SP Plus Corp (SP) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q2 2017 SP Plus Corporation Earnings Conference Call. (Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the conference over to our host for today's call, Mr. Vance Johnston, Chief Executive Officer. You may begin.

Yes. Thank you, Tanya, and good morning, everybody. As Tanya just said, I'm Vance Johnston, Chief Financial Officer at SP Plus. Welcome to the conference call for the second quarter of 2017. I hope all of you have had a chance to review our earnings announcement that was released last evening. We'll begin our call today with a brief overview by Marc Baumann, our President and Chief Executive Officer, then I'll discuss our financial performance in a little more detail. After that, we'll open up the call for a Q&A session.

During the call, we'll make some remarks that will be considered forward-looking statements, including statements as to our 2017 outlook and guidance and statements regarding the company's strategies, plans, intentions, future operations and expected financial performance. Actual results, performance and achievements could differ materially from those expressed in/or implied by these forward-looking statements due to a variety of risks, uncertainties or other factors, including those described in our earnings release 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 wanted 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. I'm very pleased with our overall performance in the second quarter and year-to-date. As you may have seen in our earnings release, we completed a transaction in the second quarter of this year where a joint venture in which we hold a minority interest, sold its core real estate asset, and we realized earnings of $8.5 million on our proportionate share of the transaction. We believe this was a good transaction for our shareholders. Even without this gain, relatively strong gross profit growth, coupled with a lower level of G&A spend, drove significant growth in operating results.

Breaking down our 2 major business segments, the Airport division continued to produce strong results. While the Airport business did not replicate the level of gross profit growth it experienced in the first quarter, which benefited from a relatively milder winter, we are nevertheless pleased with the Q2 results.

In our Commercial division, we had mixed performance across industry verticals and geographic markets. New business activity was strong, particularly in the hospitality vertical market, where we've made and will continue to make meaningful investments in resources to accelerate growth.

Same locations, however, especially in the New York Metro market, experienced softer trends. As we shared with you last quarter, the New York market is facing some downward volume and revenue pressures, which are having an outsized impact on certain lease locations. We've made progress towards stabilizing our performance in this market and have recently seen improving revenue trends at our lease locations. There remains more work to do to continue to increase revenue, drive volume and control operating costs.

Lower health care claim cost, both relative to expectations and relative to last year, have had a significant positive impact on our second quarter and year-to-date gross profit results. While we've seen lower-than-expected claim cost year-to-date, our expectation of claim cost for the full year has not materially changed as we believe much of the benefit we're seeing this year is due to differences in the timing of claims, which is difficult to predict. Therefore, we now expect a higher level of claims activity in the second half of the year than originally expected.

I think this is a good time to reiterate that since we operate high deductible health care and casualty and insurance programs, we are, in effect, self-insured for most claims. The timing and magnitude of claims is difficult to predict and can fluctuate from year-to-year and from quarter-to-quarter. Some of these fluctuations can be quite large and can impact relative performance measures.

Our overall client retention rate remained a solid 92% for the 12 months ending June 2017. While same operating location gross profit was down year-over-year for the reasons that I mentioned earlier, we did see abundant new business activity, most notably in the hospitality market, where we've invested in resources to help accelerate growth.

New hotel properties added into our parking management portfolio include the Westin Bonaventure in Los Angeles, one of the largest hotels in the area; 2 Kimpton properties, the Kimpton Grand Hotel in Minneapolis and the Hotel Monaco in Baltimore; the AC Hotel in Downtown, Madison, Wisconsin, which is a member of the Marriott family of properties. We also recently added a couple of hotel-based shuttle operations to our portfolio in Los Angeles. This has been an area of focus for us.

Locally, we recently won contracts with the first Virgin Hotel property located in downtown Chicago and a small boutique hotel, the Robie Chicago House, in an architecturally significant building in the heart of one of Chicago's most bustling neighborhoods.

The Airport market has also been active with 3 new airports added to our portfolio with recent contract awards at Raleigh-Durham International Airport in North Carolina, Jackson-Medgar Wiley Evers International Airport in Mississippi and the John Glenn Columbus International Airport in Ohio.

I want to reiterate that our primary focus going forward is to execute our 3 major growth initiatives: fully implement our industry vertical market strategy; expand our revenue management and marketing services capabilities; and three, further enhance our safety and risk management programs and culture. We believe successful execution of these initiatives will position us well for sustainable long-term growth.

