SP Plus Corporation (NASDAQ:SP) Q2 2017 Earnings Conference Call August 2, 2017 11:00 AM ET
Executives
Vance Johnston - EVP, CFO and Treasurer
Marc Baumann - President and CEO
Analysts
Daniel Moore - CJS Securities
Timothy Mulrooney - William Blair
Mark Riddick - Sidoti & Company
Kevin Steinke - Barrington Research
Operator
Good day, ladies and gentlemen, and welcome to the Q2 2017 SP Plus Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and the instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded.
I would now like to turn the conference over to our host of today's call, Mr. Vance Johnston, Chief Executive Officer. You may begin.
Vance Johnston
Thank you, Tania, and good morning, everybody. As Tania just said, I'm Vance Johnston, Chief Financial Officer at SP Plus. Welcome to the conference call for the second quarter of 2017. I hope all of you have had a chance to review our earnings announcement that was released last evening. We'll begin our call today with a brief overview by Marc Baumann, our President and Chief Executive Officer, then I'll discuss our financial performance in a little more detail. After that, we'll open up the call for a Q&A session.
During the call, we'll make some remarks that will be considered forward-looking statements, including statements as to our 2017 outlook and guidance and statements regarding the company's strategies, plans, intentions, future operations and expected financial performance.
Actual results, performance and achievements could differ materially from those expressed in or implied by these forward-looking statements due to a variety of risks, uncertainties or other factors, including those described in our earnings release issued yesterday, which is incorporated by reference for purposes of this call and is available on our SP Plus website. I would also like to refer you to the risk factor disclosures made in the company's filings with the Securities and Exchange Commission.
Finally, before we get started, I wanted to mention that this call is being broadcast live over the Internet, and then a replay will be available on our SP Plus website for 30 days from now.
With that, I'll turn the call over to Marc.
Marc Baumann
Thanks, Vance, and good morning, everyone. I am very pleased with our overall performance in the second quarter and year-to-date, that you may have seen in our earnings release, we completed a transaction in the second quarter of this year where a joint venture in which we hold the minority interest, sold its core real estate asset and we realized earnings of $8.5 million and our proportionate share of the transaction. We believe this was a good transaction for our shareholders even without this gain relatively strong gross profit growth coupled with the lower level of G&A spend drove significant growth in operating results.
Breaking down our two major business segments, the airport division continue to produce strong results, while the airport business did not replicate the level of gross profit growth that experienced in the first quarter, which benefited from a relatively milder winter, we are nevertheless pleased with our Q2 results.
In our commercial division, we had mixed performance across industry verticals and geographic markets. New business activity was strong particularly in the hospitality vertical market where we've made and we'll continue to make meaningful investments in resources to accelerate growth.
Same locations however, especially in the New York Metro market experienced softer trends. As we've shared with you last quarter, the New York market is facing some downward volume and revenue pressures which are having an outsized impact on certain of these locations.
We've made progress towards stabilizing our performance in this market and have recently seen improving revenue trends at these locations. There remains more work to do to continue to increase revenue, drive volume and control operating costs.
Lower healthcare claim costs both relative to expectations and relative to last year have had a significant positive impact on our second quarter and year-to-date gross profit results. While we've seen lower than expected claim cost year-to-date, our expectation of claim cost for the full year has not materially changed as we believe much of the benefit we're seeing this year is due to the differences in the timing of claims, which is difficult to predict. Therefore, we now expect a higher level of claims activity in the second half of the year than originally expected.
I think this is the good time to reiterate that since we operate high deductible healthcare and casual insurance programs, we are in fact, self-insured for most claims. The timing and magnitude of claims is difficult to predict, and can fluctuate from year-to-year and from quarter-to-quarter. Some of these fluctuations can be quite large and can impact relative performance measures.
Our overall client retention rates remain at solid 92% for the 12 months ending June 2017. While same operating location gross profit was down year-over-year for the reasons that I mentioned earlier, we did see new business activity most notably in the hospitality market where we've invested in resources to help accelerate growth. New hotel properties added to our parking management portfolio include the Westin Bonaventure in Los Angeles, one of the largest hotels in the area.
