SP (2020 - Q2)

Welcome to the Q2 2020 SP Plus Corporation Earnings Call. My name is Richard, and I'll be your operator for today's call. [Operator Instructions] I will now turn the call over to Mr. Kris Roy, Chief Financial Officer. You may begin. Kris Roy

Thank you, Richard, and good afternoon, everyone. As Richard just said, I'm Kris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our second 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 and 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 measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are discussed on the call, reconciliations to comparable GAAP measure will be posted under 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.

Thank you, Kris, and thank you all for joining us this afternoon to review our second quarter results and discuss our business outlook. By all measures, this was one of the more challenging quarters I faced in my 20 years with SP Plus. The COVID-19 health crisis has had a significant impact across our portfolio and particularly on our airport, airline and hospitality clients, along with many of our commercial clients. I'm pleased with the way we manage through it to achieve the best possible outcome. And while the second quarter financial results are not what we expected when we began the year, they reflect both the substantial decline in activity we experienced in serving these hard hit industries in the wake of COVID-19 as well as changes that -- charges that we incurred in the process of scaling our business to the level of demand for the services that we provide. We believe that the second quarter represents the low point for us and is a base from which we're building a more streamlined and profitable business. Before going into further detail, I'd like to take a moment to thank the entire team at SP Plus for the commitment they've shown to our company and to our clients. It took tremendous effort to effectively serve clients and manage our diversified operations under these unprecedented conditions, and I'm grateful for their perseverance and support. The safety of our employees and customer remains a top priority. To protect our frontline team members, we've put in place comprehensive safety protocols, including training, daily health screening questionnaires and pre-shift safety meetings, frequent risk alert communications and safety videos. In addition, we've implemented extensive cleaning and sanitation protocols in line with CDC guidelines at our locations. I will now turn to review the main events of the second quarter, beginning with the tenor of our business during the period. The actions we took to stabilize our operating results, where we stand today and how we're envisioning the future. The impact of COVID-19 tested the resilience of our entire organization in the second quarter, but the biggest disruption took place in April when state and federal mandates to curb the spread of the disease, including travel restrictions and shelter-in-place requirements, severely reduced utilization of the suite of services we provide at airports and hospitality and commercial locations. Keep in mind that even though the activity at these locations was significantly lower, the parking management and mobility solutions we provide are essential services, and therefore, in most cases, some level of our services was still required to keep facilities operational, sanitized and secure. Thus, we remained open at over 85% of our commercial division locations and at all 70-plus airports we serve, although with reduced staffing levels and limited opportunities to gain additional volume-related revenue, which severely impacted our gross profit. The good news is that we saw a pickup in activity throughout the second quarter as clients sought our expertise to address consumer behavior changes, mitigate safety and security concerns and deal with social distancing requirement. Despite the fall off in gross profit, we generated $13 million of free cash flow in the second quarter, thanks to cost reductions, contract concessions and strong management oversight. To scale our business, we took a series of actions to reduce our cost structure, some of which we detailed in our first quarter communication. These actions, which included a major workforce reduction and a significant cutback in paid hours for hourly workers, the Executive and Directors salary cuts and work-from-home efficiencies enabled us to control cost of services and reduce our adjusted G&A by 30% compared to last year's second quarter. Not all of these cost reductions are permanent, but a good portion are and the speed with which we executed them is impressive. Additionally, we took steps to strengthen our operating portfolio in order to position the company for the future. Notably, in the second quarter, we were able to exit or restructure a significant number of contracts. While there were early termination charges associated with a few of these, we eliminated a potentially ongoing source of downward pressure on gross profit and we believe that the continued shift to management contracts will provide greater gross profit visibility and less exposure to volume-related and other risks, typically associated with lease type contract. Despite these actions, our location retention rate was 90% for the period ended June 2020, which was the same level as the second quarter of last year. With respect to where we stand today, while we continue to monitor the recent pauses to reopenings in certain parts of the country, we believe that the improving trends we saw in the second quarter are indicative of the importance of our services to clients. The gradual easing of government restrictions, the ongoing expansion of our national account program in the health care vertical with the recently announced new GPO agreement and improved operating portfolio and reduced G&A expense level give us confidence as we head into the second half of the year. We've been tracking the number of travelers screened by the TSA, and it's increased steadily from a low of about 110,000 daily travelers in April, a decline of 95% compared to April 2019, up to about 670,000 travelers per day in July, which is still a substantial decline of 74% over July 2019, what was 5x higher than April. We're seeing a similar trend across the large sample of our same lease locations where parking revenues were down 60% in July 2020 as compared to July last year, which is a significant improvement from April, where revenues were down 90% year-over-year. Finally, I want to touch on our technology initiative. During this crisis, we've continued to make investments in technology, which we believe remains a key differentiator for SP Plus and an important competitive advantage, especially during this pandemic and in the new normal that will follow. With an operating history spanning over 90 years, SP Plus understands the unique needs of clients and end consumers and appreciates how critical technology is to the future of our industry. Our aim is to foster end-to-end mobility. That means we are there for the entire experience from customer acquisition to operational logistics, to real-time performance metrics and reporting. Our goal is to eliminate the pain points often caused by travel from point A to point B, such as parking and congestion issues that often accompany such travel. To that end, I'm very excited about the recent launch of our new technology brand, Sphere, which brings together a suite of industry-leading mobility-focused technology solutions that provide our clients with greater clarity and visibility into their operations and also provide end consumers with a user-friendly, seamless and contactless experience. Sphere's operational and analytics platforms provide industry-leading tools and insights to enhance and optimize our clients' operations Examples include Sphere Insights and Sphere Valet as well as enhanced capabilities coming later this year with Sphere Transact, which is a mobile point-of-sale system built to enable contactless payment, faster transactions and reduce congestion. Sphere's facility access and digital commerce platforms provide streamlined facility access and expanded digital commerce delivering touchless capabilities through Parking.com. Sphere Commerce provides sophisticated customer account management and cutting-edge pricing engine and supports touchless payment options via prepaid reservations, on-demand payments, Bluetooth check-in and checkout, QR codes and license plate recognition. Sphere's facility and data management solutions provide a centralized web console to enhance online performance and efficiencies and today Sphere Remote maximizes ease-of-use and operational efficiency via single remote operation that provides automation and in-lane 24/7 remote support for over 400 facilities nationwide. And we've seen growth in this service during the pandemic and expect demand from our clients to increase. These are just some examples. You can go to www.sphere.spplus.com to see the full scope of Sphere. Having all these technologies and capabilities under the Sphere umbrella gives us a unified identity that we believe further solidifies our position as the leading provider of mobility technology solutions. Now I'll turn the call back over to Kris for a second quarter financial review.