With that, I'll turn the call over to Vance to lead you through a more detailed discussion of our 2017 second quarter and first half financial performance.

Thanks, Marc. I'd like to spend a few minutes reviewing our financial results in more detail. As we have before, my comments will focus on adjusted results. Second quarter 2017 adjusted gross profit increased $1.8 million or 4% over the same period of 2016. As Marc mentioned, the primary drivers of gross profit growth were lower health care claim costs, strong performance in the Airport division as well as robust net new business. The combined impact of all the foregoing items more than offset the mix performance of same locations in the Commercial division, particularly in the New York Metro market, which Marc touched on earlier.

Adjusted G&A for the second quarter of 2017 decreased by $0.6 million or 3% from the second quarter of 2016, primarily due to the previous cost-reduction initiatives and continued cost management discipline, which more than offset the additional resource investments we're making to support our various growth initiatives.

Adjusted gross profit growth and lower G&A drove significant growth in adjusted EBITDA of $2.1 million or 8% over the second quarter of 2016.

Adjusted EPS was $0.53 for the second quarter of 2017 as compared to $0.34 in the second quarter of 2016, an increase of 56%. In addition to adjusted EBITDA growth, a significant reduction in depreciation and amortization expense, including a $2.5 million reduction in D&A due to the burn-off of certain acquired acquisition-related intangible assets, helped drive the increase in adjusted EPS.

I'll touch briefly on the year-to-date results. Adjusted gross profit for the first half of 2017 increased $4.5 million or 5% over the same period of 2016 and adjusted G&A decreased by $1.7 million or 4% from the same period of 2016 as many of the same factors I discussed for the quarter are impacting the year-to-date. Resulting adjusted EBITDA for the first half of 2017 increased 15% or $5.8 million over the same period of 2016.

Adjusted EPS was $0.80 for the first half of 2017, an increase of 82% over the same period of 2016. In addition to adjusted EBITDA growth, a $3 million reduction in depreciation and amortization expense, largely due to the burn-off of certain acquisition-related intangible assets, helped drive the adjusted EPS increase.

The company generated free cash flow of $22.9 million in the first half of 2017, significantly ahead of last year's first half free cash flow of $13.2 million. The 2017 free cash flow does not include the proceeds from our share of the joint venture transaction.

Lower capital expenditures and favorable working capital movements contributed to the increased free cash flow generated in the first half of 2017. Generating significant free cash flow continues to be an area of focus for us, and we're pleased with the progress we've made.

Lower-than-expected cost of health and casualty insurance contributed significantly to the overall better-than-expected results in the first half of the year. However, current expectations for the second half of the year are more modest. As a result, we are reaffirming the previously provided full year guidance for adjusted EPS, adjusted EBITDA and free cash flow. We are increasing reported EPS and EBITDA on an adjusted basis solely for earnings of $8.5 million or $0.22 per share after-tax realized from the joint venture transaction in the second quarter of 2017.

That concludes our formal comments. I'll turn the call back over to Tanya to begin the Q&A.

(Operator Instructions) And our first question comes from Daniel Moore of CJS Securities.

You mentioned -- you talked about, Marc, prepared remarks, favorability in health care and casualty. I guess, I know it's very difficult to project, but maybe order of magnitude what -- how much incremental cost do you expect to occur in the back half of the year relative to what we saw in H1?

Well, I think, Dan, if you look at the 2 programs separately, that's worth doing. One of the things we have, of course, in the area of casualty is the ability to actually drive cost down to our programs, our safety programs and risk management programs, and that's been a major initiative as we've talked. And so our expectation long-term for casualty is that we will continue to find ways to drive down our total cost of risk.

So that's an ongoing expectation, and obviously, as we've talked before, in a given quarter, our actuarial assessment that's done by the actuary can result in an increase in cost being recognized or a decrease in cost being recognized, but the long-term trend should be in the positive direction. So I think that's just an ongoing aspect of how the casualty programs work.

Health care is a little trickier because it's hard for us to control costs directly. Obviously, we have our employees covered by our health insurance programs. We made some changes to the programs last year in order to make sure that the programs were market trusted, in other words, the benefit offering and the cost and the employee contribution, the client contribution were all calibrated against market conditions.

