SP Plus Corp (SP) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the SP Plus Corporation second quarter 2015 earnings conference call. (Operator Instructions) As a reminder, (technical difficulty) I would now like to turn the conference over to today's host for this conference, Mr. Vance Johnston, Chief Financial Officer of SP Plus. Sir, please go ahead.

Thank you Michelle, and good morning, everybody. As Michelle just said, I am Vance Johnston, Chief Financial Officer at SP Plus. Welcome to the conference call for the second quarter of 2015.

I hope all of you have had a chance to review our earnings announcement that was released last evening. We begin our call today with a brief overview by Marc Baumann, our President and Chief Executive Officer, then I will discuss our financial performance in a little more detail. After that, we will open up the call for a Q&A session.

During the call, we will make some remarks that will be considered forward-looking statements including statements as to our 2015 financial 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 issued yesterday 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.

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 turn the call over to Marc.

Thanks, Vance, and good morning, everyone. We are very pleased with our second quarter and year-to-date performance. The year-to-date -- year-over-year second-quarter comparison is somewhat of a challenge because some of the strength we saw in the second quarter of last year in 2014 resulted from the release of pent-up demand from the first quarter of 2014 which, as you know, was impacted by severe weather.

Q2 2014 gross profit was up 6% on an adjusted basis versus 2013 so that's really a strong indication of the balance we got in Q2 last year from the weak Q1 last year. So that's definitely impacting our Q2 results on a comparative basis and of course, ultimately, we think that the year-to-date performance is a better indicator of how we are performing as it combines both Q1 and Q2 the last year and this year.

Our year to date 2015 adjusted EBITDA is up $5.9 million or 17% over 2014, driven primarily by just the gross profit growth of 7% and controlling G&A. A number of our key initiatives are gaining traction, which we believe is reflected in our year-to-date results. We are continuing to see strong for momentum in our new business as our 2015 pace is running ahead of the previous record levels.

I want to highlight a few of our recent wins across our diversified vertical markets. Our focus on municipal markets continues to pay off with the expansion of our relationship with the city of San Mateo, California. We will consult with the city on its downtown parking and transportation planning-related decisions including acquisition of new parking equipment, parking website design, creation of new online parking permit program, upgrading of the parking enforcement systems, implementation of centralized downtown valet programs, new digital graphics, facility maintenance, and interactive marketing.

The city also renewed a multi-year operating agreement for our continued oversight of its onstreet and offstreet parking meter program.

We are also expanding our presence in the institutional market with the award of a contract to provide customer service and cashiering for Duke University and Duke University Hospital campus in Durham, North Carolina. The multi-year contract encompasses five parking garages, comprising of approximately 2,500 parking spaces.

On the event side, our SP Plus event logistics group was awarded a contract to provide assorted event logistics and shuttle management services for the FiFA Women's World Cup events that were held during June 2015 in Ottawa, Ontario, Canada. We also expanded our relationship with NASCAR venues with the addition of the Auto Club Speedway in Fontana California.

We also provided a consulting services to the Special Olympics World Games 2015 Organizing Committee in Los Angeles and this is a particularly nice contract for us because two days after the event began, the Committee turn to us to take over management of the events transportation program. We promptly brought in over 100 staff to deliver a successful transportation program for the athletes, media, guests, and family in attendance at the 14-day event. On the maintenance front, we recently began offering an array of maintenance services in the Toronto market for 23 parking facilities, an expansion of our relationship with GWL Realty Advisors for whom we previously have been providing only parking management services.

In addition to expanding our service offering to existing clients, we are also continuing to leverage our relationships with large commercial developers and REITs to win new business. MVP REIT recently selected us to provide its parking management services at the CW parking location in Milwaukee's central business district. The Company now has received contracts to manage the parking operation at 12 MVP REIT properties since October of last year.

Despite all the new business activity in the first half of the year, our overall location count has decreased by 182 locations since the end of 2014. A large component of this decrease is attributable to the loss of two contracts to manage 116 mostly small surface slides concentrated in the West Coast. Correspondingly, our location retention rate dipped to 88% for the 12 months ended June 30, 2015.