Thank you, Mark, and thank you all for joining us this afternoon. As usual, I will provide more color on our adjusted financials reported this quarter as well as our liquidity position. You can find a full reconciliation of all non-GAAP measures to their nearest GAAP measures in the tables accompanying today's earnings release. Adjusted gross profit, which excludes $600,000 of restructuring and integration-related costs as well as a $16.7 million noncash lease impairment charge related to the write-down of right-of-use operating assets declined to $3.9 million compared to $61.9 million in the year ago quarter, mainly as a result of the impact of COVID-19 on our business. During the quarter, we increased our provision for credit losses and potential legal settlements by $10.1 million as part of our regular review of these items and in light of the impact of COVID-19 on our business. Excluding $3.7 million in integration and restructuring costs, second quarter 2020 adjusted G&A decreased by 30% to $19.1 million as we took actions to scale our overall costs in light of the current business environment, including reducing accruals for the company's variable compensation plans. Adjusted loss per share was $0.86 compared to net income per share of $0.81 for the second quarter of 2019. As a reminder, adjusted net income and adjusted income per share for both years exclude amortization of acquired intangibles, which were higher in the second quarter of 2020 due to an intangibles impairment charge. The provision for credit losses and legal settlements represented a per share loss of $0.35 after tax. Considering the current business environment, we are very pleased to report the company generated $26 million in positive net cash from operations in the first half of 2020, 22% higher than a year ago period, and first half free cash flow of $15.9 million versus $14.5 million in the same period of 2019. At the end of July, we had $168 million of undrawn capacity under our senior credit facility, our current availability and our expectation to generate positive free cash flow in the second half of the year, gives us confidence that we have enough financial flexibility to manage through this challenging business environment. Looking ahead, it remains difficult to predict the duration of COVID-19's impact on our clients and our business or to anticipate the timing of an economic recovery. Based on what we know today, we expect to see improvement in adjusted gross profit in the third quarter for several reasons. First, second quarter adjusted gross profit of $3.9 million included a $10.1 million provision for credit losses and legal settlement, which we don't expect to reoccur in the third quarter. Second, our gross profit improved progressively throughout the second quarter, with June being the best month of the quarter and our G&A steadily decreased during the quarter, with June being the low point in terms of G&A costs. Third, we terminated or converted to management contracts 80 leases during the quarter. We expect gross profit in the second half of the year will benefit from no longer having these locations structured as leases. Also, there are about 100 additional leases that will come to their contractual expiration during the second half of the year, many of which were unprofitable in the second quarter. Regardless of whether or not we are able to convert them to management contracts, the expiration of some of these leases will naturally improve our profitability over the next 2 quarters. And finally, we expect that our Q3 G&A will be lower than it was in Q2, given progressive improvement throughout the quarter, and we expect to be free cash flow positive in the second half of this year. With that, I will turn the call back over to Marc for some closing thoughts.