So we made some changes that ended up being favorable to the company midyear last year, I think we're seeing some benefits from that. That's not an ongoing thing. I think that's kind of flowed through now because it's been about a year since we did that. I think the challenge, of course, is that most health claims come through usually in the 12 months of the year or maybe the first quarter of the following year. And so very, very difficult to predict.

So I think while we're happy to have the positive upward movement in the first half of this year from health claim cost, I think the right thing to do is to maintain our view, which is that we won't expect any further positive movement in claims cost as we go through the rest of the year. And in fact, it may be, as we said in our remarks, that some of the benefits have flowed through a little earlier in the year than we would have thought. And so therefore, may go little the other way in the rest of the year.

Dan, I would just -- this is Vance, I would just add one thing to what Marc said. Obviously, with health care, you have kind of deductibles. And so as those deductibles are met, we take on more of a proportion of that. And so in some cases, you would expect the deductibles to be met on an individual basis. And as we get into the second half of the year, and then we would take on a higher proportion of those costs for certain claims that come through.

So that seasonality may -- that may be there on a go-forward basis as well?

Yes, yes. You would expect it. You wouldn't expect. Obviously, we -- as Marc alluded to, tough to predict kind of the degree of claims and kind of when they come through for health care. But that kind of phenomenon and the fact that deductibles are met and then we take on a higher proportion of it, notwithstanding anything significant, you'd expect that trend to continue forward.

Got it. Very helpful. Shifting gears, D&A. You mentioned the step down of the burn-off of intangibles. Is Q2 a good run rate to think about on a go-forward basis?

Yes. No, I think that's a reasonable run rate to think about.

And then if that is the case, and obviously, excluding the onetime gain that you had in the quarter from the sale of the JV, it would seem that at least your EPS guidance appears conservative given the magnitude of that step-down. Any comment there?

Yes. Look, when we look at EPS guidance, we factor in a number of different things. And obviously, we're getting a favorable impact, as we've alluded to in our prepared remarks, related to the fall off of certain intangible assets and depreciation expense going down due to that.

But there is a variety of things that we've considered, and so we'll just have to kind of wait and see how things play out. But we feel reasonably comfortable with where we're at with our guidance, and it could be -- obviously, there is a range that's there, and effectively we just reaffirmed our guidance in the range at this point in time. Now that could change, but that's where we're at now.

Okay. Lastly, and I'll jump out. Leverage continues to drop and really accelerate quickly down to about 1.5x this year's EBITDA. Just talk about options for capital allocation and is there a natural time between now and year-end when you might consider whether it be dividends or other uses of capital?

We're always focused on making sure that we're optimizing capital allocation for our shareholders. And obviously, we are aware of the fact that we have delevered significantly over the past couple of years as we generate significant cash flow.

But I would say, first and foremost, our focus is on looking out into the world and seeing whether there are either parking companies or ancillary-related businesses that we could acquire at attractive multiples. That's an ongoing active process that we have going all the time. And we'd love to deploy some capital to try to get some transactions done and accelerate our organic growth and complement it with some acquisitions.

So that will continue to be our focus. Obviously, we're providing adequate capital to the business, and so where we need it either to invest or support in a deal or renewal of a deal, we're doing that. If we need to make investments in technology, we're doing that. But as you know, we have a negative working capital model. And so generally speaking, we don't require a lot of our own capital to be invested in the business.

As you're aware, we do have a stock buyback program that was authorized by our Board. We're constantly reviewing that in our forward forecast for the business and make sure that where appropriate we're buying back our stock when that makes sense. And clearly our Board will, on an ongoing basis, look at the potential for dividends. And that's something that was an ongoing agenda item for our Board of Directors.

But it's premature now for us to sort of signal any steps that we might take other than to reiterate the fact that we are clearly getting our leverage to the low end of the range that we've talked about. There is no need for us to delever further per se, but we want to make sure that if we're making decisions to spend some of that cash flow that we have that we're using that in an effective way to generate long-term shareholder value for our investors.

And our next question comes from Tim Mulrooney of William Blair.

Yes. So I just want to go back to the guidance question, just for a minute, just to make sure I have these numbers correct. So you did $0.80 in the first half of '17, which is up 84% year-over-year. The midpoint of your guidance is $1.60, which implies $0.80 in the back half of the year, which would imply an EPS decline of 10% in the back half of the year. Do I have my numbers correct?

Yes, you have the numbers correct. The way you're stating them, yes.