Two Kimpton properties, the Kimpton Grand Hotel in Minneapolis and the Hotel Monaco in Baltimore. The AC hotel in downtown Madison, Wisconsin which is a member of the Marriott family of properties. We also recently added a couple of hotel-based shuttle operations to our portfolio in Los Angeles, this has been an area of focus for us.
Locally, we recently won contracts with the First Virgin Hotel property located in downtown Chicago and a small boutique hotel, the Rove [ph] Chicago, how it's been architecturally significant building in the heart of one of Chicago's most buzzing neighborhoods.
The airport market has also been active with three new airports added to our portfolio with recent contract awards as Raleigh-Durham International Airport in North Carolina, Jackson-Medgar Wiley Evers International Airport in Mississippi and the John Glenn Columbus International Airport in Ohio.
I want to reiterate that our primary focus going forward is to execute our three major growth indicatives, fully implement our industry vertical market strategy, expand our revenue management and marketing services capabilities, and three, further enhance our safety and risk management programs and culture. We believe successful execution of these initiatives will position us well for sustainable long-term growth.
With that, I'll turn the call the call over to Vance, to lead you through a more detailed discussion of our 2017 second quarter and first half financial performance.
Vance Johnston
Thanks, Marc. I'd like to spend a few minutes reviewing our financial results in more detail.
As we have before, my comments will focus on adjusted results. Second quarter 2017 adjusted gross profit increased $1.8 million or 4% over the same period of 2016. A Marc, mentioned the primary drivers of gross profit growth were lower healthcare fund cost strong performance in the airport division as well as robust net new business.
The combined impact of all the foregoing items more than offset the mixed performance of same locations in the commercial division particularly in the New York metro market which Marc touched on earlier.
Adjusted G&A for the second quarter of 2017 decreased by $0.6 million or 3% from the second quarter of 2016, primarily due to the previous cost reduction initiatives and continued cost management discipline, which more than offset the additional resource investments we're making to support our various growth initiatives.
Adjusted gross profit growth and lower G&A drove significant growth in adjusted EBITDA of $2.1 million or 8% over the second quarter of 2016. Adjusted EPS was $0.53 for the second quarter 2017 as compared to $0.34 in the second quarter of 2016, an increase of 56% in addition to adjusted EBITDA growth a significant reduction in depreciation and amortization expense including a $2.5 million reduction in D&A due to the burn-off of certain acquired acquisition related intangible assets help drive the increase in adjusted EPS.
I'll touch briefly on the year-to-date results. Adjusted gross profit for the first half of 2017 increased $0.5 million or 5% over the same period of 2016 and adjusted G&A decreased by $1.7 million or 4% from the same period of 2016 as many of the same factors I discussed with the quarter are impacting the year-to-date. Results in adjusted EBITDA for the first half of 2017 increased 15% or $5.8 million over the same period of 2016.
Adjusted EPS was $0.80 for the first half of 2017 an increase of 82% over the same period of 2016 in addition to adjusted EBITDA growth a $3 million reduction in depreciation and amortization expense largely due to the burn-off of certain acquisition related intangible assets help drive the adjusted EPS increase. The company generated free cash flow of $22.9 million in the first half of 2017 significantly ahead of last year's first half free cash flow of $13.2 million.
The 2017 free cash flow does not include the proceeds from our share of the Joint venture transaction. Lower capital expenditures and favorable working capital movements contributed to the increase free cash flow generated in the first half of 2017. Generating significant free cash flow continues to be an area of focus for us and we're pleased with the progress we've made.
Lower than expected cost of health and casualty insurance contributed significantly to the overall better than expected results in the first half of the year. However, current expectations for the second half of the year are more modest. As a result, we're reaffirming the previously provided full year guidance for adjusted EPS, adjusted EBITDA and free cash flow. We are increasing reported EPS and EBITDA on an adjusted basis solely for earnings of $8.5 million or 22% per share after tax realized from the joint venture transaction in the second quarter of 2017.
That concludes our formal comments. I'll turn the call back over to Tania to begin the Q&A.
