more than one person share that space on different days of the week. So, fortunately, all of our technology that we developed is fully enabled for those kinds of activities. I think we'll also see some people will say, well, I'm not going to come in every day, so I don't want monthly parking, but I don't want to pay the daily rate. So would there be some sort of a pricing bundle that I could have that would enable me to maybe buy 10 parking passes at a discount all at once.

And once again, we have the technology that enables that. So I think we're well-positioned for those sorts of change, expected changes in consumer behavior.

Tim Mulrooney -- Analyst

That's all really interesting. It's an increased need for parking management in the future. That will be interesting to see how that plays out in the coming months. If I could switch gears for a second, Bags.

It was a pretty big acquisition for you guys, but I think some investors are still a little unclear about what the exposure is here? Can you just talk about the end market breakdown at Bags between airlines, hotels and cruise ships, so we can all kind of get a better understanding of what the overall profile of the business is?

Marc Baumann -- Chief Executive Officer

Sure. We can do that. I think primarily, their prime business client base are airlines. They serve 17 airlines.

And the array of services are delayed luggage delivery, which means if your bag doesn't come out of the baggage carousel, then they only need to get it to you, then it also could include managing the baggage service office that you go to. And so that's kind of the main legacy part of their business. They also do skycap check-in services at the curb front for airlines and for individual airlines, and they move people in wheelchairs for airlines. So there's a sort of an airline-centric focus for activities that take primarily at airports.

The other thing they do is they move bags between airports and cruise ship terminals or resorts. And so obviously, that part of the business will be impacted just like the airline part will be, based on whether people are going on cruises or cruises are sailing or resorts are reopening. And I would say what we're seeing is that, for the most part, airlines are flying planes, although with very few people on them. And of course, a lot of the resorts have scaled back or temporarily closed, and there's no cruise lines sailing right now.

That being said, I think most of these organizations are preparing for what their recovery and restart looks like. And despite all of the challenges that some people in travel and leisure have, for the most part, the people that we deal with at the airline clients are actually not furlough, they're working because they're very eager to explore new ways to drive down the cost model for providing service, what the airlines are expecting now is an increased need for cleaning and sanitation in the cabin. And so we're actually having some conversations with some of the airlines about providing those services. They're also saying that we may want to discourage carry-on luggage because it slows down the process.

There are already going to be enough things involved in cleaning the cabin and now you bring new elements into the cabin. So there may be an increase in checked baggage, and that means there will be more delayed baggage that will need to be delivered. We're talking to airlines about consolidating some of these functions such as baggage service offices or even wheelchair services, so that we can provide under one contract those services for multiple airlines. So things that weren't considered before where everybody was going their own way and we were entering into individual contractual arrangements, I think there's a new receptivity because they realize that outsourcing these activities to somebody like us or, in this case, Bags, is a way to deliver a high-quality product that's been enabled by technology at a lower cost than doing it themselves.

And one thing is for sure, all of our client base, not just the ones in travel and leisure, are going to be thinking about how to drive costs down. And, of course, outsourcing to somebody like us is the number one way that you can drive cost down in your business.

Tim Mulrooney -- Analyst

So the coronavirus pandemic, not just creating new opportunities for you on the parking management side, but also within the baggage handling business?

Marc Baumann -- Chief Executive Officer

Exactly. Because I think everybody is going to be thinking about all of the challenges of how do I navigate potentially, especially in travel leisure, the ramp-up to, let's just call it, the levels we were at last year, it might be a multiyear proposition. I mean it certainly was in the '08, '09 period, and it was not a fast ramp-up after 9/11. So any time you have a recession, there's going to be an impact on travel.

And I think it wouldn't be surprising. That being said, it's like we've talked before about the hospitality space and the impact of ridesharing and hospitality and how that reduce the number of people parking cars. And so that has an impact on the level and scale of operations at an individual hotel. But with SP Plus, we have, I don't know, 300 to 400 hotels that we operate across North America, there's 3,000 hotels that need our services.

And so while the impacts might occur at one or two places or even across the board for some of the locations we have in a vertical, there's lots of other locations that we don't provide service to at all. And the same is true in the airline space. We may do skycap for one airline, but we don't provide skycap for any other airline at that same airport or we might only provide skycap services for that airline at some of their reports and not at other airports. So there's a consolidation of activity opportunities here, I think, for the airlines, which can actually drive down cost.