But, yes, Tim, you should go back to the comment that Vance made a few minutes ago. We don't give quarterly guidance. And when we look at the year, we set our expectations for where we think the guidance items are going to move. So we look at things like EBITDA, we look internally at elements that we don't give guidance on. And obviously, we do give guidance on EPS as well.

And as the year unfolds, internally, we may move within the range that we've given. And so we only move our guidance range if we feel that we're going really be outside the guidance range, but if we're -- if we feel that we're going to stay within the guidance range, we might be, at any point in time, running higher or lower, we don't adjust our guidance on a quarterly basis.

Okay. All right. You know what, I'll move on. I know you guys have that revenue management pilot going. I think you implemented that in the first quarter. Any early indications for how that's going, initial takeaways and/or plans to expand this pilot program to a second location?

Yes, thanks for asking. We started very small, and we're looking at data and trying to understand patterns around people's parking activities at some of the locations that we've selected for the pilot. And I would say, we're starting to get some learnings. And I think some of what's coming out of it is that there is room to optimize revenue with the locations that we've looked at.

And by that, I mean, we may not be charging enough in certain cases for transient or monthly parking, in other cases we might be charging certain segments of the parking users at those facilities more than the market will bear. So we're looking at this very carefully. And I would say optimistic that learnings initially are going to lead to our ability to implement some ideas that will drive revenue up in those facilities.

Now because of that, we're going to start actually making changes. And as you can imagine, it's great to do mathematical analytics and form hypotheses about what might happen, until you actually do it, you don't really know. So we're moving into the doing-it phase at a small number of facilities to try to implement some of the conclusions we have from the analytical work, and we're also going to expand the number of facilities now that we're looking at to see whether the patterns are similar there or different.

So I think early innings here of this game, but at least initially, we are seeing some positive feedback that's encouraging us to continue down this track. I'm hoping that, as we get to the end of the year, we will have implemented some change at some locations and learn from that. But it may not be significant enough to really notice in our overall results as a company. But the goal here is to learn at a small number of locations, take those learnings and then scale those 2 locations in other places or in places where we may not necessarily have all the data.

And as we said earlier, our prime focus is on lease locations where we can make decisions and make change just on our own decision-making process. But the ultimate goal is to develop a differentiated offering that we can offer up to clients and use case studies from what we've learned at leases and use it as a means of winning new business and accelerating our growth with management clients as well.

That's good. That sounds promising. I look forward to hearing more about that in the future. Maybe one more from me piggybacking on the last question about capital allocation.

I'm curious about your M&A opportunities specifically, given the merger with Central 5 years ago, I wonder if you could ever do a large deal like that again. Or if you think there'd probably be antitrust concerns that leave you with just focusing on smaller bolt-on opportunities from here on out? Can you just share your thoughts with us, generally, about how you think about M&A?

Sure. No, I think we -- one of our goals has been, and this is not a new goal, this has been our goal for many years, is that if there is an opportunity for us to acquire one of our -- want someone else in the parking space, whether they are the larger operators or somebody that's midsize or a small size, we're always looking at it, and we're eager to explore the possibilities.

Now clearly, we would be subject to antitrust review if the transaction has certain characteristics, we know how to go through that very, very well. So I would say the potential for antitrust review would not dissuade us from taking a look at something very seriously and maybe even pursuing it.

As we learned with the Central transaction, the Central Standard transaction, while we had to go through a process and it was fairly intensive. At the end of the day, we divested a fairly small number of locations, which weren't in the end material to the results of the combined entity. And we've now moved past that period and are actually able to go back into the marketplace and try to get some of those locations back because the period that we had did not look at them as expired.

So I don't think we would be daunted by the issues of antitrust. We'd certainly follow the rules and do the right thing. I think that, clearly, in the parking space, there will be companies that will come for sale all the time. And so our goal is to make sure that the owners of these businesses, whoever they may be, will be aware of our interest in participating in any process to look at a possible acquisition of their business, and we will do that.

We have strong discipline though. We want to make sure we're really creating value for shareholders, and we've looked at a lot of things, and we've not pursued a number of them because we just couldn't see how the economic return would justify the kind of prices that people were talking about. And I think -- so I think from a -- in the parking industry M&A, that's definitely an issue.

If we look at other verticals that are ancillary to our business, whether it's ground transportation or security or facility maintenance or other things that we're thinking about, our penetration in those spaces are very small. And so it would not be, I mean, you never know what will have to be looked at or what might be reviewed by the authorities. But I think we probably have a little more open latitude to pursue things there without having to think about that too much.