Question-and-Answer Session
Operator
Certainly. [Operator Instructions] And our first question comes from Daniel Moore of CJS Securities. Your line is open.
Daniel Moore
Good morning. Thanks for taking the questions. You mentioned you talked about Marc prepared remarks favorability in healthcare and casualty, I guess I know it's very difficult to project but maybe order of magnitude how much incremental cost you expect to incur in the back half of the year relative to what we saw in H1?
Marc Baumann
Well, I think Dan if you look at the two programs separately, as worth doing one of the things we have of course in the area of casualty is the ability to actually drive cost down to our programs, our safety programs and risk management programs and that's been a major initiative as we've talked.
And so, our expectation long-term for casualty is that we will continue to find ways to drive down our total cost of risk. So that's an ongoing expectation and obviously as we've talked before in a given quarter, our actuarial assessment is done by the actuary result in an increase in cost being recognized or a decrease in cost been recognized, but the long-term trend should be in the positive direction. So, I think that's just an ongoing expect of how the casualty programs work.
Healthcare is a little trickier because it's hard for us to control cost directly, obviously we and our employees are covered by our health insurance programs. We made some changes to the programs last year in order to make sure that the programs were market tested, in other words, the benefit offering in the cost and the employee contribution, the client contribution were all calibrated against market conditions. So, we made some changes ended up being favorable to the company mid-year last year I think we're seeing some of the benefit from that, that's not an ongoing thing. I think that's kind of float through now because it's kind of all the years since we did that.
I think the challenge of course is that most health claims come through usually in the 12 months of the year or maybe the first quarter of the following year. And so very, very difficult to predict. So, I think while we're happy to have the positive upward movement in the first half of this year from health claim cost,
I think the right thing to do is to maintain our view which is that we won't expect any further positive movement in claims cost as we go through the rest of the year. And in fact, it may be as we said in our remarks that some of the benefits have flow through a little earlier in the year than we would have thought. And so therefore, make although the other way in the rest of the year.
Vance Johnston
And Dan, this is Van, so I'd just add one thing to what Marc said. Obviously with healthcare, you have kind a deductible and so those deductibles are met, we take on a more of a proportion of that. And so, in some cases, you would expect deductibles to be met on an individual basis. And as we get into the second half of the year and we've take on a higher proportion of those costs for certain claims that come through.
Daniel Moore
So that seasonality may that maybe there on a go forward basis as well?
Vance Johnston
Yeah, you'd expect it, you wouldn't expect obviously we as Marc alluded to tough to predict kind of the degree of claims and kind of when they come through for healthcare. But that kind of phenomenon of the fact that deductibles are met and then we take on higher proportion of it not to stay anything significant you'd expect that trend to continue forward.
Daniel Moore
Got it, very helpful. Shifting gears D&A that you mentioned the step down of the burn off of intangibles. Is the Q2 a good run rate to think about on a go forward basis?
Vance Johnston
Yeah. No, I think that's a reasonable run-rate to think about.
Daniel Moore
And then, if that is the case, and obviously excluding the onetime gain that you have in the quarter from the sale of the JV, it would seem that at least your EPS guidance appears conservative given the magnitude of that step down, any comment there?
Vance Johnston
Look, when we look at EPS guidance, we are factoring a number of different things. And obviously we're getting a favorable impact as we'd alluded to in our prepared remarks related to fall off of certain intangible assets and depreciation expense going down due to that.
But there is a variety of things that we've considered and so we'll just have to kind a wait and see how things play out. But we feel reasonably comfortable with where we're at with our guidance and it could be obviously, there is a range that's there and effectively we just reaffirmed our guidance in the range at this point in time. Now that could change but that's where we're at now.
Daniel Moore
Okay. And lastly and I'll jump out, leverage continues to drop and really accelerate quickly down to that 1.5 times this year's EBITDA. Just talk about options for capital allocation and if there a natural time between now and year end, will you might consider whether it would be dividends or other uses of capital? Thanks.
Marc Baumann
We're always focused on making sure that we're optimizing capital allocation for our shareholders. And obviously as a whole, aware of the fact that we have delevered significantly over the past couple of years as we generate significant cash flow.