The other side of this is that some of our competitors have walked away from some of their deals, are not fulfilling their obligations to their clients. And so we're getting inbound requests from some of those people saying, "Hey, X, Y, Z Company just walked up the job, will you guys come in? And the answer is yes. So I think once again -- or we have other people calling, say, I'm concerned about the financial strength of the parking operator I have now. And so I'd like to talk to you about providing some services to us.

So while there are plenty of negatives that we've been talking about as this pandemic kind of runs its way through our economy, we're trying to position ourselves to be able to take advantage of the opportunities that we think are there now for growth, but also as we move out of these various sort of draconian stay-at-home period.

Tim Mulrooney -- Analyst

Yeah. Thanks for all that color, Marc. I think that's great color and good consideration, particularly for longer-term investors. Maybe if I could ask one more.

If we could dive into your managed contracts just a little bit more. This has implications for my model, but I want to talk about specifically how your contract terms are structured. So what's your approach to contract enforcement during this period now? This is for managed contracts now. If a facility is closed, would you still be collecting a management fee? And if not, is the contract extended by the duration of the shutdown? Or is that just lost revenue? Can you walk us through how to think about your managed contract structure during periods where some of these facilities are completely shut down? Thank you.

Marc Baumann -- Chief Executive Officer

Right. Sure. Well, I mean, bear in mind, Tim, that in the commercial group, only 15% or so of the locations are actually shut. And they're the ones that you might imagine.

One of them are hotels and sports stadiums and things like that, convention centers, the places where literally, there's no activity going on at all. And I would say the same thing I've said many times about contract structures, they vary tremendously. But bear in mind, for the most part, management contracts are terminable by the client on 30 days notice. I mean, that's been in our disclosures for a long, long time.

And we look at a contract not so much as the client locked in and were locked in, it's a written description of our working and business relationship. And it describes what we provide and what services we provide and how we're compensated. So clearly, when a client comes to us, and says, "Hey, I'm under financial duress, and I need to restructure my contract." What we look at is, can we restructure that contract in a way where it still makes sense for us to operate there? Are we going to make money? We're not into loss leaders. And so if we can restructure the contract to try to accommodate the client's request, we're going to do it.

And of course, that means in a time like this, some clients are saying, I close my location, and I need to suspend the management fee for a period of time until I reopen. We're going to work with them and see whether that makes sense. Now sometimes the clients like, oh, I want to suspend a fee, but I want you to keep incurring costs. And we're like, well, we can't do that.

So I think the answer is -- and this is what we say to them. Look, we have cultivated a management team and infrastructure and a set of capabilities at the facility. We may have scaled down all the hourly workers, but do you really want to lose that? Because then when it comes time to start-up, in effect, we're starting from scratch. And the people that might not be there or may not be available.

So I think most of our clients get that, and they realize that maintaining us, our fee structure, our management organization makes a lot of sense because they want to be prepared to reopen and capture the business opportunities that are there when things come back.

Tim Mulrooney -- Analyst

OK, Marc. Thanks. Appreciate all the color as always. Thank you.

Marc Baumann -- Chief Executive Officer

You're welcome.

Operator

Our next question comes from Kevin Steinke with Barrington Research.

Kevin Steinke -- Barrington Research -- Analyst

Hi. Good afternoon.

Marc Baumann -- Chief Executive Officer

Hi, Kevin.

Kris Roy -- Chief Financial Officer

Hi, Kevin.

Kevin Steinke -- Barrington Research -- Analyst

Hey. So you've really established some momentum here over the last four quarters in terms of new managed locations added that continued in the first quarter. Just wondering how much we can tie that to your national account relationships? I mean did you continue to add locations through those national account relationships in the first quarter? Or were there other sources, maybe, that you had a locations through as well?

Marc Baumann -- Chief Executive Officer

Yeah. That's a great question, Kevin. Yes, we did. And I can say that when we look at sort of first quarter new business and compare it to 2019, we actually had an increase in new business.

It was about, I don't know, a little over 10%. So we actually generated more new business in the first quarter this year than we did in the first quarter of last year in our commercial group and that takes into account the fact that the latter half of March wasn't so good. And of course, we're adding new business now, as we've just described in our conversation with you, but that increase in new business is all coming from national relationships. And I think that the strategic focus on national accounts, as I indicated in my prepared remarks, is absolutely the right thing to do because it's these large complex organizations that will have the most demanding standards for restarting.

And so if you think about what do they want to do, they want to have, whether it's special protocols, about social distancing, extra sanitation and cleaning protocols in their lobbies, special protocols for cleaning around elevators and other public spaces in parking facilities, protocols for employee determining whether employees are ill or not, including temperature checks and the like and keeping records of that and deploying capabilities around those things, having proper signage. I mean these are the kind of our inbound request that we're getting from some of our larger national clients now. And we've created multipage, very complex plans that address their desires for the operation of their facility, which includes parking. And they're very eager to have us implement, and we're starting to implement in places that are reopening those protocols.

