Student Transportation's (STB) CEO Denis Gallagher on Q2 2017 Results - Earnings Call Transcript

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Student Transportation Inc (NASDAQ:STB) Q2 2017 Earnings Conference Call February 13, 2017 2:00 PM ET

Executives

Doug Coupe - Director, Communications and IR

Denis Gallagher - CEO

Pat Walker - EVP, CFO

Pat Vaughan - Chief Operating Officer

Tom Kominsky - Chief Growth Officer

Pat Gallagher - Director of Sales, SafeStop

Analysts

Greg Colman - National Bank Financial

Gary Prestopino - Barrington Research

Tyler Brown - Raymond James

Jonathan Lamers - BMO Capital Markets

Operator

Good day, ladies and gentlemen and welcome to the Student Transportation Second Quarter 2017 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Doug Coupe. Sir, you may begin.

Doug Coupe

Thank you, Kelly. Good afternoon, everyone and thank you for joining us to discuss the second quarter fiscal year 2017 results, which ended December 31, 2016. Joining me today on the call are Denis Gallagher, Chief Executive Officer; Pat Walker, Executive Vice President and Chief Financial Officer; Pat Vaughan, Chief Operating Officer; and Tom Kominsky, Chief Growth Officer.

This morning, the earnings release, MD&A and financials were disseminated. The release, MD&A and financials are accessible on SEDAR, EDGAR and our Web site at ridestbus.com. In addition to our standard disclaimer about forward-looking statements, please also note that all figures are in U.S. dollars, unless otherwise specified. I will also remind you that this conference call is being webcast live on our Web site.

With that, I’ll turn the call over to Denis Gallagher.

Denis Gallagher

Thank you, Doug. Good afternoon everyone. And thanks again for joining us. Again in this new world of business and newer virtual water cooler several of us on the call are at various locations as we’re working in the field. So, let me begin by saying we are pleased with the steady performance of our operations for the second quarter of fiscal 2017, as well as our year-to-date results. The momentum created by our ongoing efforts to increase operational efficiencies will have positive long-term effects on our financial performance. As we all know, this is not a one quarter one year business.

During today's call, I’ll review the highlights of our second quarter results and provide some additional background on a number of key areas before I turn it over to our CFO Pat Walker to review our complete financial results for the second quarter, as well as the year-to-date perspective. As Doug mentioned, also with us on the call today are Patrick Vaughan our Chief Operating Officer, Tom Kominsky our Chief Growth Officer and Leader of the Manage Services Group.

After Pat Walker's remarks, I’ll wrap-up with the look what the head for the remainder of 2017 and we can take a few questions from our analysts. Revenue for the second quarter of fiscal 2017 increased almost 6% to $177.2 million from $167.4 million for the second quarter of fiscal ‘16. Net income for the quarter was $6 million or $0.07 per common share compared to $5.5 million or $0.06 per share for the same period of last year. Adjusted EBITDA increased to $42.9 million, up from $41.5 million for the second of 2016.

Looking at the first half of fiscal ’17, our year-over-year revenue was up 7% to $279.4 million from $260.8 million. Adjusted EBITDA increased 10% to $43.1 million from $39.2 million, reflecting a margin of 15.4% compared to 15% for the first six months of fiscal 2016.

Now, we did report a net loss for this first six months of fiscal 2017 of $5.7 million or $0.06 per common share, compared to a net loss of $4 million, or $0.04 per common share for the first six months of fiscal 2016, primarily due to our growth as in the larger volume of business it takes us to start-up and the seasonality of the business, along with some impact of some non-cash charges. Severe weather in the fall and early winter caused school closings and created additional costs for wages and fuel and snow removal. Now, we expect to regain most of that, just over $1 million of deferred but not booked revenue, in the third and perhaps even fourth quarter, but not the added expenses.

We have seen some areas, like the West region, get hit with storms in California and Oregon, while the Midwest, Northeast States, and even Ontario, got hammered recently with heavy snow days which will hit in the third quarter. It’s fair to say all of regions have had weather related issues so far this year, which by the way in our business, is nothing unusual. Additionally, our second quarter in this fiscal year reflects a higher than normal non-cash compensation expense, which is a one-time charge that hit net income for the period due to the timing of determination of the B share plan which shareholders approved in November at our Annual General Meeting. Pat Walker will cover that in greater detail in his comments.

Overall, the first half of fiscal ’17 has been solid with improvements in our margin year-to-date and good momentum as we expect to hold throughout the remainder of the year and into next year. On the core contracted side of our business, our experienced regional teams remained focused on safety, operational efficiencies and business development. The bid season is well underway, and last week we were thrilled to announce our new largest customer. The new 10-year $187 million contract or about $16.5 million per year plus annual increases awarded with Duval County public schools in Jacksonville, Florida is in addition to the existing contract we have in place with them currently. This effectively doubles the size of our operations there, making them our new largest customer and yet they will still be less than 5% of our projected total revenues next year.

We will provide the school district when an additional 250 brand new air conditioned school vehicles with seatbelts, innovative safety and communications equipment and the latest technological advancements, including our SafeStop mobile app for parents, which we are including free for parents, if the district approves. The contract will generate, as I mentioned, in excess of $16 million per year in revenue with fixed price increases for nine years and also includes a guaranteed floor for mileage reimbursements, as well as live load fuel reimbursed by the school district. We can and will use the new fleet for the entire length of the contract.

This contract award demonstrates our ability to develop long-term public private partnerships with a vast group of customers from rural suburban communities to large regional school districts in many major markets. Our team is already busy getting ready for a summer start-up, which will require additional staffing, training of new employees, and locating additional facilities. We are making great strides improving operations with the use of new technologies and telematics. These tools are highlighting new areas of potential expense reduction, as well as showing us how to become even more efficient. 97% of our locations now have time and attendant software that helps improve our ability to manage wages and other costs mandated by law. The new programs, when used correctly, will have eliminated mistakes and reduce the risk of errors by employees and managers.

We've also added regional operation application managers in the field, which we call ROAMs, to work with local terminal managers on installing and implementing the new technology applications and to find ways to reduce cost in each location. These new positions are helping us roll-out the various software programs we're using for payroll, maintenance, fuel usage, vehicle speed, idling, monitoring of driver behavior, and provide on-time performance metrics.

Now, we've thrown a ton of new things at our local managers during the last year, so we're simplifying ways to assist them to help manage key indicators and to make improvements daily as we see them. The ROAMs, along with our innovation and tech teams, have played an important part in getting us better connected with each terminal and eventually with each individual vehicle.