But I would say first and foremost, our focus is on looking out into the world and seeing whether there are either parking companies or ancillary related businesses that we could acquire at attractive multiples. That's an ongoing active process that we have going all the time. And we love to deploy some capital to try to get some transactions done and accelerate our organic growth and complement it with some acquisitions. So that will continue to be our focus.
Obviously, we're providing adequate capital to the business and so where we needed either to or support in the deal or renewal of the deal. We're doing that if we need to make investments in technology we're doing that. But as you know, we have a negative working capital model and so generally speaking we don't require a lot of our own capital to be invested in the business.
As you're aware, we do have a stock buyback program that was authorized by our board. We constantly reviewing that, and our forward forecast for the business and make sure that where appropriate we're buying back our stock when that make sense. And clearly our board will on an ongoing basis look at the potential for dividends. And that's something that was ongoing agenda item for our Board of Directors.
But it's premature now for us to sort to signal any steps that we might take other than to reiterate the fact that we are clearly getting our leverage to the low end of the range that we've talked about, there is no need for us to delever further per se, but we want to make sure that if we are making decisions to spend some of that cash flow that we have - that we are using that in an effective way to generate long-term shareholder value for our investors.
Daniel Moore
Got it. Appreciate the commentary, I'll jump out. Thanks.
Operator
And our next question comes from Tim Mulrooney of William Blair. Your line is open.
Timothy Mulrooney
Good morning.
Vance Johnston
Good morning.
Marc Baumann
Good morning, Tim.
Timothy Mulrooney
So, I just want to go back to the guidance question, just for a minute, just to make sure I have these numbers correct. So, you did $0.80 in the first half of 2017 which is up 84% year-over-year. The midpoint of your guidance was above 60% which implies $0.80 in the back half of the year which would imply in EPS decline of 10% in the back half of the year. Do I have my numbers correct?
Vance Johnston
Yes, you have the numbers correct. That's why you are stating them, yes.
Marc Baumann
Tim, you should go back to the comments that Vance made a few minutes ago. We don't give quarterly guidance and when we look at the year we set our expectations for way we think the guidance items are going to move. So, we look at things like EBITDA, we look internally elements that we don't give guidance on and obviously we do give guidance on EPS as well.
And as the year unfold, internally we may move within the range that we've given and so we only move our guidance range if we feel that we're going to really be outside the guidance range. But if we feel that we're going to stay within the guidance range, we might be at any point in time running higher or lower, we don't adjust our guidance on a quarterly basis.
Timothy Mulrooney
Okay, all right. I'll move on. I know you guys have that revenue management pilot going that I think you implemented that in the first quarter. Any early indications, or how that's going initial takeaway and or plans to expand this pilot program to set the location?
Marc Baumann
Thanks for asking. We started very small and we're looking at data and trying to understand patterns around people's parking activities that some other locations that we've selected for the pilot, and I would say, we're starting to give some learning's. And I think some of what's coming out of it is that there is room to optimize revenue as the locations that we've looked at.
And by that, I mean we may not be charging enough in certain cases or transient or monthly parking. In other cases, we might be charging certain segments of the parking users at those faculties more than the market will bear. So, we're looking at this very carefully and I would say, optimistic that learnings initially are going to lead to - our ability to implement some ideas that will drive revenue up in those facilities.
Now, because of that we're going to start actually making changes and as you can imagine, it's great to do mathematical analytics than form hypothesis about what might happen. Until you actually do it, you don't really know. So, we're moving into the doing it phase at a small number of facilities to try to implement some of the conclusions we have from the analytical work, and we're also going to expand the number of facilities now that we're looking at to see whether the patterns are similar there or different. So, I think early innings here of this game, but at least initially we're seeing some positive feedback that's encouraging us to continue to down this track.
I'm hoping that as we get to the end of the year, we will have implemented some change at some locations and learned from that but it may not be significant enough to really notice in our overall results as a company but the goal here is to learn at a small number of locations, take those learning's and then scale those two locations in other places or in places where we may not necessarily have all the data.