And so I think it conveys to them that working with somebody like us on a broader basis than simply those locations where we currently serve them is making a lot of sense. So I'm hoping that as they see our response to this and our creativity on helping them manage through this that will actually lead to more opportunities with some of these national clients.

Kevin Steinke -- Barrington Research -- Analyst

OK. Great. So it sounds like even in this environment, you can still continue to develop expansion of existing national account relationships or even continue to pursue new national account relationships? Or is there some sort of impediment to developing those new and existing national account relationships in this environment?

Marc Baumann -- Chief Executive Officer

Well, that's an interesting question. I think if you were to ask me two months ago, what do I think of the idea of everyone working from home where they can't? I would have been negative on it because I would have thought that people would not be as productive working remotely. And whether it's Zoom or Google Meet or whatever tool people are using, I think we've all had an eye-opening set of experiences around the fact that we can be highly productive working from home, and that maybe a lot of live meetings aren't even really all that important or valuable. And what we're hearing from many of our clients now because we're having video meetings with them, even including pitching new deals, they're like, "Wow, this is really great." It's a great way to do it.

And so I think we're actually -- I'm surprised to actually see that a number of either current clients or prospective clients are going ahead with RFP processes and the like during this time because they really feel that makes sense more than ever maybe to get new creative ideas on how to deliver these services in a more cost-effective way. So we actually have a number of proposals in development right now for national-type clients and, hopefully, we'll be successful in landing some of them.

Kevin Steinke -- Barrington Research -- Analyst

OK. That's really interesting. And as you were -- the discussion about bags that was going on here. Obviously, the near-term negative impacts, but you mentioned maybe some opportunities around baggage handling.

And so I thought, given all the conversations you're having with airport clients, would there be even more interest in the remote check-in service going forward? Because that's a service that would, I think, in some ways, increase social distancing, reduce touch points because you won't have people standing in line to check bags. And so is there perhaps some momentum for remote check-in coming out of this environment?

Marc Baumann -- Chief Executive Officer

I think there will be. But once again, travel volumes are very, very low. And I think we get data that is publicly available data that the TSA puts out. I mean trailing passengers being screened is down like 90-plus percent from the pre-COVID-19 pandemic period.

So the number of passengers traveling is very low. And so the need for remote check-in or other social distancing type check-in arrangements at the moment is not great because, obviously, there's just not a lot of people even in the terminals. But I think as things start to come back, that will be an important ingredient because the airlines are saying, look, we can't have these giant congested check-in areas. And of course, even the TSA, where a lot of baggage is being processed through TSA and brought on board, I think this is what I indicated earlier, there are some discussions around maybe we need to discourage carry-on luggage because we don't want to have that congestion.

We want people to be able to sort of buzz right through security screening, which is not easy to do if people have lots of luggage that has to be screened. So I think the expertise that Bags has in this area, both on the inbound front in terms of checking in remotely or at a curb or in a parking garage or at some other place, or also alleviating congestion at the baggage claim because they have, obviously, clients where they pick up the baggage from bag claim and take it to the traveler or take it to the traveler's home if they're returning from a trip. Bags also has a service called Bags VIP, where individual travelers can pay to have their luggage delivered to their house. It's something that I pay for to use all the time when I'm traveling, so I don't have to wait for my check luggage.

So, hopefully, there's an appetite for our sponsored models for these sorts of things. And because that's the best model, I think, for us in terms of generating volumes. And there'll be lots of good solutions around helping people maintain social distancing on their way in and also on the way out on their journey.

Kevin Steinke -- Barrington Research -- Analyst

OK. That's an interesting color. Thanks for taking the questions.

Marc Baumann -- Chief Executive Officer

OK, Kevin. You're welcome.

Operator

Our next question comes from the line of Marc Riddick with Sidoti.

Marc Riddick -- Sidoti and Company LLC -- Analyst

Hi. Good afternoon, everyone.

Marc Baumann -- Chief Executive Officer

Hi, Marc. Good afternoon.

Marc Riddick -- Sidoti and Company LLC -- Analyst

Good afternoon. I wanted to touch a little bit -- just a follow-up on national account. I was wondering if you could give an update as to where we are as a percentage of the revenue ballpark? I think this is something that's been mentioned before, I did want to see if that had been updated or if that's something you could share at this point?

