SP Plus Corporation

At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host today, Mr. Christopher Roy, Chief Financial Officer. Sir, the floor is yours.

Thank you, Joanna, and good afternoon, everyone. As Joanna just said, I'm Christopher Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our first quarter 2021 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including statements as to the impact of COVID-19, outlook for 2021, and statements regarding the company's strategies, plans, intentions, future operations, and expected financial performance. Actual results, performance, and achievements could differ materially from those expressed or implied due to a variety of risks, uncertainties, or other factors, including those described in the company's earnings release issued earlier this afternoon, which is incorporated by reference for purposes of this call and available on the SP Plus website, and the risk factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the SEC. In addition, management will discuss non-GAAP financial information during the call. Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance. They are provided for informational purposes only. A full reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are discussed on the call, reconciliations to comparable GAAP measure will be posted under the Regulation G tab in the Investor Relations section of the SP Plus website. Please note this call is being broadcast live over the internet and is being recorded. A replay will be available on the SP Plus website shortly after the end of the call and will be available for 30 days from today. I will now turn the call over to Mark Baumann, our Chief Executive Officer.

Mark? Thank you, Chris. I'm pleased to report that we saw a progressive improvement in business conditions in the first quarter, tied to further relaxation of pandemic-related restrictions and accelerated vaccine rollout. We believe that these factors have spurred consumer confidence and have led to a pickup in travel and other leisure activities, which of course is good for our business. At the same time, consumers remain cautious, which has translated into increased use of private automobiles rather than mass transportation in many large metropolitan areas. In short, these positive factors offset the seasonality that we typically experience in the first quarter of the year and resulted in the quarter coming in better than expected. We also had a $4.8 million benefit in the first quarter related to certain cost concessions that were one time in nature. Taking that non-recurring benefit out of the first quarter adjusted gross profit, the quarter was still slightly ahead of fourth quarter 2020 levels, despite the fact that Q1 is historically our slowest period, with the upside coming from both our commercial and aviation segments. While it's still early in the year, our first quarter performance increases our confidence in the gross profit and G&A guidance we provided in late February. With respect to G&A, we continue to closely manage our cost structure while making ongoing investments in our technology offerings to support future growth. Our G&A run rate is projected to be 26% lower in 2021 than it was in 2019 at the midpoint of our guidance. This significant reduction includes systemic changes and efficiencies that we've implemented throughout the company, which we believe will help us return more quickly to pre-pandemic levels of EBITDA. Additionally, once business conditions return to more normalized levels, we would expect to exceed pre-pandemic EBITDA levels as we leverage our more streamlined organizational structure and G&A cost base. At the same time, our operating structure and value proposition continue to improve. First of all, management contracts now comprise 86% of our commercial portfolio, up from 81% at the start of last year, creating more visibility and predictability. We believe that the stability resulting from this shift, which shields us from exposure to utilization as well as increasing labor rates and other operating costs, is especially important now and in the post-pandemic environment. While we're still open to lease arrangements with clients who require them, our leases will be structured in ways that mitigate risk, for example, through shorter terms or built-in cancellation clauses. Second, our market position has been further strengthened by a weakened competitive landscape, which has seen some operators fold altogether or suffer major financial setbacks and distractions, making them less desirable partners for facility owners. SP Plus has a reputation as an operator that lives up to its obligations and delivers on service levels, Consequently, we expect this environment should provide us the opportunity to increase our market share. And after a year of very challenging business trends, we're seeing improvements across our operating footprint. Let's first take a look at the travel landscape. Travel is picking up for a number of reasons, including improved customer confidence and pent-up demand after more than a year of quarantining and basically sheltering in place. In the first quarter, we saw travel volumes progressively increase, especially over spring break. This is consistent with TSA data that show a recovery in air travel underway with month-to-month sequential improvement in travel levels. Hotel occupancy rates also improved in many geographies during the first quarter. Based on the metrics we monitor, experts are generally predicting that travel will increase even more in the second half of the year. With airports increasingly busy, they're open to solutions like the ones we provide which reduce congestion and enable social distancing. We successfully managed the influx of post-Super Bowl travelers with our curbside concierge check-in at the Tampa International Airport, and the outstanding performance of our team led to a new ongoing contract at that airport. We continue to seek to provide additional service such as those for existing clients, expanding our growth potential and addressable market. Shifting to our commercial business, We expect commuters in metropolitan areas to continue to show a strong preference for using their personal vehicles for the foreseeable future. Available data on miles driven and tolls paid support our expectation for a continuation of that trend as more people return to their workplaces. In many urban locations, parking activity increased during the first quarter, and in some cases, businesses at or ahead of pre-pandemic levels. We think this is a trend that is here to stay, and this increased demand makes our technology offerings even more relevant and useful. We consider technology a key differentiator for SP Plus and an important competitive advantage for us in retaining clients and winning new business. Clients value our proprietary offerings, and we continue to invest in the digital transformation of our industry. We issued a press release earlier this week that highlights the great progress we're making with our various sphere products and digital offerings. We now have almost 400 facilities across the US and Canada that have transitioned to the Sphere Commerce on-demand gaitless solution, which allows daily parkers the option to bypass a pay station or any interaction with parking equipment or personnel to quickly and securely pay on their personal smartphone or device in the comfort of their own vehicle. We're also rolling out our touchless capabilities at gated locations and are making good progress. Momentum remains strong as both our clients and parking customers increasingly adopt our digital offerings, as evidenced by a 77% increase in reservation revenue on our ProprietaryParking.com platform from January to March of this year. In summary, we're very pleased with our first quarter performance, our market positioning, and the improving business conditions that we see on the horizon. Chris will now provide you with a more detailed financial review.