And as we said earlier, our prime focus is on lease locations where we can make decisions and make change just on our own decision-making process. But the ultimate goal is to develop a differentiated offering that we can offer up to clients and use case studies from what we learned at leases and use that as a means of winning new business and accelerating our growth as management clients as well.
Timothy Mulrooney
That's good, it sounds promising. I look forward to hearing more about that in the future. Maybe one more from me, piggybacking on the last question about capital allocation, I'm curious about your M&A opportunities specifically given the merger with Central five years ago. I wonder if you could ever do a large deal like that again or if you think that probably be antitrust concerns, that maybe we're just focusing on smaller bolt-on opportunities from here and now, can you just share your thoughts with us generally about how you think about M&A.
Marc Baumann
Sure. No, I think we - one of our goals has been - and this is not a new goal. This has been our goal for many years. Is that, if there is an opportunity for us to acquire one of our - want someone else in the parking space whether they are the larger operators or somebody that's mid-sized or a small size, we're always looking at this and we're eager to explore the possibilities.
Now clearly, we - with the subject of antitrust review, if the transaction has certain characteristics we know how to go through that very, very well. So, I would say the potential for antitrust review would not persuade us from taking a look at something very seriously and maybe even pursuing it, as we learn with the Central transaction, the Central Standard transaction while we're here to go through a process and it was fairly intensive.
At the end of the day, we divested fairly small number of locations, which weren't in the end material to the results of the combined entity and we've now moved past that period and are actually able to go back into the marketplace and try to get some of those locations back because the period that we had did not look at them as expired.
So, I don't think we would be daunted by the issues of antitrust. We certainly follow the rules and do the right thing. I think that clearly in the parking space there will be companies that will come for sale all the time and so, our goal is to make sure that the owners of these businesses, whoever they maybe will be aware of our interest and participating in any process to look at a possible acquisition of their business and we will do that.
We have strong disciplines though. We want to make sure we're really creating value for shareholders and we've looked at a lot of things and we've not pursued a number of them, because we just couldn't see how the economic return would justify the kind of prices that people were talking about.
So, I think from a - in the parking history M&A that's definitely an issue. if we look at other verticals that are ancillary to our business whether it's ground transportation or security or facility maintenance or other things that we're thinking about, our penetration in those spaces are very small and so it would not be - I mean you never know what we'll have to be looked at or what might be reviewed by the authorities. But I think we probably have a little more open latitude to pursue things there without even to think about that too much.
Timothy Mulrooney
Got it. Okay. Well, thank you for all the details and congrats on another nice quarter.
Marc Baumann
Thank you, Tim. Appreciated it.
Vance Johnston
Thank you, Tim.
Operator
[Operator Instructions] Our next question comes from Mark Riddick of Sidoti. Your line is open.
Mark Riddick
Hey, good morning.
Vance Johnston
Good morning, Mark.
Marc Baumann
Good morning, Mark.
Mark Riddick
So, I wanted to touch a little bit deeper on the investments on the hospitality side certainly that's been an area where you have been getting new business wins and not just this quarter, but certainly recently. I wonder if you could share a little greater detail on maybe some of the higher level of things that you're looking at within those investments and may be whether there are specifically regional or by brand or how we should be thinking about the main focus of the investments going forward.
Marc Baumann
Sure. Happy to do that. And I know I have touched on this before. One of the things that we discovered, we went through a comprehensive review of our business and looked at ways that we could take steps that would accelerate our growth as we go forward and one of the things that kind of stood out to us is that the vast majority and probably the bulk of our hospitality clients are located either in Chicago and New York or Florida.
And we've spent some time trying to understand what do we attribute that to. And at the end of the day, I think what we attributed to is the fact that we have people in those places who are solely focused on hospitality and the hospitality business is a lot different from commercial office buildings or apartment buildings in the like. It's very intense at night and weekends and hospitality clients often have major events whether it's conventions or weddings in the like.
And so, in order to be successful in that space, you really have to have people who kind of live and breathe their world and often came out of their world and are clearly focused on that. And so, we have people like that in New York, we have people like that in Chicago; we have people like that in Florida.