Marc Baumann -- Chief Executive Officer

No. It's not really something that we have readily available, and I'm pretty confident we have never put that out there before. One of the challenges is that when I've talked about our national account focus, I know I mentioned this before that we identified about 25 organizations that we thought were candidates for, what I would call, a national account relationship. And what does that mean? That means that we can offer a dashboard so that they can see data either aggregated or drill down data on the performance of their facility.

We can hold quarterly business reviews with them to review performance metrics and creative ideas from our marketing teams and obviously, give them more special focused attention, commensurate with a larger type of a relationship with us. And when we identified those 25 organizations, probably now close to 24 months ago, it was really with a view that there are organizations that we already serve somewhere and that what we want to do is take a relationship that might exist in a couple of places and turn it into a national relationship because that organization has a footprint across the country. And that's been the strategy. And that's worked out very, very well.

We've made a lot of progress. We've talked about some of our big wins. And of course, we've also gotten into the group purchasing organizations, in the healthcare space, which has led to a number of new opportunities for us in that space, but there are lots and lots of other organizations that we serve that have locations that we don't serve for them. And so really, the universe of potential national account candidates is way more than that 25, there's probably 100 or maybe even more.

And so our goal -- and of course, in the essence of designating somebody in national account, we still have the same goal. And that is in every market that we operate, understanding who's using our type of services, who has a need for our type of services and cultivating relationships with them on the local level because all of our success in the end in adding new clients and new locations comes from a two-pronged approach. One is at the local level, where our local teams of people go and cultivate relationships. And then the other is working with those organizations or the larger organization on a national account basis.

Marc Riddick -- Sidoti and Company LLC -- Analyst

OK. That's very helpful. And, actualy, part of your answer kind of beard into what my next question is, and I wonder if you could expand a little bit on more so as to, maybe, what the dialogue has been like with Premier, given what they're dealing with and what their members are dealing with? I was wondering if you could share a little bit of how that's evolved in the -- I mean it's only been a few months since the arrangement was originally signed, but it certainly has probably taken a different turn in day-to-day function. I just wonder if you could talk a little bit about that particular engagement with them.

Marc Baumann -- Chief Executive Officer

Sure. I mean there's a tremendous amount of activity, obviously, going on in hospitals these days. And a lot of it is upending them logistics models that hospitals have had in place for a long time, and many hospitals are not allowing visitors. And other hospitals, in certain cities, that are dedicated to COVID-19 patients, and they're not accepting other patients.

And then other hospitals are not accepting COVID-19 patients. And some of those are in the same medical center groups, if you will, or hospital groups. And so there's the need to move staff, patients and other doctors and others between campuses. So in many cases, with healthcare, we're seeing an increase in request for shuttle bus activity to move people around.

Obviously, we've gotten requests for additional staffing because as we've talked before, we operate at, I think, about 130 hospitals now. Most of them are seeing a surge in activity. And so they're asking us to send more staff. So some of the staff that maybe wasn't as busy or wasn't needed in places that have seen a reduction in activity.

We redeployed over to the healthcare to meet that need. So I think, honestly, from the specific point of Premier, I mean hospitals are conducting RFPs right now for our array of services. And it's that same reason that I mentioned a few minutes ago. While hospitals are seeing a surge in activity, they're seeing a lot of pressure on them financially.

And elective surgeries have been canceled or postponed. There may be a surge in patients that are either on Medicaid or Medicare, which have lower reimbursement rates than private insurance. And so the CEO and CFOs of hospitals are going, oh my gosh, my financial model is upside down. I may have a surge of activity.

I might even have more costs because of this pandemic. And what I really need is somebody that's going to help me manage the logistics in this changing world, bring their technologies in, but also at the same time, help me drive down the cost of providing those services because my old business model has been disrupted. And we stand, I think, well poised to provide those types of services.

Marc Riddick -- Sidoti and Company LLC -- Analyst

Great. And then one last thing for me. I think it goes back to the technology investments that are going, which I appreciate the color on that. I was wondering if there has been a shifting of priorities as to what projects to focus on or anything like that vis-a-vis maybe six months ago or so that are kind of at the top of the list that you want to get done sooner rather than later? Thanks.

Marc Baumann -- Chief Executive Officer

Yeah. That's a great question. And you know it's one of those times, sometimes you're good and sometimes you're lucky. I think we've been both good and lucky on this front.