We've also been working with school officials in our core contracted business, and our new managed services group, to find ways to improve service and reduce cost. Now, we can use the same technologies in both businesses, which reduce cost on the core side and increase our revenues on the MSG side. Fuel continues to remain stable in the market and also as indicated by the futures. The majority of our fuel exposure is mitigated or locked-in, not only for the remainder of this fiscal year but some portion already locked in at even lower prices for fiscal year 2018, as well. Approximately, 30% of our fuel usage is now customer paid fuel, which is risk-off.

We do continue to face headwinds, however, in the former driver shortages in certain geographic markets. These shortages are impacting the entire school transportation industry. 90% of school districts and contractors in the industry recently reported needing additional drivers. We're working to counter that trend by stepping-up our recruiting efforts and retention program in all areas. This year, we also invested in new technology to attract and process new employee leads. We're rolling that out now in our Eastern Business Group, which is our largest region after a beta test proved the new program to be highly successful.

However, the answer is first; we have to demonstrate to our customers the importance for improved wages, which require revenue increases above the low CPI increases we have historically received. Many school officials are in agreement and we have seen contract and renewal prices continue to rise in most markets. We're also showing customers how to increase passenger utilization, and become more efficient, which saves them real money. In my opinion, improved routing and telematics are needed in this industry and we will continue to push for more efficient operations.

Now, I'll turn it over to our CFO Pat Walker for a detailed look at our financial results. And I’ll be back after to talk to you more about our how the bid season is going, and the progress we’ve made with our new managed services group, when I return after Pat's report. Pat?

Pat Walker

Thank you, Denise. Good morning everyone and thank you for attending our Q2 conference call for fiscal 2017. We released our Q2 results this morning. We also filed the financial statements and MD&A on SEDAR in EDGAR this morning as Doug had mentioned. And also as Doug had mentioned, all detailed information that we have, or all numbers that we use, will be in U.S. dollars unless we discussed otherwise.

The operating results summarized in the press release include revenue and adjusted EBITDA for the second quarter and first six months of fiscal 2017. We use adjusted EBITDA internally as the useful measure for tracking performance. And as we previously stated, adjusted EBITDA is a non-GAAP measure.

In advance of this discussing the operating results for the second quarter of fiscal 2017, I will note the seasonality of the school bus transportation industries and thus, the Company's operations as I’ve done on previous calls. Based on that seasonality, the financial results for the Company for any one quarter are not indicative of the financial results for a full fiscal year.

The Company's second quarter and six months results for fiscal ’17 reflect the continued growth of the Company through the execution of our ABC growth strategy. Company started operations on nine new bid contracts and one conversion contract in July for the 2017 fiscal year. And we continued operations on the acquisitions of two consulting and management services firms that we completed in the third quarter of fiscal 2016. As such, the second quarter and first six months of the prior fiscal year do not include any of the operations for the new bid and conversion wins secure for fiscal ’17, or the two acquisitions completed in the third quarter of fiscal ‘16.

And looking at the results for the first six months of fiscal ‘17, revenue for the first six months of fiscal ’17 totaled $279.4 million, an increase of $18.6 million or 7.1% over the first six months of fiscal 2016. The change in exchange rate between the Canadian dollar and the U.S. dollar for the first six months of fiscal ’16 to the first six months of fiscal ’17 in connection with the translation of the company's Canadian operations into U.S. dollar had a minimal impact on the period-over-period change in revenue. $10.9 million and $7.8 million of the revenue increase for the first six months of fiscal ’17 are attributable to the net new business noted along with the same terminal operations respectively.

Adjusted EBITDA for the first six months of fiscal ’17 followed $43.1 million, an increase of $3.9 million or 10% over the adjusted EBITDA for the first six months of fiscal ‘16. And the change in the exchange rates between the Canadian dollar and the U.S. dollar also had a minimal impact on the period-over-period change in adjusted EBITDA. $3.3 million of the net increase in adjusted EBITDA for the first six months of fiscal ’17 is attributable to the net new business noted earlier. Same terminal operations reflected the adjusted EBITDA contribution associated with the same terminal revenue increased that I noted combined with reductions in fuel expense and maintenance costs, which were partially offset by increases in wages, operating expense and French benefits.

The decrease in maintenance expense reflected lower net pt part expense, while the lower fuel expense primarily related to market pricing, locking-in lower prices year-over-year for fiscal 2016, and a concerted effort on reducing fuel through monitoring the idling and vehicles going off route, which add access mileage. The increase in wages primarily reflect higher driver wages due to a continued tightening of available drivers resulting from the lower unemployment rates in many of our markets, along with some increase in maintenance and operations wages, while the increase in operating expense reflects an additional year of vehicle leasing costs and the increase in French benefits reflect some higher worker compensation expense.

The decrease in fuel expense, primarily reflects the lower market pricing and savings that I mentioned, but that was partially offset by the impact of some retroactive alternative fuel tax credits that were recorded in the prior year second quarter. The retroactive fuel tax credits recorded in the prior year related to fiscal ’15 and resulted from the U.S. legislation that was passed towards the end of the prior year second quarter was passed on December 18, 2015, that reinstated retroactively from July 01, 2015 certain tax benefits and credits that had originally expired at December 31, 2014.

The legislation retroactively extended the alternative fuel tax incentives through December 31, 2016, providing a $0.50 per gallon excise tax credit allowance for alternative fuel use. With the reinstatement of the $0.50 propane credit at the end of the prior year second quarter, again that was retroactive to January 01, 2015, we picked up approximately $800,000 to $900,000 in fuel tax credits for the period January 01, 2015 through June 30, 2015, which would have been the second half of fiscal year 2015. Excluding the portion of that tax credit associated with the prior fiscal year period, same terminal fuel in the first six months of fiscal ’16 would have been 5.5%. Fuel expense for the first six months of fiscal ’17 came in at 4.9%.

And as we have discussed on past quarterly calls, we continue to maintain fuel mitigation features in our revenue contracts in the 60% range with approximately 30% reflecting customer paid fuel and 30% reflecting other forms of mitigation. In addition, we have also noted the fuel lock-ins we have done historically in regards to our fuel exposure.

We look to lock-in approximately 20% of our fuel exposure with fixed price contracts from suppliers annually in addition to the 60% covered by the mitigation. With the remaining 20% of our fuel exposure fully subject to market price variations. Most of that portion is in rural areas where we fuel vehicles locally and/or we have no bulk storage tanks available.