Thanks, Kris. As Kris mentioned, it does remain difficult to predict what's going to happen for the remainder of this year with any precision. However, in the long term, we believe that clients in our target verticals will need our services even more as they face financial and operational challenges ahead. Our services help our clients improve mobility, adapt to social distancing requirements and ultimately mitigate congestion. While we recognize that new normal will be quite different than the business climate of a few months ago, we're optimistic about the opportunities in front of us to build on our key verticals and expand our national accounts program. Also, as the public transportation becomes less desirable in many major cities, there's increased opportunity for us to help manage parking and control congestion. We believe the steps we've taken position us well for the long-term. To sum up, we're confident that SP Plus, with its continuing deployment of differentiating technology, will be at the forefront of the digital transformation of our industry and is well poised to emerge as a leaner, more profitable competitor with improved offerings for our clients and their customers. Now we can go back to Richard to open the line for questions.

[Operator Instructions] And we have a caller on line, Mr. Daniel Moore from CJS Securities.

I want to start with maybe kind of the legacy business, if I could, Marc, ex Bags, just what retention rates look like in your core management contracts exiting the quarter, if we were to exclude the Bags business?

Yes. Well, as you may know, when we talk about location counts and retention, we're really talking about our commercial division. So that's already without Bags, and that we had very high retention. I think we mentioned that our retention was 90%, which was actually the same as second quarter last year. And the good news on that, of course, is that we've been actively looking at a lot of our lease locations, as Kris described. So the fact that our retention was as high as that was actually a nice thing to see. The other thing is that, during the second quarter, the commercial division added 48 new management locations. So while we have been actively reducing our lease account in the ways that Kris described, at the same time, we're building our portfolio of management locations.

Very helpful. Sorry, if I missed that stat. Cash flow, really impressive in light of all the challenges here. How much of the free cash flow you expect in H2 reflects unwind of working capital, if any, at all?

Dan, I'd say that's very little in terms of kind of unwinding of any sort of working capital. I think from what you saw, receivables was down significantly, strong collection on receivables. There's very little in terms of unwinding that will happen in the second half.

And was there a cash flow, sort of measurable or material benefit from customers terminating contracts into you during the quarter or that you might expect in the back half of the year?

No, nothing material in Q2 and don't really see anything in that part of the year.

Got it. And then maybe one more. Just -- you gave some good color on the cadence with both gross profit improving through the quarter and exiting and gross -- and G&A declining. If we put that together, can you maybe give us a little more cadence on the level of gross profit monthly and what we've seen in July?

Yes. I think as you look, all of this really depends on what a recovery curve looks like. And I think that's difficult so for us to really kind of put in, in terms of what that might look like and how we're kind of thinking about it. What I can say is we feel really confident about the second half of the year being free cash flow positive, which we mentioned in our prepared remarks.

Our next question on line comes from Kevin Steinke from Barrington Research.

It's somewhat interesting that you hope to show successful [Technical Difficulty].

Kevin, this is Kris. You're breaking up a little bit from a cell phone reception standpoint.

I'm sorry about that. Is it better now?