While the loss of these contracts represents a big decrease in a number of locations, it does not have a material effect on our gross profit. We continue to be focusing on growing our net locations, improving our location retention rate to 92%, which is a level that Standard as a standalone company was able to achieve in the recent past.

As you can see, we've had a very busy and productive year so far. We are well underway in executing on our key initiatives, including our cost reduction initiatives, and are pleased with our progress to date. I want to talk a little bit about one of our key areas of focus regarding safety and risk management.

We're rolling out a number of new safety and loss mitigation programs. We recently launched a comprehensive safety communication campaign designed to provide our field operation with an expanded set of tools to prevent accidents and injuries.

We are also invested in safety and risk reduction expertise, meaning we've added some new folks to provide increased access training and accountability to our frontline organization where risk is most effectively managed. We are also refining our claims administration program in order to process and close claims faster and more cost-effectively.

In addition, we are reviewing our overall insurance program structure to find the best carriers, the optimal attachment points, and the proper retentions to ensure that the program is reflective of our current risk appetite. We believe that risk is an area with significant opportunities and these initiatives will position us well to reduce our total cost of risk over the coming months.

With that, I'll turn the call over to Vance to lead you through ma ore detailed discussion of our financial performance and guidance for 2015.

Thanks, Marc, and hello, everybody. I would like to spend a few minutes reviewing our financial results in more detail.

As a reminder I want to reiterate that we are presenting and will focus our comments on adjusted results that exclude the impact of nonroutine items such as restructuring, merger, and integration costs related to nonroutine structural and other repairs, one-time transaction costs, certain nonroutine tax items, and the impact of any nonroutine asset sales or dispositions.

We include in this last category the contribution of the Company's Click and Park business to Parkmobile meaning that we've adjusted to the 2014 results as if the Click and Park revenues and costs had already been contributed to Parkmobile and we've also excluded the Company's equity interest in the joint venture for purposes of comparability.

Now second-quarter 2015 adjusted gross profit was essentially flat as compared to the same period last year, as was same operating location gross profit growth. As Mark mentioned earlier, because the second quarter of last year was such a strong quarter due to the release of pent-up demand for the first quarter, the quarterly year-over-year metrics are not indicative of the solid performance of the second quarter of this year.

In any event, we did continue to see strong new business momentum in the second quarter across our businesses. We also continued to see decreases in our casualty loss reserve estimates and health benefit costs, which benefited second-quarter gross profit by $700,000 and $900,000, respectively. We believe we are starting to see the benefits of some of the safety programs Marc mentioned earlier.

of 2015 was slightly higher than the second quarter of last year largely due to costs for our 2015 performance-based compensation and long-term incentive programs which were $1 million higher than last year. Adjusted EBITDA for the second quarter of 2015 was $22.9 million, a slight decrease from the same period last year. Adjusted EPS was $0.29 in the second quarter of 2015, $0.01 higher than the adjusted EPS for the second-quarter 2014.

Touching now on the year-to-date results which we believe are more indicative of the Company6's performances we mentioned earlier, adjusted gross profit for the first half of 2015 was $89.3 million, a 7% increase over the same period last year. On the same location basis, for operating location, gross profit for the fiscal half of 2015 was 3% higher than the same period last year. So, pleased with the same level location gross profit growth and this continues to be an area of significant focus.

Adjusted G&A for the first half of 2015 was up slightly by about $400,000 or 1% over the same period last year. A $2.7 million increase in costs for performance-based compensation and long-term incentive programs was the primary driver of what otherwise would have been a nice year-over-year decrease in G&A of about $2.3 million. As we mention regularly, we are very focused on executing on key cost reduction initiatives and better managing G&A and we believe we are starting to see the benefit of this.

Resulting adjusted EBITDA increased $5.9 million or 17% than the first half of 2015 as compared to the same period last year. Both periods of 2015 and 2014 had significant tax benefits, resulting from the reversal of valuation allowances for deferred tax assets ,which had been excluded from the adjusted results for both years. Adjusted EPS for the first half of 2015 was $0.43 as compared to $0.23 for the first half of last year, an increase of $0.20.