Net loss for the first six months of fiscal ’17 was $5.7 million, reflecting the net loss per share of $0.06 compared to a net loss of $4 million, reflecting a net loss per share of $0.04 for the first six months of fiscal ’16. The $1.7 million increase in net loss for the interim six months period of fiscal ’17 results primarily from the $3.9 million increase in adjusted EBITDA combined with $1 million decrease in impairment charges on our oil and gas assets, a $700,000 reduction in foreign currency loss, a $300,000 and $1.1 million decrease in D&A expense and higher income tax benefit, respectively. That was offset by $2 million increase in operating lease expense, the $2.2 million increase in interest expense, $2.8 million increase in non-cash compensation expense and $1.8 million decrease in other income.

The $2.8 million increase in non-cash compensation expense results both from the timing of the former B3 share grants and awards under the employee incentive plan, or EIP plan, and per share value of the B3 share awards under the EIP plan in the current year.

While the total B3 share grants under the EIP plan on a full year basis for fiscal ’17 are virtually the same as the decreased share grants in fiscal 2016, all of the fiscal ’17 grants were done in the first six months period of fiscal ’17 as we started the process to phase-out the EIP program. In fiscal ’16, 30% of the grants for the full year were done in the third quarter. And then secondly, the fiscal ’16 decreased share grants reflected a U.S. dollar weighted average per share value of $3.88 as our stock price decline during the prior year. And the fiscal ’17 decreased share grants reflect the U.S. dollar weighted average share price of $5.69 as our share price recovered during the current year.

The $1.8 million decrease in other income related to the $1.8 million non-cash gain recognized in the first six months of last year associated with the re-measurement of the B3 share liability, again as our stock price declined during the period last year. In the fourth quarter of last year, we put in place an equity hedge to mitigate the re-measurement gains and losses associated with the B3 share liability. As such, any re-measurement gain or loss on the B3 share liability in the current period is offset by the change in value of the corresponding equity hedge.

In summary, shareholders, last November at our ATM, approved to end EIP plan and replace it with the new equity plan for the future. The former EIP plan that shareholders had also approved was in effect for almost 11 years, and was very a key as an incentive to reward and retain key employees. And looking to the capital deployed for fiscal ’17, in the first half of fiscal ’17, we utilized leasing for approximately $10.5 million in growth capital vehicles and $39.8 million in replacement capital vehicles, which covers the majority of the replacement CapEx.

These operating leases have six-year terms with the majority or approximately 85% of the lease vehicles for’17 in the U.S. were the indicative lease rates were in the 1.9% to 2.8% range. The lease vehicles in Canada represents the remaining 15% where indicative rates were in the 3.8% to 4.4% range due to the lack of a tax benefit to lessor in Canada. The lease expense recorded in our P&L has a direct expense and cost of operations. We purchased $26.2 million in fleet directly in the first six months of fiscal ’17, $16.9 million of that was for growth and $9.3 million was for replacement CapEx.

We also received cash proceeds from equipment sales of approximately $1.6 million. The majority of the fleet purchase directly related to the 10 new bids and conversion contracts and the vehicles associated with additional routes secured as part of the new business for fiscal ’17. As discussed on prior calls, the Company finances the replacement value through purchases of buses where the Company owns the buses out-right and also through the operating lease financing that’s available to us where the lessor owns the buses. The buses purchased by the Company are included as assets on the Company’s balance sheet, and are included in the replacement CapEx spending that I just noted.

The buses leased are not included as assets as the lessor retains ownerships of those buses. The operating lease payments are included in operating expenses on the income statements, as I just mentioned. And thus, they are reflected as cash outflows on the cash flows provided by used in operating activities line on the cash flow statement.

Included in the net replacement CapEx purchase for fiscal '17, is approximately $6 million in lease buy-outs that we entered into back in 2011-2012 fiscal year. We purchased 321 vehicles related to those lease buy-outs. These vehicles have an approximate fair market value of approximately $10 million, and remaining useful life of 68 years or more in some cases. We most likely will be use of purchase these leased vehicles at the end of their lease term to benefit from remaining eight year or so asset-life that they have. We continue to view leasing as the financing option available to us as we look to increase our retained cash to grow. We have, in a lot of cases, lined the lease terms up directly with new contract terms and renewals.

In regards to our monthly dividends, we paid cash dividends during the second quarter and six month period ended December 31, 2016 of $9.6 million and $19 million respectively. And moving to our balance sheet, during the fiscal 2017 interim period, we significantly strengthened the balance sheet with two debt restructuring transactions. The first occurred on July 27, 2016 when the Company entered into a fourth amended and restated credit agreement. The new amended credit facility extends maturity of the agreement back to five years, and now reflects the maturity date of July 27, 2021, and it increases the commitments under the credit agreement to $340 million from the previous committed level of $225 million.

The increase in the size of the facility resulted from the addition of two new lenders to the bank group with certain existing lenders increasing their commitments as well. The new amended facility continues to provide for $100 million accordion feature, which provides access to an even larger facility should it be needed in future. The Company used drawings under the new credit facility in-part to repurchase the U.S. dollar denominated of $35 million senior secured notes that were set to mature on November 10, 2016.

In our second transaction on August 16, 2016, the Company issued Canadian denominated 5.25% convertible debentures due September 30, 2021 for net proceeds of approximately $62.5 million. And then on September 19, 2016, the Company finalized the early redemption of the U.S. dollar denominated $60 million 6.25% convertible debentures that were originally set to mature on June 30, 2018. The net proceeds from the issuance of the similar size 5.25% convertible debentures funded the early redemption of the 6.25% convertible debentures effectively lowering the interest cost and extending the maturity of this tranche of subordinated debt to five years back to 2021.

At December 31, 2016, our outstanding debt balance has totaled approximately $337.5 million, which included $114.8 million in net convertible debentures and $222.7 million in credit agreement debt. The current credit agreement balance includes the timing impact of an investment in net working capital of $44.7 million compared to the June 30, 2016 fiscal year-end. The Company's credit agreement trend provides for the $340 million available commitments that I mentioned, and includes the $100 million accordion feature for additional capacity when and if needed. And again, it matures on July 27, 2021.

The convertible debt includes the Canadian 6.25% convertible debentures that were issued in November 2013, and mature in June 2019, and the Canadian dollar denominated 5.25% convertible debentures that were just issued in August, as I mentioned, and they are due on September 2021.