It's better. Yes.

Okay. Maybe I'll just start over. I was just talking about -- I was intrigued by the fact that you were able to so successfully convert a sizable number of leases, the management type contracts in a relatively short period of time. And you've typically talked about how the type of contract is dependent on client preference. So what made clients amenable to switching the contract types? And does that kind of change your thinking longer-term about the mix of lease versus management? And how much further down you can drive that lease contract portfolio?

That's a great question, Kevin. I'd say, first and foremost, when we enter into lease contracts, we try hard to put some provisions in there that protect us on the downside. And a lot of times, that takes the form of, if revenue drops by X, we can terminate the lease or renegotiate the rent terms, et cetera. And so clearly, when this epidemic unfolded, we faced those sorts of situations, and we analyzed all of our leases and looked at our opportunities for improving the financial terms of those leases for the company. And in some cases, we had the right to terminate, and we executed those termination rights. And what we found is that the landlords came back to us and said, hey, we just love the job you do, and we think that your best position to generate the maximum amount of revenue out of this facility of anybody we can think of, so would you be willing to stay here under any terms. And in some cases, we've said we would be glad to stay, but we're going to have to have a management contract form. And maybe someday in the future, when things are more predictable, we might be willing to enter into a lease again. But at least for now, this is going to be the way that we would do it. And we got a lot of positive response to that. As far as our general desire to do leases, we've had a long-term focus on trying to serve the wants and desires of clients or landlords. And of course, as you mentioned, Kevin, some people do like the lease form. And what we have been doing over the past few years, especially in the face of congestion caused by ridesharing and other things going on, is to avoid making long-term fixed rent lease commitment. We have some of those kind of leases in our portfolio, and many of them are burning off now. But the leases we've been entering to more recently, give us the kind of provisions that I was just describing, but also provide for more of a percentage rent structure. So even in this environment today, if a landlord said, look, I really would like a lease structure, and we can structure it as 100% percentage rent after covering our operating costs, we're happy to look at that and see whether there's enough revenue there to justify it. So I don't see us eliminating leases from the portfolio in the future. But clearly, we've talked many times about our desire to make profit at every location. And if the contract structures that are there for that location don't enable us to make profit, we look for a way to not be there.

Okay. Great. And that's just helpful. So could you talk a little bit more about the launch of Sphere? And is that just like you said, kind of a unified brand strategy kind of aggregating everything you are, you had in place from a technology perspective? Or does it signal an even more of a ramp-up in technology investments longer-term and maybe accelerated new product development? I mean what can you just talk about the strategy there and the outlook from that Sphere technology perspective?

Glad to do it. I think, as we indicated last quarter, while we were very, very actively looking at our organization and looking for costs we could reduce and things we -- steps we could take to bring down G&A, one of the decisions that we made was to not touch our technology development process, and in fact, to accelerate the execution of our technology strategy, which we completely revamped at the beginning of 2019. And that strategy has led to a number of new capabilities that we are introducing. And just in this past couple of months, we've rolled out our on-demand payment programs for non-gated surface lots. And so via the mobile web, you can now pay at a surface lot with QR code, text or on our mobile app just by entering your zone. So that's a huge innovation for us, and it's not commonly seen out in the parking industry. At the same time, we've been working on enrolling, in the pilot phase, a friction-free touchless option for gated environment, because in some places, you do want to have gates to ensure that there are -- people are paying or there maybe needs to control access to the facility. And so those are major developments and that we have been working on for some months now that have come to fruition, and we're now starting to roll out into our business. So -- and we'll continue to develop additional capabilities and roll those out throughout the year. What Sphere does is it takes those things but also gives a unifying brand identity to all of the other technology that we've been doing for some time. And I know we put out a release earlier in the week, the kind of details all of that. But what you see there is a mix of some existing capabilities that we've rolled out over the past couple of years, and then other things that are in the process of being rolled out right now. But I think it reemphasizes our desire and our belief that we're at the forefront of the digital transformation of our industry. And we want to make sure that we have a very clear and effective way of communicating to both our existing clients and the prospective clients what those capabilities are. And that's why we decided to introduce the new brand.