In addition to increased adjusted EBITDA, lower interest expense resulting from the amended senior credit agreement that we put in place earlier this year also contributed to the year-over-year adjusted EPS increase. Based on the results for the first half of the year, we continue to expect both adjusted earnings per share and adjusted EBITDA for the full year to be towards the higher end of the guidance range.

Adjusted free cash flow of $5.5 million was generated in the first half of 2015 as compared to $14.3 million generated during the first half of 2014. While 2015 adjusted free cash flow was lower than last year, largely due to increased cash taxes in 2015, which was expected, it was in line with our six-month expectations and we continue to expect to generate adjusted free cash flow of $30 million to $36 million for the full year.

That concludes our formal comments and I will turn it back over to Michelle to begin Q&A.

(Operator Instructions) Dan Moore, CJS Securities.

Good morning. This is actually Robert Magic, backing up Dan.

Good morning, Robert.

Just talk a little about the environment for contract renewals today compared to where they were two years ago? Is pricing for renewals neutral, positive, or a moderate headwind?

I think one of the challenges we have in answering a question like that is that things do vary a lot across our verticals. I would say in the commercial real estate markets and the traditional areas that we've operated in, we're seeing similar environment to what we saw a couple years ago. Our goal in management contract relationships is to prevent both our existing locations going out to renewal and obviously just continuing to operate there.

As you know, private companies don't have to put things out to bid so our goal is to do such a great job as we can to avoid the client thinking in terms of putting it out to bid. , I would say that environment hasn't really changed.

What we are seeing on the municipal side of things where we do definitely have deals go out to bid it and make it -- they get renewed. It's very competitive right now and I would say that it's not new. It's the same as it has been but it's always a challenge when you are the incumbent with a municipal deal to hang onto that contract in a renewal period.

And while we have done very, very well in that for a long long time, that continues to be probably the area where there is the most competition because you are subjected to competitive bidding at renewal time.

That was helpful. And can you update us on the agreement with Parkmobile USA? Perhaps what type of sequential growth you are seeing in the business and if you could, any preview on the potential features that are in development?

I think the initial phase of the Parkmobile business after we sold them Click and Park last year has been to integrate the Click and Park programs with the Parkmobile legacy systems and that is ongoing right now.

So we're nearing the end now the transition period with them. They have definitely focused on a number of areas including taking advantage of all the new things that are going to be happening with connected cars in the future and driving transaction volume, both through SP Plus locations and also through other parking operators.

So their business I think is tracking fairly well according to expectations. It's still in early phase development and I think our expectations for the future of that hasn't really changed from what we talked about when we announced the transaction last fall.

Thank you.

Kevin Steinke, Barrington Research.

Just wondering if you could give us an update on the cost reduction initiatives you have in place and if they are on track with the timing you expect and just a general comment on what sort of pacing we should expect as you continue to work on those initiatives.

Yes, Kevin, this is Vance, and I will respond to that. So as we've alluded to in previous calls, we are very, very focused on managing G&A and taking out cost over all the Company and I think that we feel overall that we are seeing some progress. I think some of that progress as we alluded to in our prepared remarks were starting to see believe through G&A which is a good thing, so that's very positive. So that's a very positive sign.

We expect more of that as we continue on down the road in terms of the project themselves. The primary focus is in a couple of key areas. One is optimizing backend processes at the Company and we have a number of projects that are underway on that. I know we've talked about them previously.

We feel that those are on track, and once again we are comfortable with where we are at in the progress that were making.

Secondly is organizational realignment. We continue to look at that and basically have made some adjustments to our organization in previous months and feel comfortable with where we're at with that and the progress we've made in the results that are been generated from that.

Also, we are very focused on getting better supplier terms through sourcing strategies and tactics that we are employing at the Company for our, both, direct and indirect spend. We feel that we've made some good progress on that and there is much more of that to come as we head over the next couple of years.

And then the last bucket is just what I would call is management -- tighter management and overall management of discretionary spend and we've employed a number of things at the Company to do a better job of that. And I think we're making real progress on that and once again, I think you can start to see that bleeding through our financial results.