Before I turn it back over to Denis, I would like to conclude with couple of following comments. We entered fiscal '17 with an estimated 6% to 7% growth in year-over-year contract revenues as we previously reported, associated with those 10 new bid and conversion wins for fiscal '17 combined with the impacts of the two small prior year acquisitions. We are trending right on that target based on the results for the first half of the year. We have been and continue to renew additional bid opportunities for fiscal '18 as well, and continue to see some increased contract pricing in the current bid market.

And lastly, as Denis had mentioned, we were awarded a substantial contract in Florida by an existing customer that basically doubled the size of our work with that customer. The combined contracts result in this school district becoming our largest customer with combined revenues at approximately 4.7% of our annual consolidated revenue. We anticipate the deployment of approximately 250 vehicles at an investment in the range of $23 million to $24 million in a very cash flow accretive deal. Since this is a very large contract, we will incur some start-up costs this year, which will be expense as incurred that we do not anticipate in our current year budgets.

We continually review and monitor the debt markets as well as exploring new lease financing proposals. At the end of the second quarter, we have approximately $115 million in availability under the credit agreement commitments with the potential of the additional $100 million accordion feature. In addition, we will begin the annual review process in regards to lease financing proposals. In the last three fiscal years, we received lease offers in the $100 million to $130 million annually, which was way beyond what we actually needed or used in each of those years.

We expect similar level proposal for fiscal '18, which we will utilize to some extent for part of the fiscal '18 replacement CapEx to be deployed. Our replacement CapEx deployment for fiscal '18 along with the growth CapEx deployment will be depended on the final outcome of the current bid season. With the current availability under the credit agreement and the pending lease financing proposals, we will be in good shape to cover any potential additional growth opportunities along with the replacement CapEx deployment for fiscal '18.

Now, with that, I would like to turn it back over to Denis for some concluding remarks. Denis?

Denis Gallagher

Thanks Pat. As I said earlier, we’re in the second half of the bid season. Several RFPs and bids have been submitted, and we’re still waiting to hear on some, plus existing contract renewals are being negotiated. We are feeling very positive about the prospects for the next school years. We continue to maintain our 95% renewal rate on our existing contracts as we have over the past 20 years.

Our managed services group addresses the needs of the more than 10,000 school districts, and own and operator their own fleets. It’s $16 billion market. We’re just beginning to scratch the surface to service that market. We are building out several new lines of businesses as a result of demand from customers. We started out small last year, but we expect to triple the top-line revenue growth in that group this fiscal year. We have the potential for at least another 20% organic growth or more in that group for fiscal 2018 as we leverage the innovative products and services that we’ve developed. Our management team in this group is very talented and experienced in developing various solutions for school districts.

Through our various subsidiaries, we now provide management and consulting services to school boards and administrators in several hundred school districts, and recently added a suite of full service fleet solutions for our customers. These are all very complementary businesses to our contracted core that we can grow on an asset like basis. We are reviewing various strategic options and joint ventures to see if there is a fit with those firms already serving schools with products and services that we could leverage.

Technology and innovation will continue to impact our business in maintenance, operations, sales and labor costs. 65% of our fleet is now equipped with GPS. And when combined with our routing software, this allowed us to identify and remove 200 buses from our system this year by creating more efficient routes. We will continue to invest in this technology, and to eventually get the fleet up to 100% equipped in the next few years.

On another topic Broadridge shareholder services has recently calculated our shareholder make up and it did change a bit this past year. They currently estimate our U.S. shareholder base has increased to approximately 30% of our extending shareholders as of December 2016, up from 20% in December 2015. Now, we believe the increase in U.S. shareholders can be attributed to our continued growth and steady performance we had shown in a stable consistent manner, as well as investors finally noticing our dividend, which is paid in U.S. dollar. And of course, the addition of two new research analysts, and we now have three analysts covering the Company in the U.S. and three in Canada.

Finally, last week our Board of Directors, which reviews and approves the dividend on a quarterly basin in advance, approved the monthly cash dividend for the remainder of this fiscal 2017 year. Now this marks the 150th consecutive monthly dividend announced to be paid since we became a public company 12 years ago. So, as I always say, there is a trend there. We’ve come a long way since then. It’s a long road with a lot of bends. We are always learning, always improving, and are committed to staying ahead of the curve in this industry.

On May 17th, we will be celebrating our 20 years since I started the Company by participating in the closing ceremony on the NASDAQ that day in Time Square New City. So, mark it down your calendar, watch us on TV as we get a chance to thank all those who have supported us over the years.

With that, I’ll take some questions from our analysts. So, Kelly, if you want, please open the line.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Mark Neville with Scotiabank. Your line is open.

Unidentified Analyst

Good afternoon guys, its Max calling. Just wanted to clarify on the managed services business. I believe at one point you were talking about $10 million to $15 million in revenues at that business. Is it tripling, does that get you to that run-rate? Or are we talking about more growth in that?

Denis Gallagher

Max, I’ll let Tom handle that since he’s here.

Tom Kominsky

That’s spot on, so that $10 million to $15 million gets us that tripling.

Unidentified Analyst

And do you mind just maybe giving a little color of what’s driving the growth from there, which units?

Tom Kominsky

I’m not going to get too specific with our five business units. But I’d say, overall, we’ve developed a service offering that nobody in the industry really has. So, the name of the game for us is just really getting out and talking to potential customers, those 10,000 school districts that Denis mentioned earlier, we found that our value proposition speaks very clearly and loudly to them once we get in the door.

Denis Gallagher

I would also say, maybe Tom, a lot of our customers on that site are not customers on the core site, we’re just saying…

Tom Kominsky

Right, I’d say that, yes, 100% accurate. I’d say there is probably less than 3% to 5% overlap of managed service group customers with core customers. So, we’re touching the new customer base that we’ve never touched before.

Unidentified Analyst

And maybe just a quick one on the fuel costs. It seems like you’ve been locking in some favorable fuel for the following year, and next year. Given where fuel prices have gone, do you think fuel is more of a headwind or tailwind to margin going forward?

Denis Gallagher

Good question. I’d say its stable and we actually went out and looked at the futures about 18 months, and it really doesn’t look like it's changed much, between current price today and about 18 months. Now, obviously, things can change in the market, we all know. But to give you an example on the fuel that we had previously locked-in, 2015-2016 kind of year that we locked-in for the current fiscal year that we’re in. We were at a pre-tax delivered price for -- this is for diesel. And as Pat Walker had kind of refers to the 20% that we kind of lock-in, we were at $2.03 for pre-tax gallon, but that’s delivered. We locked-in about half of our usage for next year of the same quantity at a $1.88 pre-tax delivered.