Okay. Great. And I noticed when you're talking about the 2020 outlook in the press release that you're going to continue to focus on high-value verticals, which include hospitality and aviation, you mentioned there. So I guess the takeaway there is that, the longer-term strategy is mostly unchanged, I guess, despite this interruption and that you still see hospitality and aviation is good long-term verticals to be in?

We do. And I mean, I don't -- when we highlight certain verticals, it doesn't mean that we're not interested in the other verticals. So our goal is really to roll out our whole technology-enabled suite of capabilities across all verticals where people are moving from point A to point B. And so that clearly remains the focus of the company. We've talked about aviation and hospitality for some time, in part because our penetration is low, and we think there's opportunity for growth. And so in hospitality, for example, we have maybe 300 to 400 hotels that we operate, and there's over 3,000 hotels in North America that could benefit from our services. And most of those hotels have outsourced parking to somebody out in our industry. So one of the ways that we can get growth, even if volumes are lower at individual properties is to expand the footprint of hotels that we serve. Likewise, in the health care space, there's thousands and thousands of hotels, and that's why -- or hospitals rather, and that's why we've been actively trying to line up additional GPOs in the health care space. And the one that we announced just in June has 16,000 properties that are part of the GPO. And so the idea that we could grow from our 150 hospitals that we serve today throughout North America to literally thousands in the years ahead is a realistic ambition. And I think given that hospitals today are facing both added congestion because of patient volumes with the COVID disease, but also, in some cases, financial pressures because of the reduction in maybe elective surgeries and other higher profit margin type activities at hospitals, that makes them receptive to looking for somebody like us to come in and bring technology and capability and drive additional profitability for their operations. I think in the aviation space, we have strong relationship with 17 major airlines where we provide baggage handling, delayed luggage delivery and other services. And yes, there's severe distress on air travel right now. But once again, our footprint with individual airlines is small, maybe that for a given airline, we provide wheelchair services or skycap services or check-in services for just a handful of their locations throughout the country. And so our discussions with them are really around expanding that footprint and enabling us to do more for them. On the airport side, as we've talked about the fact that not only do we continue to operate at all of our 73 airports that we've operated for some time, but airports are actively putting out RFPs either because contracts are coming up for renewal or because they're unhappy in some way with what's going on there right now in their operation. And so we're actively pursuing those and bidding on those types of opportunities. So while there's an overall downward pressure at the moment in terms of air travel and the like, I think, in particular, airports are taking the long view and recognizing that eventually air travel will resume. They have congestion problems and service problems at their -- at the curbs in normal times, and they're looking to find a partner who can help them solve those problems.

Our next question on line comes from Mr. Marc Riddick from Sidoti.

I was wondering if you could put a little color around -- and thank you for mentioning as far as the contracts that are up for expiration for the remainder of the year. I was wondering if you could talk a little bit about -- you also mentioned, however, the new locations that were added. I think you said there were 48 that were -- new management contracts that were had during the quarter. And I was wondering if you could touch a little bit on that, as you mentioned during the first quarter commentary around inbound contacts and those that were new to outsourcing. I was wondering if you could put a little color around maybe what those new management contracts look like that were -- that came in? And then I have a couple of follow-ups around that.

Yes. Well, we're still getting those inbound requests. And I think increasingly, as people see that this pandemic is not going to end right away, there's maybe ongoing worry about whether or not some of our competitors are going to survive financially. Many of them are dropping the ball in terms of not getting the job done. There have been a couple of smaller operators who have bankrupt. And so the people that they serve are becoming concerned about who's going to manage my operation successfully. And so we're continuing to get those inbound requests. There are frequently people that have freestanding parking garages or other parking -- surface parking lots and the like. There's not a lot going on in a lot of office building parking in many cities right now as people working from home. But there's a fairly robust amount of activity as people are reducing their use of public transit in most major cities and driving in. And so in some cases, driving volumes in cities are quite significantly up from what you would expect given the level of business activity that's going on. So I expect that we will continue to hear those kind of inbound requests. And of course, people -- owners of properties or managers of properties have added anxieties around health and safety, social distancing protocols, using and deploying technology that's either a low friction or touch list and we have all of our COVID operating plans developed. We're sharing them with our clients. Many of clients are asking us if they can take our COVID plans and use them in their own organizations because they like what we've put together for them on the parking side of things. And so I think a larger, more sophisticated operator like SP Plus, is going to be a better partner for many property owners and managers during these uncertain times.