(Operator Instructions) Our next question comes from Marc Riddick of Sidoti.

So I wanted to touch a little bit deeper on the investments on the hospitality side, certainly that's been an area where you've been getting new business wins and not just this quarter, but more -- but certainly recently. But I was wondering if you could share a little greater detail on maybe some of the higher level things that you're looking at within those investments. And maybe whether they're specifically regional or by brand or how we should be thinking about the main focus of the investments going forward?

Sure. Happy to do that. And I know I've touched on this before. One of the things that we discovered, we went through a comprehensive review of our business and looked at ways that we could take steps that would accelerate our growth as we go forward, and one of the things that kind of stood out to us is that the vast majority and probably the bulk of our hospitality clients are located either in Chicago, New York or Florida. And we spent some time trying to understand what do we attribute that to.

And at the end of the day, I think what we attribute it to is the fact that we have people in those places who are solely focused on hospitality. Now the hospitality business is a lot different from commercial office buildings or apartment buildings and the like. It's very intense at night and weekends, and hospitality clients often have major events, whether it's conventions or weddings and the like.

And so in order to be successful in that space, you really have to have people who kind of live and breathe that world and often came out of that world and are clearly focused on that. And so we have people like that in New York, we have people like that in Chicago, we have people like that in Florida.

In a lot of our other markets, we have the same client base and we have the same competitors, but we haven't really deployed those kind of people. We've really, up until now, left our normal individuals who are there developing commercial office buildings, freestanding parking lots, all the normal verticals that we talk about. And those businesses are a lot different from hospitality.

So I think the lesson for us, and this is what we made the commitment to do, is we need to deploy more of those kind of people like we have in those 3 markets into other markets. And so that's one of the things we're doing right now.

So we're putting what we're calling regional hospitality asset managers in a handful of markets, and we're starting with Southern California, and I think we're starting to see some benefits from that in the wins that we've announced in our earnings release. So I think -- and we'll add more as we get -- as we start to see success from that approach, we'll add more in other markets and will keep going until we reach a point where it doesn't make sense.

Now that being said, we've had tremendous success in a few markets where our local management team and regional managers have just done an outstanding job of developing and cultivating hospitality business on their own. And so I don't want to send a message that it's only these people that are focused on hospitality that can do this.

But we see hospitality as a really important and great growth market for us over the next several years. Our penetration rate is very low in many, many places, and we're very eager to try to put those resources to work.

We also had a leader of one of our business units retire at the end of last year. And while he's working for us on a multi-year consulting arrangement, we brought in a new individual to sort of head up business development for hospitality. So while we have leadership over our business development in the Commercial division, generally, we feel that hospitality is so specialized that we wanted to bring in somebody to focus just on that on a national basis and cultivate national relationships with hotel chains, ownership groups, property managers, management companies and the like so that we can continue to expand our opportunities in hospitality.

That sounds very promising, and I appreciate the color on that. And I guess my last question is around the -- if you could share anything as far as the timing of -- actually, I guess, I have 2 more. The timing of contract renewals that you see sort of maybe over the next few quarters or so, are there any particular quarters that may have a lot more or less bulked up in any particular area? And then my follow-up to that is wondering if you could share updated retention rate data?

Sure. Well, the -- I think in our business because we are about 90% management contracts and, except in the government space and the private sector, most of those contracts are terminable on 30 days' notice. I mean, this has been -- is a factor in our industry. So we don't tend to get too concerned over, does this contract expire here, does that contract expire there, because our contracts are always in the process of renewing.

And most of our management contracts have provisions that allow them to be extended automatically if the contract term comes up. So I don't think that's anything to be concerned about. Clearly, in the government space, you will see large airports are on a cycle, and there is always something. So we renewed a number of airports this year, we will have other ones coming up. That's just the way government contracting works, tend to be 5-year contracts.

And I think retention, we talked about location retention in the release at the 92%, which is at the high end of the range that we've been over the past few years. I think we were 94% last quarter. It is going to bounce around a little bit. But clearly, our goal is to really drive up our location retention rate. And the reason why it moves around is that sometimes we gain or lose clients that have multiple locations.