So we feel at this point pleased with the progress we've made. We'll continue to see those things -- the benefits of these initiatives -- some of them will happen sooner than later, but it will continue to be a focus for the next couple of years.

Okay, great, and could you also talk about again your focus on driving same location growth and update us on initiatives to do that in terms of cross-selling additional services or whether it's with your -- also with your operating performance group that you have out in the field? If it's in existing locations. Could you just talk about those couple of initiatives, please?

Happy to do that, Kevin. I think the overall series of things that we're doing haven't changed too much since we last spoken. Clearly our goal on all of our contracts is to make sure that we have escalation clauses built into the contract or incentive fees and we have pricing structures that we put in place with clients where the client benefits by the things that we do for them and we benefit by driving increased performance for them.

So that's an important focal point for us to make sure that that's in place.

Obviously, as I said in my earlier comments in answer to a question, it's important that a client sees us as delivering value to them on an ongoing basis. Because retention is in many ways more important than winning new business. We need to hold on to what we have and we need to drive additional profit to the client and meet their other objectives.

And that's something that we have a lot of experience doing but it means that we have to get in front of the clients with new ideas all the time. We can't just keep doing the same old thing.

And certainly the area of interactive marketing, using website -- our own website, industry website, or some of these new apps that people are using out there to try to attract attention and identify people that might want to park someplace. Our goal is to be -- position ourselves as an expert to our clients with our ability to help them optimize revenue and generate additional profits at their locations.

So we -- to that end, we are bringing more resources into our Company on the marketing side and making sure that in our major markets, we have marketing resources on the ground that can work alongside our operating teams and help them develop clever, innovative programs to help drive our clients' business and also for our lease locations to drive our own business where we are operating those as a lease.

So I would say that's probably the major new focus since we last spoke in. Clearly we've expanded our facility maintenance business. We talked about the new contract in Toronto where we were operating parking and we now brought facility maintenance into it. That continues to be a growth area for us as we look for opportunities to sell facility maintenance services into our current client portfolio. So those are the main focal points on how we intend to drive gross profit growth.

Obviously I think it goes without saying -- I will say it anyway. The lease locations, we have to pay attention continuously to parking rates and overtime and efficiency of those operations, and we have operations excellence team out there looking at leases and large management contracts to ensure that we're driving performance on the ground every day as well. Because all those little steps add up and generate more gross profit growth for the Company.

Okay, perfect. What is your overall view of the economic environment -- demand environment that you're operating in right now?

I would say it's fairly strong. It's a good economic backdrop. That is a bit of a double-edged sword in certain places.

Certainly it's nice to see people out, taking advantage of more confidence in coming into the city and staying at a hotel. Maybe they weren't doing that before and there's a lot of activity in the major metropolitan areas of people coming in, driving, etc.

What we're seeing in the flipside of that is a lot of development going on now and so the existing parking facilities -- maybe they were surface slide or a garage nearing the end of its useful life. Some of these are being convert -- torn down or repurposed into buildings.

And so there's a tremendous amount of that going on now in certain markets in Texas, in particular, in Chicago, to an extent, and also in New York. We're seeing a lot of that into the certain extent we haven't lost a lot of property because of that since we last spoke, but it is a risk area for us because a lot of our lease locations are subject to termination in the event that the property wants to be sold for redevelopment.

I would say so far in New York, what's been good for us is that other people's properties have been taken for development and so those cars have to go somewhere and so we are putting them in our facilities. So that's why I said, strong economic backdrop. We would always rather have that than any other economic conditions, but it's not all upside. And it's something that we have to monitor very carefully.

Okay, that's an interesting take on it. Appreciate the comment.

And I wanted to ask specifically about the Special Olympics Games. It sounds like there might be an interesting back story as to why you were brought in later. What, were they having issues with the operations and they needed someone to fix what was going on or why didn't you immediately start and then why were you called in?

Well, we actually had a small consulting contract in advance of those events and when we go in, because of our vast experience in running parking and ground transportation for Olympic Games and Super Bowls and other major, major events of the years, it's frequent that we are called in for some advice upfront and when we are called in for advice upfront, we will do as much or as little as the client would like us to do.