Okay. That's very helpful. And then actually just 1 quick bookkeeping question. The -- wondering if you could -- do you have an update as to CapEx expectations for full year?

Yes. We don't typically break that out by quarter. I think where we've been in historical basis, we'll probably be slightly -- I think, I mentioned this on the first quarter call, we'll probably be slightly less than that. And so far this year, we have about $8 million in CapEx.

I mean, just to add 1 thing to what Kris is saying, probably half of our CapEx expenditure has been on technology. And so where we don't want to trim that back at all, if anything, we see the COVID crisis as opportunity for us to not only complete technology development, but to actually roll them out in our existing organization when volumes of activity are lower, it makes for easier implementation and transition. So if anything, we're trying to step on the gas on some of that stuff so that as business comes back, we've already made the transformation throughout our business.

Okay. That's perfect. That's helpful. And then I was wondering if you could give a quick update around the preferred vendor efforts that have taken place. And I was wondering if you could share with us whether the current challenges have maybe accelerated that or decelerated or maybe what you're experiencing there? And if it's similar to what you are expecting going into the year or what that looks like now?

Yes. The one relationship that we entered into was relating primarily to commercial office space. And I would say that's a little quieter right now. And I think it's partly because so many people are working from home. And so there's not as much focus on that in the property management world. But as I was indicating a few minutes ago, Marc, the -- in the health care space, those clients or prospective clients are feeling financial pressures. They're dealing with congestion and a lot of challenges that the COVID pandemic is bringing to their facilities. And so as a consequence, that's where we're getting more of the interest from those GPO arrangements that we put in place. And we're now actively responding to RFP and making -- having other meetings with prospective health care clients as a result. So clearly, when we have some wins that are notable, we'll end up talking about those, but there's a lot of activity in that space right now.

Okay. Great. And then the last 1 for me. As far as the lease contracts that are up for expiration between the end of the year, I was wondering, do you have current visibility as to what that volume might look like for 2021? Or is it too early to sort of think about those?

It's probably a little early in terms of what that would look like. I think we're working on a variety of different initiatives internally around leases and inbound in terms of new inbound contracts that are coming through. So I think it's a little early on that. But, yes, as you look at what we're trying to do, for the back part of the year, and I mentioned 100 contracts that will kind of naturally expire in the back part of the year. Certainly, that's going to have some significant gross profit for the back half of this year, but also benefit '21.

Okay. And I forgot. One last thing. I promise it's the last one. Wondering, if you could give a bit of an update as to national account activity and maybe what their engagement is like. I think you touched on some of the cost savings efforts that they might be pursuing, but I was wondering if you could give maybe a broader overview as to where that might -- where we might be going with that for the remainder of the year and the way you see that going, going forward?

Yes. I mean we really believe that, that strategy makes an awful lot of sense. And particularly with some of the technology capabilities around Sphere Insights, which is our technology platform and dashboards where we can not only use those tools to help us optimize our management of the facilities, but we can share with our clients in real-time what's going on in their facilities. And nobody else has been able to bring together all the data that's in the parking equipment itself and the equipment that's -- the data that's not in the parking equipment, for example, around payroll and other costs that are being incurred to operate the facility. So our initial reactions from some of our larger national clients have been that they love these tools and of course, we can only present to them information for the facilities that we operate. And to the extent that they have other facilities operated by others that don't have tools like that, they're sort of blind as to what's going on there. So I think we're really trying to continue the conversations around letting us expand our operational footprint with those large national clients so that they can not only get the advantages of the -- of our skills in operating, but also they can have greater visibility into what's going on in their facilities. So that is just an ongoing process. Clearly, we're having more Zoom meetings with our larger clients and small clients as well as opposed to making trips and visiting them in person. But I don't really think the pandemic has interrupted our focus on national accounts.

[Operator Instructions] Our next question on line comes from Sam Kusswurm from William Blair.

Am I coming through all right?

Yes. We can hear your line, Kusswurm. Go ahead.

Great. With COVID expected to be with us at least for the near term, are you expecting to maybe more importantly seeing people use parking instead of public transportation?