And lot of our other markets, we have the same client base and we have the same competitors, but we haven't really deployed those kinds of people. We're really up until now left our normal individuals who are there developing commercial office building, free staying, parking lots, all the normal verticals that we talk about and those businesses are a lot different from hospitality.
So, I think the lesson for us and this is what we made the commitment to do is, we need to deploy more of those kinds of people like we have in those three markets into other markets. And so that's one of the things we're doing right now.
So, we are putting what we are calling regional hospitality asset managers in a handful of markets and we are starting with Southern California and I think we're starting to see some benefits from that in the wins that we've announced in our earnings release.
So, I think and we'll add more as we start to see success from their approach we'll add more in other markets and we'll keep going until we reach a point where it doesn't make sense.
Now that being said, we have tremendous success in a few markets where our local management team and regional managers have just done an outstanding job of developing and cultivating hospitality business on their own.
And so, I don't want to send a message that it's only the people that were focused on hospitality that can do it. But we see hospitality as a really important and great growth market for us over the next several years.
Our penetration rate is very low in many, many places and we're very eager to try to put those resources to work. We also leader of one of our business units retire at the end of last year and while he's working for us on a multi-year consulting arrangement. We brought in a new individual to sort of head of business development for hospitality.
So, while we have leadership over our business development in the commercial, generally we feel that hospitality is so specialized that we wanted to bring in somebody to focus just on that on a national basis and cultivate national relationship with hotel change, ownership groups, property managers, management companies and the like so that we can continue to expand our opportunities in hospitality.
Mark Riddick
Sounds very promising and I appreciate the color on that, thank you. And I guess, my last question is around the if you can share anything as far as the timing of or I guess I have two more. The timing of contract renewals that you see sort of maybe over the next few quarters or so?
Are there any particular quarters that may have a lot more or less bolt up in any particular area? And then my follow up to that is whether or not if you could share updated retention rate data? Thank you.
Marc Baumann
Sure. I think in our business, because we are about 90% management contracts and except in the government space and the private sector, most of those contracts are terminable in 30 days' notice. I mean this have been - it's a factor in our industry.
So, we don't tend to get too concern over does this contract expires year does that contract expire there, because our contracts are always in the process of renewing. And most of our management contracts have provisions that allow them to be extended automatically if the contract term comes up. So, I don't think that's anything to be concerned about.
Clearly, in the government space you will see larger airports are on a cycle, and there is an always something. So, we renewed a number of airports this year we will have other ones coming up that's just the way government contracting works tend to be five-year contracts. I think retention we've talked about location retention in the release that 92% which is at the high end of the range that we've been over the past few years.
I think we were 94% last quarter. It is going to bounce around a little bit, but clearly our goal is to really drive up our location retention rate. And the reason why it moves around is it sometimes we gain or lose clients that have multiple locations. And I think we indicated in the release that we had ended up getting renewed at an airport it had a lot of location so that had an impact on driving it down to 92%.
But I think internally our goal is to try to get our retention rate up to 95%, that will be that's a long-term objective. But I confident that the efforts that we are put in place and the leadership that we have in place in our organization will get us there ultimately.
Mark Riddick
Okay, sounds great. Thank you very much.
Marc Baumann
You're welcome.
Operator
And our next question comes from Kevin Steinke of Barrington Research. Your line is open.
Kevin Steinke
Good morning, Marc and Vance. So, you talked about the cost reduction initiatives prior cost reduction initiatives offsetting to this point your resource investments that you're doing this year.
Just wondering as you look to the second half, if you think that will continue to be the case or if the investments ramp up a little bit more in the second half and maybe G&A expenses don't benefit as much on a net basis from prior actions you've taken?
Marc Baumann
Well, I think we're always looking at ways that we can take cost side of our G&A base and as we talked in the last call we took cost in for 2017. We made some additional changes to our organization. We're also continuously looking at strategic sourcing and other automation and technology things which Vance can elaborate on. So, those things are kind of ongoing and we'll get the benefits of those as they happen.