So we seem to have hit the market at the right time. We watch it, obviously, on a daily basis and see where we can continue to lock-in. We also are looking at it in regards to growth. So, when we know we’re looking at certain contracts and bids, we’re taking a look at where the futures are, where we can lock-in. There is a mix, obviously, between propane and diesel. We’re probably close to 20% to 25% of our fleet is in the alternative fuels range, 20% of our fleet, I think it is, or so, is in the alternative fuel range. Some of that is part the customer paid fuel. The big part of our propane contract is out in Omaha. And historically, we’ve waited till after the winter to lock-in those prices there, because what happens in the Midwest is they use propane as home heating oil or as home heating fuel.

And they also, in some markets, use it to actually heat the crops. So they cover and heat the crops, and we went through that about two years ago or three years ago. And so we’re a little smarter today than we were yesterday, and we tend to -- we’ve bought some propane to lock-in. But we see and we’ve learned, over the last three years, the way that market goes and there is always a deep in the spring. So, we’re going to look to lock-in in as we move into next year in Omaha.

Operator

Thank you. Our next question comes from the line of Greg Colman with National Bank Financial. Your line is open.

Greg Colman

I wanted to with the Jacksonville contract that you announced just a little bit before the quarter. Can you give us an idea of what kind of margins we would expect from that contract? Is it consistent with the rest of the business, or noticeably higher or lower?

Denis Gallagher

The contract was uniquely negotiated, I'll say. So, it was publically bid and then it was a series of negotiations with three to four players, three that we know of. For sure, we were one of the three that was negotiating. I think we were very innovative. We came up with a floor on the mileage and we came up with a fixed cost on that. And those were two very important features to have in such a long-term contract. The margins that we see there are probably, I would call it, consistent to maybe a little bit higher than what we have on our operating line, only because of the fact that we have some certainty now with customer paying for live-load fuel for the guaranteed price increase and for the guarantee on the floor.

And why I say the floor price I just want to -- like we have an existing contract with them. And they give you an estimated amount of mileage that they run. Historically, they have run less than the anticipated mileage. So, it's a mileage based contract. So, in this particular case what we said was, we'll do this new one but we want to guarantee the floor price. And that's what I think is going to make the difference for us there. Now, the way that we can improve the margin is finding the right facilities there that will lower the deadhead costs, because if the customer is paying for live-load, we're paying for the deadheads. So we want to make sure that we -- it's a very big geographic area -- Duval County, Florida. These counties are much bigger than just the City of Jacksonville. I mean, it is the entire county. And we're going to run about half of the amount of buses or so that are in the county. Our other two large competitors for student and national express dorm are both in the same school district as well.

Greg Colman

So Denis this is the second big win in Jacksonville, obviously, the first one was big, this one doubles it. Is there more to come, or are those other contracts locked-in for a while there? And there is no real bid opportunity for couple of few years here?

Denis Gallagher

Well, there is what they call they call these GSAs, which are service areas. And there are four main service areas. We'll have two of the four. I think in the contract, and I think because I'm right, is that you're not allowed to have more than three. So, there would be the possibility -- and they're all approximately the same size. So in other words, the district runs a little bit -- maybe over 1,000 or so vehicles. We'll have probably close to 500 in that district. That's a very large contract for us. Now, our existing contract -- Pat Vaughan, you're on the phone, our existing contract currently comes up in two years. But we do have the option to renew, correct?

Pat Vaughan

Yes, we have five one year renewal options at our discretion, as well as the districts.

Denis Gallagher

And in that particular case, Greg, our mileage rate is actually higher than the one we just bid. However, what I was saying is, we did have the guaranteed floor on the current one we have whereas we have this. So, we took a lesser rate to get the guaranteed floor.

Greg Colman

On the Jacksonville, still sticking with it. Pat, you mentioned some start-up costs. Are these going to fall through the OpEx line, or are they going to be capitalized? I assume they’re probably on the OpEx side. And which quarter would we expect them? And can you quantify it at all. Basically, I am trying to get a feel for which quarter should we expect to see margin contraction associated with the start-up of the Jacksonville contract, so we’re not surprised with it.

Pat Walker

They have to be expense -- you’re no longer allowed to capitalize them. So they definitely expensed and probably the expense over -- they could range in the range of $300,000 to $400,000 probably would happen over the third and fourth quarter and into the first quarter of next year, so in over three quarter period.

Greg Colman

So it did not really material amount from a margin compression standpoint?

Pat Walker

Probably not going to be there, and we want to point it out.

Denis Gallagher

Yes, we want to point it out, because I mean, historically, we build-in into our current budgets. We build in growth for -- what we also build in the expense to have the growth. Because I just want to make it clear there to anybody listening or reading is that we win these contracts in this particular case Pat the contract starts August 1st. Correct?

Pat Vaughan

Yes. So, we’ll be preparing from now until then obviously, taking lease of the facility and starting to process for all hiring of the 250 drivers.

Denis Gallagher

Pool starts when Pat Vaughan? Like August 20th, 13th?

Pat Vaughan

August 14 February.

Denis Gallagher

Yes. So Greg, the fallacy is you take over August 1st you got to start in 14 days. You can't do -- patent couldn’t move his army that quickly, whenever -- but you can't scale up that fast. So we have to start this process early that’s why we’re happy when school districts bid these things early. But in this particular case, it’s just a huge volume. We need to put every one of those drivers that are currently working for another company who is ending their contract with the district. And we need to put their drivers through our training programs, our credentialing programs. So we need to check their criminal background checks, fingerprints, put them through drug testing, put them through safety and training programs. Every single one of those 250 folks are going to have to be recertified for us. And that’s a safety process that we go through to make sure.

Now, on a smaller contract, if we were to win 30 or 40 business contract, the costs are immaterial or whatever. But it's still time and effort that it takes away, this is a big one. We do have a couple of others, as I said in the queue, that we’re waiting to hear on, and anxious to see how we’re going to do with those, which are new contracts as well.

Greg Colman

Switching gears to exactly that. If we look at what you’ve already won and including the Jacksonville contract. Your top line revenue growth for 2017 is tracking at 6% to 7%, I think Pat is that what you said. So, what are you tracking for with the only the existing win so far for 2018 over '17’s fiscal?