Thank you, Mark. I will now give a more detailed view of our adjusted results for the first quarter of 2021. Adjusted gross profit for the first quarter of 2021 was $40.1 million, which excludes restructuring and integration-related costs and a small impairment charge. This represents a 16% year-over-year decrease from $47.7 million in the year-ago quarter, mainly due to the pandemic-related reduction in business activity over the last year. As Mark already mentioned, offsetting the impact of the pandemic-related decline was a $4.8 million benefit this quarter related to certain cost concessions, which are not expected to reoccur. First quarter 2021 adjusted G&A expenses totaled $20.3 million, which excludes $700,000 in restructuring and integration-related costs. This was just $100,000 higher than the 2020 first quarter. While relatively flat, This does reflect significantly higher performance-based compensation accruals in 2021 compared to the first quarter of 2020, where we actually reversed out the plan-to-date accruals for our long-term performance-based compensation programs, given the onset of COVID-19. If you exclude the performance-based compensation accruals from both periods, our G&A would have been well below last year. Our cost reduction efforts are even more evident when compared to the first quarter of 2019, as adjusted G&A in the first quarter of 2021 declined 23% from that period, reflecting the success of our cost actions and laying the foundation for us to operate as a leaner organization and better leverage growth process. Our adjusted earnings per share were 27 cents compared to 64 cents in the year-ago quarter. Both 2021 and 2020 numbers exclude restructuring and integration-related costs, non-cash impairment charges, amortization of acquired intangible assets, and related tax impacts, and reflect the same trends that we spoke about. Moving to our cash flow in the first quarter of 2021, cash from operations was negative $1 million, and free cash flow was negative $3.9 million. Although these two metrics declined year over year from positive cash from operations and free cash flow of 8.2 million and 2.8 million respectively, our performance in the first quarter of 2021 was better than we expected and consistent with historical trends where the March quarter is usually the lowest operating and free cash flow quarter of the year and often negative. All in all, we still expect to grow free cash flow in 2021 versus 2020 as previously guided. Based on our current results and visibility, we are reaffirming our full year 2021 guidance for gross profit of $140 to $160 million, G&A of $75 to $85 million, and a higher free cash flow year to year. We continue to expect our performance in the first half of the year to remain similar to the second half of 2020, with a pickup in the second half of this year. With that, I'll turn the call back over to Mark for some closing thoughts.