And I think we indicated in the release that we didn't end up getting renewed at an airport. It had a lot of locations. So that had an impact on driving it down to 92%. But I think internally, our goal is to try to get our retention rate up to 95%. That will be a -- that's a long-term objective. But I'm confident that the efforts that we are -- put in place and the leadership that we have in place in our organization will get us there ultimately.

And our next question comes from Kevin Steinke of Barrington Research.

Marc and Vance, so you talked about the cost reduction initiatives, prior cost reduction initiatives offsetting, to this point, your resource investments that you're doing this year. Just wondering as you look to the second half, if you think that will continue to be the case or if the investments ramp up a little bit more in the second half and maybe G&A expenses don't benefit as much on a net basis from prior actions you've taken.

Well, I think we're always looking at ways that we can take cost out of our G&A base. And as we talked on the last call, we took cost out for 2017 as we made some additional changes to our organization. We're also continuously looking at strategic sourcing and other automation and technology things, which Vance can elaborate on. So those things are kind of ongoing. And we'll get the benefits of those as they happen.

In terms of the investments we're making in revenue management and marketing services or in these hospitality asset managers, that's sort of a gradual investment. But again, as we talked last quarter, we're not talking about tens of millions of dollars, large numbers, we're just talking about adding resources. As I mentioned on hospitality, we're adding a handful of people.

If that -- if we start to gain traction and they start to bring in results like we're starting to see in the greater Los Angeles area, we'll add more of those resources either later in the year or as we move into '18. But the goal is always make investments in G&A where it makes sense to try to drive more gross profit growth.

Okay. And I think in your prepared comments you mentioned some continued softness in New York, although I think you also talked about that you've made some changes and have started to see some improvement. Is that the case? And if so, could you just give a little bit more detail on what you're doing there?

Sure. I mean, I think anytime that you're not achieving the performance expectations, you start to look at what's really driving that. And I think some of the things that we learned is that maybe we had not invested enough in marketing and promotional activity in the New York market relative to what we had done before and relative to what some of our competition has done.

We're certainly seeing some increased penetration from parking aggregators in New York and other places. And again, we have to make sure that we're making good decisions about how to work with them, what inventory to make available through them and what inventory not to make available through them. And I think as we've brought about kind of a renewed and intense focus on New York, we're making some changes there to try to optimize revenue.

And because we've begun to create a revenue management capability in the organization, we spend a lot of time focusing on New York where we have a lot of leases, and we're learning a lot of things through analysis about pricing decisions we've made around monthly parking, transient parking and the like.

So we have our desire to create a revenue management system, if you will. That's this ongoing project that I spoke about a few minutes ago. But in the meantime, we're spending a lot of time looking at just whether we have the right rates, the right allocation of transient versus monthly at a number of locations.

And then finally, we brought some new leadership in over the operating team, and they are looking at things like staffing levels, overtime, controlling overtime, obviously making sure we're following good safety practices and the like. So major spotlight focused on improving performance there.

But I think as we've talked before, the underlying issues that affect New York, and to some extent some other cities, are really around congestion. There is clearly ride sharing is a factor in the hospitality space, in particular. And so that's just part of the environment that we operate in.

But I think it was nice to see, and we're starting to see this in the last couple of months. It's not really reflecting so much in our Q2 results. We're starting to see some positive revenue trends in the New York market, in particular.

Okay. That's helpful. And then could you just give more detail on this joint venture transaction that you did? And if that's just a one-off or if there are other opportunities like that?

Yes, I mean, I think the legacy is that legacy Central Parking business owned a lot of real estate, and a lot of that was sold before Central and Standard merged 5 years ago. There were a few joint venture interests left. And this is, I think, the last one or there might be one more, but not necessarily have to do something with that.

But our -- the majority partner in the joint venture really was looking at this real estate, talked to us about the value of it relative to what we thought it might be and we decided to support a transaction. Now the reality is at the moment, and probably for some time, it's still a parking facility, and we still operate the parking facility. So we're just not the owner of it any longer or part owner of it any longer.

Yes, I would just -- Kevin, I would just add to Marc's comments. I mean, obviously, whenever we're able to do something like that where we're able to -- selling it, own or have a 30% stake in a partnership like that and there is a decision made to sell an asset like that, obviously, we believed, as we said in our prepared remarks, that, that was very good transaction for shareholders.

Certainly there was a gain that was recorded on that. But more importantly, we generated significant cash that came from the sale of that asset in our proportionate share of that. So very good transaction for shareholders.

And our next question comes from Daniel Moore of CJS Securities.