In terms of the investments we're making in revenue management and marketing services or in these hospitality asset managers, that's sort of a bridge of investment, but again as we talked last quarter, we're not talking about tenths of millions of dollars large numbers, we're just talking about adding resources as I mentioned on hospitality, we're adding a handful people.
If we start to gain traction and they start to bring in results like we're starting to see in greater Los Angeles area, we'll add more of those resources, either later in the year or as we move into 2018. But the goal is always make investments in G&A where it makes sense to try to drive more gross profit growth.
Kevin Steinke
Okay. And I think in your prepared comments, you mentioned some continued softness in New York although I think you also talked about that you've made some changes and have started to see some improvement, is that the case and if so, could you just give a little bit more detail on what you're doing there?
Marc Baumann
Sure. I mean I think anytime that you're not achieving the performance expectation you start to look at what's really driving that and some of the other things that we learned is that maybe we had not invested enough in marketing and promotional activity in the New York market relative to what we had done before and relative to what some of our competition has done.
We're certainly seeing some increase penetration from parking aggregators in New York and other places and again, we have to make sure that we're making good decisions about how to work with them, what inventory to make available through them and what inventory not to make available to them and I think as we brought about kind of a renewed and intense focus on New York, we're making some changes there to try to optimize revenue and because we began to create a revenue management capability in the organization.
We spend a lot of time focusing on New York where we have a lot of leases and we're learning a lot of things through analysis about pricing decisions we've made around multi-parking, transient parking in the like. So, we have our desire to create revenue management system, if you will that's an ongoing project that I spoke about a few minutes ago.
But in the meantime, we're spending a lot of time looking at just whether we have the right rates, the right allocation of transient versus monthly at a number of locations.
And then finally, we brought some new leadership in over the operating team and they're looking at things like stepping levels, overtime, controlling overtime obviously by making sure we're following good safety practices in the like. So, major spotlight focused on improving performance there.
But I think as we talked before the underlying issues that affect New York and to some extent some other cities are really around congestion, there's clearly rig-sharing is a factor in the hospitality space in particular. And so that's just part of the environment that we operate in. But I think it was nice to see and we're starting to see this in the last couple of months it's not really reflecting so much in our Q2 results. We're starting to see some positive revenues trends in the New York market in particular.
Kevin Steinke
Okay, that's helpful. And then could you just give more tail on this joint venture transaction that you did and that's sort of one-off for the other opportunities like that?
Marc Baumann
I think the legacy is that legacy Central Parking business owned a lot of real estate and a lot of that was sold before Central and Standard merge five years ago. There were a few joint venture interests left and this is I think the last one or there might one more, but not necessarily - we have to do something with that, but the majority partner in the joint venture really was looking at this real estate, talk to us about the value of its relative to what did we thought it might be and we decided to support the transaction.
Now, the reality is at the moment and probably for some time, it's still a parking facility and we still operate the parking facility. So, we're just not the owner of it any longer or part owner any longer.
Vance Johnston
Yeah, Kevin I would just add to Marc's comments. I mean obviously whenever we're able to do something like that where we're able to own or have a 30% stake in a partnership like that and there is a decision made to sell an asset like that, obviously we believe as we've said in our prepared remarks that must break the transaction for shareholders certainly there was a gain that was recorded on that but more importantly we had generated significant cash that came from the sale of that asset and our proportionate share of that, so very good transaction for shareholders.
Kevin Steinke
Right, makes sense. Okay, well that's all I had. Thanks for taking the questions.
Vance Johnston
Thank you, Kevin.
Marc Baumann
Thanks, Kevin.
Operator
And our next question comes from Daniel Moore of CJS Securities. Your line is open.
Daniel Moore
Thank you. Just a quick follow-up or two if the challenges, the great description I appreciate the color on New York City, it's very helpful. The challenge is that you had seen in the last couple of quarters seeing similar ones in other major urban areas and are you I mean just kind of talk about trends in general and are you instituting or implementing similar steps in terms of partnering with some of the apps and the aggregators etcetera?