Hey, thank you, Chris. We believe SP Plus is well-positioned to emerge from the pandemic as a stronger company with an expanded addressable market, greater visibility, and an improved cost structure. We believe our ability to reduce congestion and improve mobility will accelerate demand for our services in a post-pandemic environment, and we expect that the catch-up in travel and other new trends in commuting and return to the workplace has the potential to be multi-year business drivers for us. Now I'd like to go back to the operator to open the call up for questions.

Thank you so much. Ladies and gentlemen, if you have a question at this time, please press star, then the number one on your touchtone telephone. If your question has been answered and you remove the wish yourself from the queue, please press the pound key. Your first question comes from the line of Mr. Daniel Moore from CJS Securities. Your line is open.

Thank you. Good afternoon, Mark and Chris. How are you?

Hi.

Doing well. You? Thanks for taking the questions. You indicated Q1 was driven by, you know, improved conditions, obviously, despite the seasonality, the typical seasonality, and that conditions improved sequentially through the quarter. Given that, you know, is it reasonable to assume 2Q gross profit EBITDA, you know, continue to sequentially improve barring some significant change in momentum in May and June?

Well, we would have expected Q2 to be a little better than Q1 anyway, because as we said, Q1 is our seasonally weakest quarter. But I think if business conditions continue to improve on a sequential basis, then obviously our business will improve in the same sort of way. I think we mentioned in our guidance that our guidance is based on the first half of 2021 being comparable to the second half of 2020 from a gross profit point of view. And there were obviously some very strong months in 2020 as well in the latter half of the year. So I think we're encouraged by what we saw, and we certainly are seeing an increase in business activity month to month.

Very helpful. And then taking that a bit further and kind of taking into account, obviously, the customer concession that you pointed out, You know, the guidance starts to look a little bit conservative. I'm wondering if there's investments or expenses contemplated, you know, in the back half of the year that we should be thinking about, or is it simply a function of just wanting to remain conservative, you know, at this stage of the year?

No, there's no big investments contemplated. I think that when we were looking at the year, and bear in mind we only formulated and gave our guidance about six weeks ago, So not so much happens in six weeks that gives us a greater visibility into what's going to happen in the latter part of this year. I think we expected a gradual ramp up and very little improvement in performance in the first half, but then our guidance contemplated more significant ramping up and movement in the second half. We don't have any new insights now that let us, I'd say, see that the second half is going to be any better than we thought it would be six weeks ago. Now, obviously, we're getting new information all the time. And as we move into the second quarter, we'll get a little better picture of the second half of the year. But I think at this stage, we obviously feel better about our guidance than we did when we gave it because we've had a great first quarter. But I think it's premature for us to be thinking about increasing our expectations for the year.

Very helpful. I'm going to sneak one more in, if I may. Just focusing on the aviation segment or portions of your business, how did that gross profit perform year over year in the quarter? And with air travel bookings clearly picking up, at least in terms of leisure, even back to pre-pandemic levels in some cases, how quickly do you think we can get back to 2019 or pre-pandemic gross profit on that side of your business? And if you don't want to give a timetable, I think you mentioned the prepared remarks, so we could exceed that for the overall business. Is that the case in aviation as well? I know it was a mouthful, but I appreciate any comments.

That's a lot, yeah. I mean, I don't have the segment information in front of me, but I would be surprised if aviation performed better than a year ago in the first quarter. But the reality is that, as we've talked before, our aviation segment, has our entire bags business in it. And that business was severely impacted during COVID as travel and leisure really ramped down. And so that business will come back with travel and leisure resuming. And I think there's some great indications. I see a number of the airlines are going to be running fairly robust schedules in the summer for travel and leisure this year. I think they're talking about getting back to pre-pandemic you know, levels overall in 2023, including business travel. So, you know, we're expecting to see, you know, continuing improvement in travel. And as those things improve, then the bags business will follow that along and come back. And, you know, you didn't ask the question, but, you know, kind of related to that, you know, our bags business was able to expand their delayed luggage business by getting a new contract with Hawaiian Airlines during the quarter where they're now going to be delivering delayed luggage for Hawaiian Airlines in 21 markets. So there's been a lot of activity preparing for the resumption, but the pace of that resumption is really going to follow the amount of leisure travel that people are doing.