Pat Vaughan

We’re tracking the similar kind of rate. So, we’re saying between price increases, volume increase, and some managed services increases that they’re going to come in with. We should -- again, it's lot bigger numbers. But 5% to 7% for this year, probably close -- maybe a little shy of seven, but right on six kind of mark, which is locked-in and contracted. Again, we’re getting beat-up here in the winter, I don’t know if you’re Toronto today, Greg. But I understand some of the Toronto GTA schools are not going today. We’ve had almost 10 days of loss school in Oregon. And they’ll make -- they historically have made those up. But weather has beaten us up in a bunch of places.

And again as I said in the -- during my statement, we’ll re-coupe the revenue in most of those cases as we historically have always done. It’s the expenses that we don’t re-coupe, because we’ve gotten overtime where drivers coming for work, school has called-off. We have snow removal costs, et cetera, those things that again we deal with. So, we always pray for nice weather. We always coach historically on average 180 days a year, we can’t predict which 180 days they’re going to be between July 1 and June 30. But we anticipate a lot of these days will be made up in the fourth quarter.

Greg Colman

I guess, my question is that you’re saying 6% to 7% make sense for 2018, as well. And I question is, is that based on everything you’ve won up to and including today and anything that win beyond this would be in excess of that, or is that based on experienced estimate as to what you’re going to win based on what’s coming down the pipe? My question being is that if you win additional contracts from here on in, should we be thinking higher than that 7% or you’re already starting baking-in a certain level of success on the additional contracts that you’re bidding on?

Pat Walker

I think you know us well enough that we’re baking in. We’re going to have success to kind of get to us to get us to that 6% to 7% range. I don’t think it's heavy lift to get there but if we’re going to -- if we win things, we’re starting to have the calendar push against us now. So, if we’re going to win something that a lot more significant, we would basically know about it already.

Greg Colman

And then just two to quick finish-ups here, Max has already asked about it on the asset light part of the business. I think you mentioned by tripling the consulting, et cetera, you could be looking at $10 million to $15 million in revenue from that area. Can you remind us what the total amount of revenue is currently from all of the asset light area of the business, which would include the managed services in addition to the consulting in addition to the safes up, et cetera, et cetera. What’s the current amount of asset light revenue that was generating in the quarter, just reported at about $180 million?

Tom Kominsky

Greg, I think that I’ll just answer in the context of the managed service group, and I'm probably going to hit high level. Last year, we were at about $4.5 million for the managed service group. We feel confident that we’re going to hit $10 million to $15 million through the managed service group by year-end. I don’t have that quarterly number for you, but you could probably divide that by four and get to it.

Denis Gallagher

I think what Greg is looking for is we also, on the core side of our business we have managed contracts that were in addition to the managed services group. And Greg, we have to do much better job of getting that Pat Walker. You don’t happen to have that to you at all?

Pat Walker

I just jump right back on Denis, I got kicked- off. No, I don’t have I mean the services, the managed revenues where we manage and schools districts owns those, I don’t have that at my fingertips.

Greg Colman

It's no problem, Pat, we can go offline. Denis, just my question is just that you have obviously depreciation carrying cost associated with the asset heavy part of the business. And this asset light looks more and more interesting. Just trying to wrap my arms around what percentage of the business is it is now?

Denis Gallagher

Pat Vaughan, do you have any idea on your side, on the core side, what piece would be managed. I mean it used to be 5% to 10%?

Pat Vaughan

It's in that range, it's not a little bit lower, Denise. It's not a huge component.

Pat Walker

Our managed vehicles are probably about 5%.

Greg Colman

And this is it for me, now, I really promise. But how much of that, if we did you say it was on that routing software that allowed you to remove 200 buses from the fleet?

Denis Gallagher

How much is what?

Greg Colman

Right at the end of your comments you said you were able to remove 200 buses, again more efficient routing work there. I’m just wondering how does that rolls-out, what could that ultimate number look like? How much could the fleet improve in efficiency, i.e., how much of the current fleet is running on that higher efficiency level, what fleet denominated that 200…

Denis Gallagher

Well, we know it can’t beat we’ve taken this as zero. So, we just keep looking at whatever we can do. How fast can a guy run the mile, I don’t know. But you have to just keep break in the record. But when we get this -- as we have been deploying the new telematics, it showing, for example -- Pat Gallagher is here too, it’s also showing us things like the stops, like you were telling.

Pat Gallagher

Yes. It’s on-time performance, route and stop utilization. So not only, how many new routes and miles that bus running but how many bus stops on that route is it hitting. So, we’re able to start tracking that and really get -- really smart about turning 50 routes into 45, and we’re getting it.

Greg Colman

But is the entire fleet running on that new software and telematics now?

Denis Gallagher

No, about 65% of the fleet.

Operator

Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Your line is open.

Gary Prestopino

Most of my questions have been answered. But Denis can you maybe just comment on how has -- the discipline on the pricing in the market, has that improved or stayed pretty steady state from where it was six months through a year ago?

Denis Gallagher

Well Gary, I mean, there was a time about five years ago where prices were going backwards. And that stabled -- that went stabled the last couple of years. Last two years, we saw prices rise considerably, meaning taking some decent jumps. Now, again, we might have 15% of our work that goes out to bid, because the other 15% to 20% of our work maybe could be up for contract renewal, that means that we have the option to renew it and/or rebid it, and/or if the customer at that point chooses to rebid it.

So, we don’t have the same opportunity as maybe a couple of our larger customers, or our larger competitors, who could put more work out to be bid then certainly we could. But the prices did come in a lot higher last year. What we are seeing this year is we’re seeing prices come in higher. I really haven’t seen any go back, roll-back or go lower. But I have seen the increases I would call it, become more reasonable or level-off. So I haven’t seen a lot of 15%, 20%, 30%, increases that I saw two years ago, or last year, on selected contracts that were just way below market from five years ago. And that’s really what happened. A lot of competitors took back prices five years ago.

So, if we’re seeing prices now in the -- on average price increases in bids probably in the five or so plus percent range that’s very attractive. We’re seeing CPI increases. We actually talked this morning, CPI is around 2%. I don’t think, we’re going to get 2%, because everybody redefines CPI, however, they wanted CPI for their region at CPI minus this. But we’re gearing towards about 2.5% on the price side that we see right now that we're going to get, and that's overall. So that getting CPI at some and getting and 5s and 6s on some as well. But we're not seeing any irrational pricing from competitors that's for sure.

Gary Prestopino

And then just a question for Tom, you mentioned that you seem to have -- you’re starting to get momentum on your value proposition for the managed services. What, if you could just summarize, what is the key value proposition that you're out there selling right now that is driving the growth?