Well, that's for sure happening. I mean if you get the data on mass transit ridership, whether it's in New York or Chicago or even in Los Angeles, where there's quite a bit of mass transit, not as much as cities like Chicago and New York. It is down way, way, way down. I mean you're talking 80% to 90% down. And I think it's because, at least at this point, people are concerned about being in an environment in close proximity to other people. So what's happening is when you look at business activity down by X in a city, traffic is not down by that same number. So there's clear evidence that people are driving more. And in fact, Kris and I were just talking the other day about the fact that there are a lot of first-time buyers buying cars. And so I think we're going to see a bit of uptick in car ownership as well. So I think people are preparing for a period of time, at least, where they are looking for alternatives to mass transit to get to work.

Great. And have you had conversations with organizations maybe on offering billed parking arrangements for those returning employees?

Absolutely. And I think a number of large companies are trying to figure out, is they -- are they looking to facilitate the efficient purchasing of parking, are they looking for shared arrangements where maybe they don't want a monthly parking arrangement that's just allocated to 1 person, but could it be shared between more than 1 commuter because people aren't going to be in every day or do people look for an alternative to monthly parking that maybe not as cheaply discounted as monthly parking, but it's not as expensive as paying the daily rate. And the good news is that our technology platforms can enable all of those sorts of capabilities. And so we're continuously talking to companies, large and small, in all the places where we operate about how we can serve them during those times.

We have a follow-up from Dan Moore.

I think I heard you were able to keep your commercial locations relatively flat sequentially. Is that correct? And what are your expectations for H2 given the dialogues and pipeline of opportunities that you have? Do you think we can get back to a little bit of sequential growth in the back half of the year?

Well, we like to hope so, Dan. We -- as you guys know, that have followed us for a while, we went through a period where we were seeing sequential decline in our commercial locations. And we put a major focus on that over the past 2 years to go out and aggressively acquire new locations from clients. So I was very, very pleased to see the 48 new management locations in the commercial division in the quarter. And our hope is that, that will continue. And my belief is that we have the capability to expand our commercial location footprint in the management contract area.

Perfect. And in terms of competitive wins, you mentioned some competitors even going out of business, clients turning to you for solutions. Any more color, Marc, just the balance between competitive opportunities versus any incremental pricing pressure you might be seeing from competitors?

Yes. I think right now, in terms of the pricing of the service that we provide to clients, I think most of the clients, either the current clients or prospective clients, they're more focused on, can we operate safely in an environment like this? Can we make sure that the public feels comfortable using our facilities? Do you have the right COVID protocols in place? And of course, a lot of the technology offerings we've been talking about, facilitate that because people don't want to touch things and they don't want to interact with other people. So that is probably a more important focus right now than can I get the service for a little bit less money. And of course, a lot of the people, the competitors that are having financial trouble, they're not able to do the things that we can do in terms of technology or health and safety protocols and the like. So they're turning to us. When I say they, I don't mean the competitors, I mean the owners or managers are probably returning to us because that's really what they're looking for right now. The other thing that I didn't mention earlier is that some of our competitors are just walking away from lease arrangements and defaulting on leases. And so we're hearing from some of those people, too, who are now desperate to find somebody to kind of step in and help them out. And as we talked earlier, we're willing to do leases on the right terms. But we're also saying, in some cases, may you have had, had a lease with that other party, but we are not prepared to do a lease, but we will do a management contract with you.

Perfect. Last one, I'll give it a shot. Any metrics you can provide on July performance from a financial perspective, gross profit, EBITDA?

No. No, Dan. This is Kris. I -- we're right in the midst of a kind of closing the month. So it's probably a little early for us to be able to give any sort of color around the month of July.

Yes. I think the only thing we did give you in the comments was about volumes in July. And so we indicated that volumes that had a large sample of same-store leases were down 60% in July versus about 90% in April. So we have some raise of light there in terms of those same-store leases and continue to give us confidence that there is some growth in activity going on out in the world.

And at this time, I see we have no further questions. I'd like to turn the call over to Mr. Marc Baumann for closing remarks.

Great. Thanks, Richard, and thanks to all of you for being with us today. I appreciate you taking the time to get an update on what's going on at SP Plus. And we look forward to speaking to you again next time. Have a good one now. Take care.

And thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.