Very helpful. I'll circle back with any follow-ups. Thank you. Thanks, Dan. Thanks, Dan.

Your next question comes from the line of Tim Mulrooney of William Lear. Your line is open.

Good afternoon, Mark. Good afternoon, Chris. Thanks for taking my questions. So the guidance question was asked, so I'll ask something else. On the commercial side of your business, have your downtown commercial customers, particularly in office buildings, have they approached you about their changing parking needs as a result of more employees choosing to work from home? If so, can you talk about how those needs have changed and how that might impact your business?

Well, I'd say yes is the answer, and not just recently. I mean, I think all through COVID, we've been in ongoing discussions with our commercial office building clients and the property managers that often represent them because they were very interested in our protocols for managing through COVID. Do we have a COVID playbook to keep people safe? Can our technology accommodate social distancing and, you know, limited congestion and all of the touchless stuff that we've talked about on these calls and also was in our press release earlier in the week about spheres. So we've had a lot of ongoing conversations. But I think more and more companies are recognizing that this work-from-home thing, while it has been a good stopgap to get us through the pandemic, and in general people have coped pretty well, that there is something missing and lost from the effectiveness and the productivity in the corporate world. And so I think most of the clients we're talking to are talking about getting people back, hopefully half time or more. And some of that will depend on local regulations around capacity and the like, but many markets now and cities are raising those capacity limits. I just saw New York was raising theirs and other cities are as well. So I think more people will be working in the office than maybe we would have imagined even a few months ago. And a lot of companies are talking now about bringing people back in the summer or Labor Day and not kicking the can down to 2022. So I think we're going to see a resurgence of that. Our technology can accommodate any variable. So if people want monthly parking, obviously we can provide that. If they want a daily parking, we can accommodate that. But many of our clients are saying, can we offer a multi-day pass at a discount from the daily rate but not as discounted as the monthly rate? And the answer to that is yes. So with our sphere suite of technologies, we can really accommodate whatever the demand situation might be or whatever sort of pricing regime the client might want. The one thing I should remind you of, though, is that for the most part, our management contracts are skewed toward our commercial space. And so we are less susceptible to fluctuations in volume. And so while it will be great to see people coming back and parking in office buildings, we didn't get a lot of downside in our business when they cut back on doing that and started working from home. We're not going to get a big upside when they return.

Always a good reminder that it's overwhelmingly managed contracts. Thanks for throwing that in there, Mark. Appreciate that. Just staying along this thread a little bit, so your office building customers, they're not asking to restructure contracts at this point in the face of more employees working from home. You're not having overwhelming conversations along those lines.

No, because I think our clients, for the most part, realize that the fees they pay us are a very, very small percentage of the revenue that we handle on their behalf and the scope and scale of the operation. So they're really saying to us, what can we do to bring technology solutions? How can we, if demand is lower in general, how can we bring more parkers to our facility? And so we have our data analytics team that's using technology tools that we've created to, number one, scrape the web and find out and know on a regular basis what the competitive pricing is so that we can optimize the rates that we're recommending to our clients. And we're also given additional tools to our local teams to be able to do marketing and promotional programs to try to draw customers. And we have expertise in yield management and pricing. And so a lot of our clients are saying, Give us the marketing package, the digital strategy, and the analytics package, all of which is part of our sphere umbrella, to optimize both the rates charged but also the actual revenue generated at the facilities, if that's the client's goal. So if anything, in a world like this where there may be more competition for cars, there's a greater need for our services than there might have been in the pre-pandemic world.

Yeah, okay. Well, you anticipated my last question along this line of thinking, which is, okay, so you're protected from the downside. What about the upside scenario? Are you hearing from your clients that they may be wanting, they may be having more employees that want to drive in, that there might be more competition for the limited number of parking spots at the William Blair building, for example, than there were pre-pandemic because folks don't want to ride the metro or things like that? Are you hearing things like that from your office clients?