Marc Baumann
Yeah, I mean we're not seeing the same situation in other markets than we have in New York. But I do think that the New York issue, issue that we talked about it somewhat relates on hospitality, where hospitality is definitely seeing some impacts from ride-sharing, so where you see, where we have hospitality in places like Florida or Chicago, we have similar patterns within the hospitality space now.
What I can say is that and I kind of watch and try to learn and understand what's happening with other businesses as well, this also affects other people, we're operating hospitality. So, I think the reality for the hospitality space is that ride-sharing has changed what consumers are doing. And so, there is going to be on a permanent basis fewer people parking at many hotel properties around the country that's it's reality of the world now with ride-sharing in place.
That being said, we have about 400, I think or so hotels internationally and there is at least I think 3000 that are kind of in the four to five diamond range, in other words property that we candidate for a stop break. So, well some of our existing properties, our incentive [ph] range is sort of parking volumes as they used to. That being said, there's awful lot for us to go ahead, that's why my team a little bit of a contradiction to say, well, gosh you're feeling some ride-sharing pressure in hospitality and yet you're putting all this focus on hospitality. But the reason that we're putting the focus on it is that if anything, the hotels that don't use us, need us more now than ever before.
They are looking to how to they generate revenue, how do the guest that come to their properties and so creating an outstanding guest experience for the people coming in and when they come in with their car, when they leave with their car at the end is crucial to the success of their hotel property.
So. We're very, very bullish and optimistic about the potential for hospitality as an industry and also the potential for us to gain lot of growth in the hospitality space. But I think that - we have to recognize that, that being said, ride-sharing has had some impact on the vertical.
Because most of our other major cities either we have a very little in the way of hospitality business now. We're going to try to generate more of that as we've talked or in the case of Chicago and Florida, we do have decent amounts. We're for sure seeing some impact from that there.
Now, your comment and question about aggregators. We work with aggregators on a national basis and I think the important thing is if you have a parking garage that you can fill up in the middle of the night and it's a 24-hour garage, it has to remain open. You're happy to sell that inventory to an aggregator and pay them portion of the revenue.
I mean that makes good economic sense, the marginal contribution from selling that space is not what you might get during the day time, but it's a lot better than zero which is what you'd get and of course parking inventory is time based and so that means if you don't sell it today you can never sell today's inventory ever again.
The key with aggregators is to work with them intelligently so that you're giving them the correct inventory, and you're putting that inventory out there at the right price, so that you're attracting business that you wouldn't get otherwise and you don't mind paying them as I said to share their revenue.
What can happen if you are not careful is that you might be selling them your peak inventory that you don't need to sell to their aggregator. This again is where our client to looking to us to be experts in revenue optimization for them. So that we can advise them, here's where you should use one of these aggregators, here is where you shouldn't, here is what price should be charged to the aggregator.
So, part of our value proposition to a client is that they're looking to us to guide them and making those decisions. And obviously, it's lease locations we make them on our own behalf.
So, once again, I kind of think these trends, some of these trends are actually beneficial to people like us because may be a smaller or less sophisticated parking company doesn't have their expertise, hasn't invested in the resources to be able to do those sorts of things and therefore would not be capable of giving a good advice to a client as we can.
Daniel Moore
Very helpful. Last one and then I'm done. Tax rate historically closer to 40% take down the last couple of quarters, anything going on there which we expect going forward?
Vance Johnston
No. We still expect our tax rate for the full year to be around that 40% rate, 40%, 41% rate. So, obviously we had in the first quarter, we had a little bit lower tax rate related to some items that we have in the first quarter, but for the full year we still expect consistent with our guidance at this point.
Daniel Moore
Thanks, again.
Marc Baumann
Thanks, Dan.
Vance Johnston
All right, thank you Dan.
Operator
And I am showing no further questions at this time. I'd now like to turn the conference to back over to Marc Baumann, President and Chief Executive Officer for closing remark.
Marc Baumann
Okay, Tanya. Thank you very much. And I just want to thank all of you for joining us today and your interest in our business and we look forward to speaking with you again next time. Have a great day.
Operator
Ladies and gentlemen this concludes today's conference. Thank you for your participation and have a wonderful day.
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