And I think in this particular case, we had a fairly modest contract in place. We were giving them some upfront advice, so we were there on the ground on a limited basis when the game started. What the clients saw was a need for some changes to their plans in their programs and because of our ability not only to work in the environment successfully but also draw on a fairly large organization of talented people, we were able to bring more resources in very quickly to try to help them with their plans.

So any plan, including plans we develop, is going to be subject to change once you get going and I think in this case, the client saw that there was a need for some additional help and we were right there and ready and able to provide it.

Okay, that sounds great. I will jump back into queue. Thanks for taking my questions.

(Operator Instructions) David Gold, Sidoti.

A couple of points to follow up. First, on the West Coast contracts you referenced, the locations that we lost or gave up -- a couple of questions. With those management releases or both? Number one and number two, were those lost via bidding processes from contracts that came to an end and were single -- let's say not formal bidding processes?

Yes. So yes, they were management contracts and I think -- we've talked about these contracts in the past. It's been a little while.

Essentially what we were doing is providing a person who would be a presence at a surface lot or a bank branch. That was really the contract and there was no revenue involved, these are fairly simple contracts, and they are not the kind of contract that you would actually even seek to get if you are just getting one.

And so the only reason why we went down the path of providing these services was because it was a portfolio and we ran those contracts for some time. What we experienced over the time we ran them is that the client would add new locations, drop existing ones, there was a lot of change back and forth. They became very cost-conscious. Took some of the locations in-house, but ultimately in the end decided to bid out the portfolio and see what they could do.

And so we clearly -- when we are in that situation -- take a long hard look at what are we making, what do we have to do, and what's a fair price for what we are providing.

I think we've talked before, David, that we don't seek to be the low-cost provider of services. We seek to provide the best value.

Our goal is to help clients drive their profit objectives and that's -- and our sweet spot is generally larger and more complex operations like the Olympics we were just talking about or some of these larger municipal deals where (inaudible) and requires an array of skills to put an hourly employee in a booth. It doesn't require a complex set of skills and so we just put that inside -- we are willing to do it. Continue on in the relationship at a certain price, but below that, if they want to go elsewhere, that's okay and that's what happened.

Got you, got you. Okay, so -- it was one where presumably -- you didn't rebid it if you will or maybe you (multiple speakers) did.

Well, we did rebid it but we rebid it at a price that -- we are always looking at -- look, we are a large organization, we have a lot of G&A. It requires cost to support any contract. We have accounting, processing, legal, risk management, etc. We have supervision in the field.

So we have all those things to consider and so when we are looking at what it's going to take to make money running this certain contract relationship, we think about all those things and we think about those when we are making a bid on something as a new operator and also in a renewal scenario. In this case we looked at all of the factors that I just described in said okay, here's what we think is a fair bid to provide the services. We think we've done a good job over the time we've had them.

If the client decides that they think someone else can do it for less or they want someone else to do it for less than in a case like that, we are comfortable with what we bid and so, in this case we didn't win.

Got you, got you. And then I jumped on a tiny bit late some not sure if you guys hit on it but it would be better if you could speak a little bit about the tax reversal.

Yes. Hi David, this is Vance. There was a change in the state law -- I'm sorry in the City of New York -- tax law that basically allowed us to be able to reverse certain allowances that we had set up for deferred tax assets. And if you may recall the first quarter of 2014, we had a similar type thing. That happened to be the state of New York. This -- this -- and this scenario just happened to be the city of New York city. So we are able to -- it's a good thing, very positive. We were able to reverse these allowances for deferred tax assets and so that's effectively what it was.

Got it. Good for you guys and bad for us residents. Okay, perfect. And then on a go forward, any significant change to how we should think about tax rate?

Nothing in addition to what we've described as we wrapped up the 2014 on that call and then really the way to think about it is that our cash tax rate is going to start to come -- it already has come in more in alignment with our effective but great, so that's what you're seeing now. Having said that we have the reversal of these reserves for deferred tax assets, which will help us from the cash tax standpoint down the road.

And in addition, we are also working on -- and have completed a lot of some tax restructuring projects which will have some impact on lowering our cash tax rate as we head into the next several years. And so that will somewhat offset the fact that we are paying a tax rate that is more in alignment with our book rate. But that's -- outside of that, which we have talked about before, nothing else that we see into the future at this point.