Because about a year and a half ago we said, what are the right technology investments for us to make that can either, a, drive differentiated capabilities that are going to help us win new clients and/or keep clients that we have because we're offering up cutting-edge things that no one else can do. And that's where these investments in Parking.com, Insight Valet, which is a whole array of dashboards that are used for managing valet operations. We have our remote management center where we can remotely monitor facilities. We've made investments in capabilities for low-friction transaction processing and indeed, no-touch transaction processing.

So these were all part of our technology strategy that we've been working on really for the past -- that's been our focus for probably close to 18 months now. And so the good news is because we decided to do those things, and those are exactly the things that are needed right now, a lot of those projects are coming to completion, and we're going to be able to begin deploying some of these, as I indicated earlier. The other part of our technology investment tends to be around driving cost out of our business. We have a lot of transactions, millions of transactions a day.

We have thousands and thousands of clients, thousands of employees all over the place. And so the more we can automate the things that we do, the more that we can take the manual steps out of things, there's greater accuracy and faster speed of processing. And so we have a number of initiatives under way that are designed to drive those kind of efficiencies in the business. And again, those are under way now.

So I would say, no, there is really no need to change our priorities from a technology point of view. A few new things have popped up because of all of this. And so we're making sure that we address those, as we always do when new things pop up. But I'd say, we laid out the right technology strategy for the business about 18 months ago.

We're executing well on it, and I think it's perfectly aligned to the times that we're in and what's going to come next.

Marc Riddick -- Sidoti and Company LLC -- Analyst

OK. Great. And then just one more for me. The last one, I promise.

And you touched a bit on the stress of competitors, and you're seeing some folks come to you that have worked with competitors that they're worried about their financial structure at this point. I was wondering how you might be thinking about the possibilities of potential opportunistic acquisitions, if they were to appear and maybe be accelerated due to the challenges that we're all seeing? Thank you.

Marc Baumann -- Chief Executive Officer

That's a great question. I mean you never want to say never, but I think given the fact that what's going on is going on, we're seeing competitors are shutting some talented people. We're seeing that competitors are dropping the ball in certain places and giving us the opportunity to come in. So I think realistically, at this point, our focus is more on, is there any talent that we would want to pick up that could help us? Or are we able to just take away some operations and grow organically in the way that we normally do, which is to offer a compelling value proposition to somebody and say, we can do it better than the people that you're with now.

So I think given these sort of uncertain times that we're in right now, our main focus is going to be on that for the next, at least the next several months.

Marc Riddick -- Sidoti and Company LLC -- Analyst

OK. Great. Thank you very much for all the color, Marc.

Marc Baumann -- Chief Executive Officer

You're welcome. Thank you.

Operator

We do have a follow-up from Daniel Moore with CJS Securities.

Daniel Moore -- CJS Securities -- Analyst

Thank you.

Marc Baumann -- Chief Executive Officer

Hey, Dan.

Daniel Moore -- CJS Securities -- Analyst

Most of my follow -- two of my follow-ups were just covered. But you have, obviously, a very low capital intensity business to begin with, but you talked about controlling expenses. Maybe just an updated view of capex for the full year?

Kris Roy -- Chief Financial Officer

Yeah. I think as we start to look at capex, and Marc mentioned kind of continuing to ramp up on and continue with the investments that we're making in technology, I would say, and I think this was in the release earlier from today, but we're really trying to make sure that we're strategically focused on capex. I would say that capex will come down pretty significantly this year, and we'll be much more focused on the technology-related investments.

Daniel Moore -- CJS Securities -- Analyst

Perfect. All right. Thank you again for the color.

Kris Roy -- Chief Financial Officer

And then, Dan, I just wanted to clarify real quick, just in case it didn't come across real clear there. But just as it relates to G&A, from a G&A run rate for May, I would look at $6 million. I just wanted to make sure that I clarified that.

Daniel Moore -- CJS Securities -- Analyst

It did. That was perfect. Thanks, Kris.

Kris Roy -- Chief Financial Officer

Yeah.

Operator

At this time, there are no further questions. I would now like to turn the call back over to Marc Baumann for any closing remarks.

Marc Baumann -- Chief Executive Officer

Thanks, Christy, and thanks to all of you for joining us today during these very, very unusual times. We appreciate your time in listening to us and interest in our company, and just wish you all well. Be safe. Be healthy.

We'll talk to you next quarter. Thank you.

Duration: 66 minutes

Call participants:

Kris Roy -- Chief Financial Officer

Marc Baumann -- Chief Executive Officer

Daniel Moore -- CJS Securities -- Analyst

Tim Mulrooney -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Marc Riddick -- Sidoti and Company LLC -- Analyst

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