In some cases, that's what's happening. And I think as we said in our prepared remarks, you know, in certain day parks, which is the morning commute, in some markets, in some locations, we're seeing volumes that are above, you know, they're at 2019 levels or above. And I drove into Chicago today for this call, and I was just shocked at the amount of rush hour traffic that I was stuck in at 8 o'clock this morning. So You know, I think a lot of people are driving. They are still avoiding public transit. We expect it to continue. But, you know, regardless of what each client's local needs are, you know, we have tailored solutions that are customized for them to help them meet their objectives. And that's, I think, something that everybody can use and needs. And that's why I feel very good about the interest in our services. And, of course, as we indicated in our prepared remarks, you know, the number of transactions flowing through our parking.com reservation system are up 77% just from January. We're seeing more people requesting and buying monthly parking through our digital systems. And so I think there is definitely a growth in volume going on right now, and we expect it to continue throughout the year.

Okay. All right. Appreciate all the color. Thanks for taking my questions. Thanks, Tim. Thanks, Tim.

Thank you. Once again, if you would like to ask a question, you may press star, then the number one on your touchtone telephone. Your next question is from the line of Kevin Steinke of Barrington Research. Your line is open.

Good afternoon. I wanted to follow up. You mentioned again there the 77% increase in parking.com numbers. revenues from January to March. And, you know, I assume that's just kind of following the, um, the rebound in business activity you're seeing here and, and increased uses of personal vehicles perhaps. But what, is there anything specific, uh, you're doing internally to, to drive greater awareness of, uh, parking.com or, you know, I guess any of your other, uh, digital solutions, you know, i.e. gate lists, etc., among consumers?

We are, and although, you know, because a lot of the initial selling of these technology capabilities are really in a business-to-business environment, our main focus is trying to make sure that our current clients and prospective clients are aware of our capabilities under the Sphere umbrella. So during the past six to eight months we have created in addition to the new technology, but a whole array of videos and other marketing and communication materials that we put out onto LinkedIn and other social media platforms to try to gain visibility for our capabilities in these areas. And obviously, everybody who accesses those platforms, not just potential clients or existing clients, they're also people like you and me who are just you know, going about our daily lives and we see these things out there. So that's been our main means. We've obviously put a number of press releases out about this stuff. And hopefully, you know, and a key focus for us is really signage at the facilities. And so we really made a push to make sure that people are aware of parking.com and downloading that app and the capabilities that they can take advantage of. Because obviously everybody wants a low friction, you know, very efficient, no-touch kind of experiences, and we can provide those to the traveling public.

Okay, great. And also, obviously, with the rebound in travel, you're seeing increased business activity, but specifically to bags, is there any evidence early on that the remote check-in service is gaining in popularity kind of above and beyond what you're just seeing in terms of the rebound in passenger travel?

Well, we need to go back a little bit. Pre-pandemic, we spent 2019 introducing SPs over 70 airport clients to bags capabilities, particularly around remote check-in. And I would say virtually all of those clients were very, very interested in how that technology could be used to create a better travel experience and reduce congestion and friction. Now, as we were about, we launched a couple of actual expanded operations using that technology, which we talked about before, and then the pandemic came along and all of those things went on pause. What's happening now is that a number of those conversations are re-energizing, and a number of places that had scaled back the bagged services, either at airports or airlines because of the pandemic, are now getting ready to or have already started to turn those things back on. So I think you're going to see both the ramping back up of what was ramped down, but also you know, our ability to go capture some of those business synergies between SP plus and bags, you know, in the months ahead.

Okay. Got it. And then, um, you continue to talk about, um, you know, how your market position is strengthened as, as some other competitors kind of struggle this in this environment. And, um, You know, longer term, I think right now you're kind of in debt pay down mode, but longer term, do you think that maybe creates some acquisition opportunities for you in the parking space of maybe, you know, a competitor who's been weakened, or would you rather just kind of continue to take share organically, I guess?