Tom Kominsky

Yes, really tough to summarize, but I'll try my best. And I think the easiest way to say that is just safety and efficiency to sum it up, Gary, if we can make you safer and we can make you more efficient. One of the other things Gary on that to go back to your pricing comment, I think it's important to note is that the tightening of the labor market and the driver shortages. Those competitors that are in some markets where they think they're going to just come in and tighten and/or lower prices, you still have -- you've got a market of drivers. And I'll give you an example. There was a bid in a school district the other day where there is only a core of about 60 drivers in this town.

And you can't go in and think you're just going to go in and roll-back wages. This is not a time in certainly North America, U.S. and Canada that I know of, where people are going in and rolling back wages. I mean there is a tightening of the labor force. Wages, we're seeing states like California that are moving very fast at $15 an hour wage package. Our drivers are in that range or more. We have drivers in the $20 range in some markets. So, wages are driving this. And typically what happened in Jacksonville was a result of a competitor that was not familiar with the market who came into that market, undercut the pricing, won a contract, could not perform and had to leave. And it's costing the district 37% more to have us take that contract over than what they were paying the current provider.

Operator

Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Your line is open.

Tyler Brown

Denis, so I'm just curious, how much of the book is tied to CPI in some form or fashion? And then, how much of the book is tied to what you might call a straight fixed price increase?

Denis Gallagher

Pat Vaughan, do you want to take that?

Pat Vaughan

Sure. I think, probably half of its tied to CPI and then within each of the revenue contracts we’ve got price components and fixed increases that allow us to realize the increase that Denis just pointed out on the price side, approximating 2.5%. So sometimes the districts come out and they like to tie it to CPI, other times they'll allow you to plug in a rate over the course 3, 4, 5 year period.

Tyler Brown

So, I know CPI is taking up I mean, you noted it's maybe up 2%. But I really am doubtful that that's covering the overall unit cost inflation, particularly on the labor line. So, I'm just curious if you guys are seeing any push, maybe yourselves included to migrate to alternatives for CPI, maybe even sub-components of CPI that might better align with the inflationary costs. And do you think that that's the direction that the industry could go?

Pat Vaughan

Yes. And so one of the things that we’ve been pushing and you’ll see it in another major contract that we have one of our top-fives we’re renegotiating right now. We’re demanding that we get off of CPI and we want fixed increases on that. And we have a great relationship with the customer. This isn’t adversarial we want I don't mean it in that respect. But we need to the knowledge of the fixed increases. We know that going to five to seven years that we went in the past with CPI when CPI was zero to one. It just wasn’t working, obviously, we had to become smarter. And we’ve been able to maintain our margins, because we’re pulling costs out of other areas.

So, our goal is we know that wages are going up because of the tightening labor force. We’ve got markets in certain markets where we’re in the mid 20s per hour to drive to school, and we have people on the bench. So you can always throw more money at the situation, and that’s why I was saying before, with customers we’ve gone into and said to them, listen, there is a very tight labor market. It’s going to affect on-time service and even covering all the routes. We need to pay more. And in order to do that, we need price increases above and beyond the CPI.

And I am going to tell you, 75% to 80% of them are definitely they understand. They’re willing to jump in. We’re gotten some increases that are mid to high single digits in renewals literally to help past the increased cost on. So, I think the industry is, as you said, it's got to come with a better way to take a look at CPI. The problem is school districts make up their own CPI, and it's either based on a state -- it's not like national CPI, and everybody uses the same metric. This is -- we’re going to use the eastern region between 11 and 12 at night on Thursday, whatever. So it's kind of tough to do.

Tyler Brown

Pat Vaughan, just can you give us an update on the average fleet age?

Pat Vaughan

Average fleet age, I think, that is roughly 5.3, is that the number.

Denis Gallagher

5.7.

Pat Vaughan

5.7 at the end of the fiscal year.

Tyler Brown

So, we’ve come to the store with some fresh eyes. And as we look at your fleet, I think you noticed, obviously, sub-six, is probably what 40% to 50% younger than the average in the industry. I am just curious if you guys have really given a hard thought to maybe letting the fleet age-out just a little bit, maybe a year maybe two years, if that provide maybe a bit of a leasing or CapEx holiday. Or what would be maybe some of the cons of maybe doing that?

Denis Gallagher

It’s a good idea. We have talked about it in the past calls like this. It gives us the ability as an additional lever additional trigger to pull if we needed to. I think the telematics continue to do. I think we took out 300 or 400 vehicles last year we took out 200 this year. It is amazing Tyler, the route efficiencies inefficiencies with school districts. Pat Vaughan and I were on the call this morning with one large, large customer, and I got to be careful, because they are a large customer, 77 passenger vehicles with an average student ridership for 27 kits. And there its extremely inefficient, and we can pull vehicles out, we could save them money, we would have less drivers, less spot that’s less capital that we would have to spend. And we’re trying to say to them, we can take 30 buses out of it. And of course the side would say okay, well, then you’re going to lose revenue for 30 buses. Now, we’ll take those 30 buses and we’re going to put them, there are going to be growth buses for us to go put into new contacts and new bids.

The aging of the fleet in North America had gotten pretty -- going in the wrong direction over the last few years. There is some conflicting numbers. I saw the other day that the manufacturers produced about, I think I saw it on the BlueBird Conference Call that Phil Hurlock said that there was about 34,000 vehicles. If you took a 12 year average life of all vehicles into 500,000 vehicles on the road each day, you’d need about 42,000 to maintain the life. So, I think they're still a little bit kind they’re still not even status quo.

I like the fact that the new vehicles are made better. We’ve been to the plants with all of our OEMs, all of our manufacturers. The vehicles come-off of the line today in 2018, there'll be the 2018s that will order, I think for the coming school year. They are a lot better off than certainly the 2007s and 2008s that are coming off. So, we do have that lever to pull. We look at it all the time. I can tell that Pat Vaughan from an operating point view, we’d probably rather have the newer equipment because its better fuel mileage. There’s more parts covered under warranty, things like that. But it is -- it’s a 100 year question of capital versus maintenance, right, and that’s the trade-off question.

Tyler Brown

Yes, high class problem to have. Just my one here, just Pat just curious on your thoughts on the corporate tax reform here in the U.S., as it's laid out by the house, so, I appreciate you’re not a big cash tax payer. But does the full expensing of capital change the way you think about leases versus cash CapEx?