Got you and one last, if I might. Just bigger picture, as we think about life post central integration, are there any other big savings opportunities ahead of you that you now see? Maybe you didn't see at the beginning but have reared their heads or -- opportunity still in front of us where you think there could be some big saves?

Yes, this is Vance. David, what I would say is the projects that we outlined in the fourth quarter call that we just went over just a minute ago which, I think they fit right squarely into that category of things. So for example, as we look at what's the optimal organization to support our growth strategy and how we move forward we've actually done some things certainly in the back half of 2014 and the beginning of 2015 to more appropriately align our organization and we will continue to look at that going forward. And we think that there are benefits certainly from that, so that would be one.

Secondly, I think also as we think about strategic sourcing, that's clearly what we think is a reasonably good opportunity that fits there that was not necessarily wholly factored into the synergy expectation that we had when the Companies came together. So we think that that presents a decent sized opportunity as well and something that we are very, very focused on.

And then the optimization of backend processes of the Company, whether that's going from two timekeeping systems to one, as we look at what we're going to do with monthly parking systems as we look at our systems overall, so we're very, very focused. Everything is on the table as we think about cost reduction opportunities that exist and a number of the things that we've come up with are outside of or in addition to the scope that we -- the Company -- had seen when they put the two Companies together. That's the way I describe it.

The only thing -- if I could, David, just add just briefly to Vance's comments, particularly since you mentioned that you jumped on late, I did talk about in my remarks and I'm not sure if you heard them about some of the things we're doing in the area of risk management and safety because we had some very, very good practices in place premerger. The integration process was a distraction in terms of having everybody focused on everything that we want them to focus on.

And so, one of the things that we've come back around to for 2015 is the opportunity to improve our safety practices, to drive down our total cost of risk. We've also brought in some new leadership in that area and bringing in some new ideas as well as from outside on ways to manage our insurance programs and our claim processing in new ways, and we have laid all of that out -- I laid all that out of my comments.

So as we look forward over the next 12 to 24 months, we will continue to expect to see improvement in our total cost of risk and that will drive some of our gross profit growth as well.

Perfect. Thank you both.

Dan Moore, CJS Securities.

If this has been covered, I apologize, but just wanted to talk capital allocations. How long should we expect going forward to be in debt reduction mode. What leverage ratio would you be -- would you want to achieve before you start looking at other areas of investment and what would be your priorities once we get there?

Yes, Dan, this is Vance. So, I will respond initially. So a couple things. One is that we are looking and evaluating those options. We went through some exercise to do that and assess what we think that could look like. Obviously we were able to renegotiate our credit agreement, and with that came much more flexibility as it relates to the ability to repurchase shares, to do dividends, things of that nature when the time is right and when we feel like it's the right time to do that.

So that -- two things. One, we have a lot more flexibility now that puts us in a position to really start thinking about those things. Two, we started down that process of assessing the options that we think makes sense.

And the third point would be, I think, we feel comfortable leverage ratio for the Company would be anywhere between 2 to 3 times. We're just outside, right on that 3 times leverage ratio the last couple of quarters. And so, I think we're getting into a period where over the next months -- year -- the next -- and into 2016 where we are going to be even more aggressively looking at what those options look like. But that's the way that we're looking at it.

Maybe I can just add a little bit to that Dan. First of all, we always look outside our business for opportunities to make investment, whether it's other parking companies that might become available for sale in our market or a lot of businesses. As you know, we do other things like facility maintenance, security, etc. So we are always keeping a watching brief on what's going on out there and looking for opportunities that they are there, so that's one important thing.

The other is that while we're probably at the -- we're at the top end but nearly there in our comfort zone in terms of leverage. One of the things that still needs to be wrapped up in 2015 are all of our legacy structural repair and indemnity issues.

And we've talked before about this. We are -- and you see it in some of our adjusted numbers we're taking. We're spending some money now to wrap these things up hopefully by the early fall, so I think in terms of timing of doing anything, it's hard to think about stock buybacks or dividends or what we might do.