Well, we never like to say never to anything that might make sense for us if we can acquire something and create value. But right now we're laser focused on our strategy for growth and also the rollout of our technology strategy. And that's got our main focus. And I think given the successes we've had over these past few months and some of the feedback we're getting when we win new deals about the value proposition around our technology and the other things that we do, I think that's going to be our major focus. But if something came available and it what would be worth looking at. I mean, that's been our practice for many, many years. But I'd say right now our key focus over the next 12 months is really driving organic growth and having that be led by the digital investments that we've been making. And while we've talked about a lot of the new capabilities, we're not standing still. So it's not as though we create a bunch of digital capabilities and now we're implementing them. Obviously, we are doing that. But at the same time, our development teams are working on new digital and additional digital capabilities that either respond to new opportunities we see in the marketplace or things that were already on the to-do list because we think that they can accelerate our growth. So we have now really a two-pronged focus. One is to roll out the stuff that we have developed and that we are making excellent progress on, and at the same time, continue to roll out new capabilities. And so you'll hear me talk later in the year about additional technology capabilities that we'll be rolling out to the market then.

Okay, great. And then just last for me, are you able to provide any additional color just on the cost concessions you called out there? And also, did that benefit the management contract, gross profit, or the lease uh, gross profit, or was that kind of split between the two?

That'll be, that'll be all lease type contracts. And that really is just something that we called out in this quarter, just because as you kind of go back in time, some of these negotiations that we work through with our clients, some of them are a little bit quicker and they happen a little bit faster. And so we're able to kind of get that recognized. Some of those take a little longer. conversations are a little bit longer in terms of getting to a resolution. And so we called out this one just because it's primarily to 2020. And so we just wanted to make sure we called it out that it was just a little bit unusual for this quarter and it was out of period.

Okay, got it. Thanks a lot. Thank you, Kevin.

Thank you. Your next question is from the line of Mark Riddick. Hi, good afternoon.

Good afternoon. So I wanted to touch back on the technology side of things and wanted to sort of delve into a little bit about maybe the demand you've seen so far, particularly the commentary around the facilities that you've worked with and the opportunities that you've seen since the rollout. I was wondering if you could talk a little bit about maybe what that customer makeup looks like. I mean, you did make mention of aviation and commercial operations, but is it – if you were to look at the folks who have initially embraced the technology offerings, is it similar to the customer makeup that you've seen up to this point, or are some certain segments or areas a little more active and aggressive than others?

Sure. I think that, you know, it depends a little bit about what part of the sphere umbrella – and portfolio of capabilities we're talking about. But if you talk about the SPHERE gaitless on demand, that's really for surface parking lots and other facilities that generally would have just had a pay station. And if those exist in the aviation segment, and we probably have some airports, I'm sure we do, that have those, then that solution can be implemented in the aviation segment. but it would be predominantly in the commercial segment where you would see a freestanding parking facility. The gated solution, which we are in the early stages of rolling out, could really apply to any parking facility across any of the verticals. And the idea is really to try to create the same no-touch, low-friction transaction experience for the parker that doesn't involve them getting out of their car or waiting in line at a pay station, in an environment where there are going to be gates and parking equipment with gates. It's not really going to be skewed toward any one vertical or any one segment. Obviously, those technologies wouldn't be used at special events or valet locations, but then we've talked in our press release about our mobile solution for event parking where we can capture credentials and and people's payments for sporting events and other big events. And while those events have been on hiatus or at very low levels during the pandemic, we have not been on hiatus. We've been working on our development capabilities, and we've now been able to test our new tools out in those environments. And you'll see us rolling them out there. So I think, Mark, the answer is, regardless of the verticals, there's going to be some element of our digital strategy, our technology tools, under the SPHERE brand that we are actually able to roll out and utilize. And so that's our – you know, we want to grow in all of our verticals, and they all need to be supported by, you know, technology capabilities, but those capabilities will have to be tailored in some cases to the needs of those verticals.

Okay, great. And then switching gears, I was wondering if you could talk a little bit about kind of where we are as far as national – accounts and activity and maybe sort of what that mix may look like now and maybe the take rate and activity levels that you're seeing from national accounts versus the rest of the business?