Pat Walker

Tyler, I think going forward, we’ve enjoyed the -- should I loss the term. We’ve enjoyed the significant increase in depreciation that we get, and that’s reflected in the leases and bonus depreciation. So, depending on whether that goes away to some degree that could impact some of the rates that we get, the tax benefits that the lessors get in our leasing rates.

Tyler Brown

I see. I think…

Denis Gallagher

I think you’re also going to see the fact that like right now I think Pat and our current -- notwithstanding the fact that we may not a be a large cash tax payer, but we do take -- I think our tax rate this quarter was 39%?

Pat Walker

Yes, in that range, I mean…

Denis Gallagher

So, again if corporate taxes are going down from a non-cash perspective, I get it, but would obviously improve net income. From a debt perspective, I think you’re obviously looking Tyler at, I mean at leases going away for accounting treatment, and we would be back to the banks to renegotiation covenants, and which by the way everybody would be in the same gain. So, I think again to Pat's point, we did take advantage of leasing where we give-up the tax benefit for a lower rate, and that’s been good for us right now because we don’t need the tax advantage.

Operator

Thank you. And our next question comes from the line of Jonathan Lamers with BMO Capital Markets. Your line is open.

Jonathan Lamers

Good morning. As you look towards fiscal 2018, do you have any guidance for us as to the replacement CapEx you expect?

Denis Gallagher

Good question. Pat Walker?

Pat Walker

I mean, in my prepared remarks, you noted that really that -- some of that’s going to depend on the balance of this bid-season. So, if there are certain, some bids that we get, that will determine how much growth CapEx we have. But also, if there are contracts where we are up for renewal, if some of those aren’t renewal we’ll redeploying some of those assets. So, to some degree, it’s going to dependent. And we’ve said this last year in the second quarter, just because it’s kind of early right now to tell. But I think from a high level standpoint, right now, we’re thinking that potentially we’ll be around the same level that it was this year, for fiscal ’17. I think one of the rules of thumb, as we kind of look at it, it's kind of been covering around the 7% of revenue for the year we’re going to into, that’s kind of where we’ve seen it come out in the last couple of years.

Jonathan Lamers

And I would include all the lease buy-outs and non-vehicle CapEx, and all of that?

Pat Walker

This year, we have lease buy-outs. So, I mean, certainly that’s a number I know because we’ve already done them. In fiscal ’17, we at least buy-out it's right around $5.9 million to $6 million, and I want to say next year, I think our lease buy-outs are right around $6.5 million, $6.7 million.

Jonathan Lamers

$6.5 million to $6.6 million, okay, great…

Denis Gallagher

A good rule of thumb Jonathan is like 7% in next year’s revenues as Pat says, it’s a rule of thumb. Certain years, we’ll take a look. Again, we’ve done 50 some acquisitions and sometimes the fleet is not the fleet we bought. And so, if we think we need to replace those, we have some leeway to be able to do that. But I think last year, Pat, we were like $42 million in replacement.

Pat Walker

I think $42 million and then we had another $6 million Jonathan in lease buy-outs.

Denis Gallagher

And I think what we’re saying is we should be consistent with that again this year.

Pat Walker

Right now that’s like I said high level that’s I think that’s what we’re looking at.

Jonathan Lamers

And just on the driver shortages, you noted that affecting certain markets. Can you give us a sense as to what portion of your overall business this was affecting? I mean, is this in a third of your markets or?

Denis Gallagher

Pat Vaughan?

Pat Vaughan

Sure. I think recent trade journals have highlighted the industry is facing 90% to 90% of districts that report shortage of some sort severe to a lesser amount. We have about 170 locations. I would say of that probably 10% is in different pockets are challenging. We look to have 10% spare count on the bench for service. I can safely say we don’t have 10% bench anywhere. But by enlarge, it’s roughly 10% of the portfolio, and we’re implementing changes on the methodology of recruiting and targeting more advanced systems that are helping us actually reduce the number of heads that we need and increase the productivity of the throughput. The funnel that we typically go out and we may have to take 100 applicants into find 15 qualified drivers. But we’re getting better every day in that regard.

Jonathan Lamers

And is the impact of that just reflected in wage increases, or is there extra overtime pay. Where are you primarily seeing the impact in the operations?

Denis Gallagher

The impact of not having enough drivers, and I'll speak from an industry perspective, and obviously we've in that. So we're included in that, but we're not exclusive to this. So that's my point of saying it that way, is that what happens is you bill for the routes that you cover and the routes that you perform. So, if we had 100 routes and we can only cover 95, there is five that we didn't bill. So, we've lost revenue on some of those routes that we couldn't cover. In some cases, you have liquidated damages where the customers will charge you for missing a route, or being excessively late for a route. And so, those are the financial impacts.

Overtime, yes I mean, we do pay overtime when our drivers go overtime .So we're very cognitive and very careful about trying not to get in that position. As Pat said, we basically have built-in spares. The question is, the spares aren't supposed to be working everyday all the day, just to make sure we're covering all the routes. So, it has impacted us, I would say, from a revenue point of view, slightly. It has impacted us -- again, we're not far-off when you look at the quarter or the year-to-date, we're not far off where we're going to be. I mean, year-to-date, we're up 7% and targeted 7% for the year. So, we're not far-off of where we thought we were going to be.

Could we have done better? Sure. Is the revenue that we missed? Yes. And by the way, we know we got a little bit over $1 million in deferred not booked revenue coming back to us anyway from the snow days that we've had just so far, and that's as of December. So, I think we're in pretty good shape. Again, for us, it's a very -- being such a contracted business, we're pretty good at being able to call our revenue and where that comes in at.

Jonathan Lamers

And just on those revenue deferrals, can you tell, based on the first couple of months of Q3, what level of revenue deferrals we might see from Q3 to Q4? It seems like it's been a little more wintry in Q3 so far versus last year.

Denis Gallagher

It has been, Pat -- I don't have those numbers. But I mean we have a weather check every day, so know who is open and who is closed.

Pat Walker

I do not know, Denis. I mean, Jonathan, we’re -- as soon as we finish this call, we’ll be, for the rest of this week, looking at our January month-end calls with the field and certainly that will come up what was -- what weather days we've had in the month of January. I just don't have that right now at my fingertips.

Jonathan Lamers

Right. Okay, that makes sense. Thanks for the comments.

Denis Gallagher

Thank you. Kelly, I think that's it. We're going to wrap it up. And so, that will end our call for today. I want to thank you all for joining us. And again, May 17th, you can look for us on the NASDAQ, we’ll be participating in Closing Bell Ceremonies. Thank you all. Have a safe day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone, have a wonderful day.

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