Just a quick follow-up or 2. If the challenge -- the -- great description, I appreciate the color on New York City. It's very helpful. The challenges that you have seen in the last couple quarters, seeing similar ones in other major urban areas, and are you -- I mean, just kind of talk about trends in general? And are you instituting or implementing similar steps in terms of partnering with some of the apps and the aggregators, et cetera?

Yes. I mean, we're not seeing the same situation in other markets that we have in New York. But I think -- I do think that the New York issue that we talked about is somewhat related to hospitality, where hospitality is definitely seeing some impacts from ridesharing.

So where you see -- where we have hospitality in places like Florida or Chicago, we have similar patterns within the hospitality space. Now what I can say is that, and I kind of watch and try to learn and understand what's happening with other businesses as well, this also affects other people who are operating hospitality.

So I think the reality for the hospitality space is that ridesharing has changed what consumers are doing. And so there is going to be, on a permanent basis, fewer people parking at many hotel properties around the country. That's just the reality of the world now with ridesharing in place.

That being said, we have about 400, I think, or so hotels nationally, and there is, at least, I think, 3,000 that are kind of in the 4 to 5 diamond range, so in other words, properties that will be candidates for us to operate. So while some of our existing properties aren't generating this sort of parking volumes that they used to, that being said, there is an awful lot for us to go at.

That's why it might seem a little bit of a contradiction to say, well, gosh, you're feeling some ridesharing pressure in hospitality, and yet you're putting all these focus on hospitality. Well, the reason that we're putting the focus on it is that, if anything, the hotels that don't use us need us more now than ever before. They are looking to how do they generate revenue out of the guests that come to their properties.

And so creating an outstanding guest experience for the people coming in, and when they come in with their car, when they leave with their car at the end is crucial to the success of their hotel property. So we're very, very bullish and optimistic about the potential for hospitality as an industry and also the potential for us to gain a lot of growth in the hospitality space.

But I think that we have to recognize that, that being said, ridesharing has had some impact on that vertical. Because most of our other major cities either we have very little in the way of hospitality business now, we're going to try to generate more of that as we talked. Or in the case of Chicago and Florida, where we do have decent amounts, we're for sure seeing some impact from that there.

Now your comment -- question about aggregators. We work with aggregators on a national basis. And I think the important thing is if you have a parking garage that you can't fill up in the middle of the night and it's a 24-hour garage that has to remain open, you're happy to sell that inventory to an aggregator and pay them a portion of the revenue.

I mean, that makes good economic sense. The marginal contribution from selling that space is not what you might get during the daytime, but it's a lot better than 0, which is what you'd get. And of course, parking inventory is time-based. And so that means, if it -- you don't sell it today, you can never sell today's inventory ever again.

The key with aggregators is to work with them intelligently, so that you're giving them the correct inventory and you're putting that inventory out there at the right price, so that you're attracting business that you wouldn't get otherwise, and you don't mind paying them, as I said, a share of that revenue.

What can happen if you're not careful is that you might be selling them your peak inventory that you don't need to sell through the aggregator. This again is where our clients are looking to us to be experts in revenue optimization for them so that we can invite them. Here is where you should use one of these aggregators, here is where you shouldn't, here's is what price should be charged to the aggregators.

So part of our value proposition to a client is that they're looking to us to guide them on making those decisions. And obviously, at the lease locations we make them on our own behalf. So once again, I kind of think these trends -- some of these trends are actually beneficial to people like us because maybe a smaller, less sophisticated parking company doesn't have that expertise, hasn't invested in the resources to be able to do those sort of things, and therefore, would not be capable of giving as good advice to a client as we can.

Very helpful. Last one, and then I'm done. Vance, tax rate, historically, closer to 40%, it's ticked down in the last couple of quarters. Anything going on there; what should we expect going forward?

No. We still expect our tax rate for the full year to be around that 40% rate -- 40%, 41% rate. So obviously, we had -- in the first quarter, we had a little bit lower tax rate related to some items that happened in the first quarter, but for the full year, we still expect consistent with our guidance at this point.

And I'm showing no further questions at this time. I'd now like to turn the conference back over to Marc Baumann, President and Chief Executive Officer, for closing remarks.

Okay, Tanya, thank you very much. And I just want to thank all of you for joining us today and your interest in our business. And we look forward to speaking with you, again, next time. Have a great day now.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day.