Very major focus as we've been talking over the last year. And I would say, you know, COVID has definitely impacted, I think, the pace at which certain clients are making decisions. you know, we have clearly a major focus on healthcare. And I think we have just seen that for the most part, many of our hospital clients and prospective clients have been grappling with the surge in patients and the other things that go on during COVID. And so the pace at which they have been making any kind of decisions has been very, very slow. So it's not like we're seeing competitors winning hospital and healthcare deals, and we're not. But we have the status as the preferred parking operator from three group purchasing organizations. We are working on bids and proposals for them, but it's been a little slower process than we would have liked. But I think the value proposition that we can bring to healthcare is very strong. And so I expect that as they climb out from some of their other backlogs around COVID, that they'll get back to it. I think in the commercial office building spaces, I was commenting earlier on one of the earlier questions, you know, there's a keen interest by property managers and owners for how do you both manage in a post-COVID environment, but also how do you capture parkers who, you know, may be, you know, there may be fewer of them potentially in certain markets or around certain buildings. And so how do you capture a higher share of those? And of course, our general technology capabilities are going to help with that. But I think what we're really seeing now is an interest in greater visibility into what's going on at the facilities. And so within our Sphere IQ suite of dashboards, we can provide drill-down capabilities to see what is going on at the facility, see all the key metrics, whether it's revenue or costs of operating. And I think there's been a renewed interest in that. And in fact, we're looking now at adding some resources to our national accounts team and capabilities because the amount of inquiries and the amount of interest that we've generated around, particularly around SPHERE, but also the data analytics in the SPHERE and the IQ capacity is really causing, I think, an uptick in interest for us from a national account point of view. So hopefully, as the year progresses, we'll be in a position to you know, bring some of these things home and be able to talk about them on future calls.

The data part of this is really, really intriguing, and I'm looking forward to that over time. The last thing for me is just to touch a little bit around the management contracts, and thanks for providing up to 86% of the commercial segment locations. Is there a general thought process as to what the ceiling of that may be? I mean, is it something that you think is attainable? Whatever that ceiling may end up being, is that something you think would be attainable by the end of the year?

Thank you. Oh, well, you mean the retention rate for, if you're talking about the retention rate for commercial management contracts, is that what you're asking about?

No, no, no. The management contracts as far as the percentage of the commercial segment locations that you have in the... Oh, the percentage, sorry.

Yeah, got it, got it.

But if you want to mention something about retention rate, that would be great, too.

Sure, so I can do that, too. I was just thinking about I was thinking about that when you were quoting percentages. I wonder what he was talking about exactly. I think naturally you will see that percentage grow, and that's because even without the pandemic it was growing, primarily because the owners of real estate more and more are preferring that contract form. They want to have control over their properties, and they are moving away. There's an industry trend away from leases. So that was already growing. I think, obviously, the steps we took during COVID to evaluate all of our existing leases, look at whether we were entitled to, you know, rent abatements or other concessions, or whether some of the leases might terminate, you know, we tried to do all we could to take advantage of those things during the pandemic. And so clearly, our percentage of or our absolute number of leases has come down from over 600 a year ago to a little over 400 now. So I think that will continue to be the natural outgrowth of things. You know, Chris and I are very disciplined around, you know, what commitments we're willing to make on leases, just given the general difficulties of predicting, you know, will there be future pandemics, what will happen to, you know, wage rates and the like. And so I think you'll see the size of our lease portfolio not really growing. It may even contract further in the years ahead, and managements will be the main focus. As to where it will be at year end, who knows? But I'm sure someday it could well be over 90%. I mean, we've had times in our past before we acquired various companies where we were over 90% because of those same trends. Right. Great. Thank you very much.

Thanks, Mark. Thanks, Mark.

Thank you. I am showing no further questions at this time. I would like to turn the conference back to Mr. Mark Bauman for closing remarks.

Okay. Thank you very much. And I just wanted to say thanks to all of you for joining us today and spending time with us talking about our performance in the first quarter. And we look forward to talking again in a couple of months. Take care.

Thank you, speakers. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.