It's the timing as Vance indicated. Part of that timing is driven by a desire to work our way through all of that and make sure that we know what we're dealing with. And I think we're moving along in a good way but clearly we have some stuff to finish and we have some issues to resolve before that's all put to bed and, hopefully, that will be at that point by the end of the year.

Not too far on the horizon. That's great color. And then lastly, in terms of M&A, are there specific technologies that you're looking at that you might want to bring into the fold as you think about your capabilities that you want to have over the next few years?

I would say -- one of the things that's interesting going on right now is that a lot of venture capital money is pouring into ideas. And so we've seen it with some of the on-demand -- on the street valet businesses. We've seen it with these marketing websites that are out there. And just when you think that there is as many there as going to be, new ones pop up.

And so we're trying to position ourselves as being the marketing experts and revenue optimization experts that we can help and advise our clients. And we think that's a better strategy than say well, let's acquire this are let's acquire that in the technology space because it's moving very rapidly. I think some of these businesses have the potential to be successful. Others aren't going to make it.

And so I think in terms of technology investment, in that realm, the investment we made in Parkmobile by combining Click and Park with it was the right thing for us to do and we're going to continue to work with them to make sure that the Parkmobile business is successful.

But I think beyond that, for the moment, our focus is going to be in technology experts in the marketing front.

And then also on the technology integration front. We have a technology integration group where we can advise clients on the best technology to bring into their facilities.

And again, all of the array of people that are providing technology for parking facilities are making new investments, changes, things are moving at a rapid pace and again, our goal is to be seen as an expert, to engage with our clients or prospective clients and be able to advise them on the best options. And when we do do that, there is an opportunity for us to earn consulting fees or other fees for assisting with those type of technology upgrades and integrations. We think that's a better strategy for us than aligning ourselves with one technology as an investor.

Got it. Thanks again for the color.

Kevin Steinke, Barrington Research.

Just a couple of quick follow-ups here. I did notice the nonroutine structural repairs ticked up sequentially here. And as you look to wrap up things on that front towards the end of the year, do you expect or do you have any line of sight into any more significant costs coming through on that front in the second half?

I think the good news, Kevin, is that the assortment of locations that needed some remedial work hasn't really changed much. We identified them fairly early post-merger and begin the process of trying to assess what needed to be done, what was required, what it might entail, and what it would cost, and then getting it scheduled.

So we haven't added a lot of new things -- I'm trying to think of one right now while I'm speaking with you. I don't think we've added any locations to the list over the last year or so. So it's a stable group of locations, the work is underway at all of them or it's been completed already in some cases. So I don't think we're going to have any surprises at all as we move into the latter part of the year but we need to get the work completed that's underway now and we are working very hard to make that happen by the end of the third quarter, although a little bit of it may spill into the early fourth quarter.

Okay, thanks. And then debt did come down sequentially by about $9 million but you had a big job in interest expense. What was driving that?

Kevin, this is Vance. Really what was driving that primarily would be the amended -- I'm assuming you're assuming year over year. Is that how you're thinking about it?

Also sequentially, the drop in interest expense as well as year over year.

Yes, so the big thing that striving that in both cases is, one, as our debt comes down, as you alluded to, that's helping interest expense and secondly is the fact that we, with our new amended restructured credit agreement, we got lower interest rates across the grid. So both of those would result in the lower interest expense that you're seeing.

Okay, right, that makes sense. And so we can expect this lower level as we move throughout the rest of the year.

Yes, yes. You know -- and in fact as we further deleverage, based on the amount of debt that we will have, we will be paying even lower interest expense and then in addition as we further leverage or deleverage, our rate structure is tied to our leverage ratio. So in fact we will be paying interest on lower debt, but we will be paying it hopefully (inaudible) at a lower rate as well.

Okay, all right, that's good year, thanks.

Thank you and I'm showing no further questions at this time. And I would like to turn the conference back over to Marc Baumann for any closing remarks.

Thanks, Michelle, and thank you for joining us today and participating in our call. We're looking forward to an exciting second half of 2015 and look forward as well to speaking to you with our third-quarter results. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the programming you mail disconnect. Everyone have a great day.