Redishred Capital Corp (Pre-Merger)
XTSX:KUT
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Redishred Capital Corp (Pre-Merger)
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Welcome to the RediShred Capital Corp. First Quarter Investor Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jeffrey Hasham, CEO. Please go ahead.
Thank you very much. Good morning, everyone. Welcome to our investor and analyst call to report on the first quarter results of 2020. Obviously, unique times, and Q1 reflects that. So first of all, I appreciate everyone being here with us. Hope everyone is doing well and staying safe. First quarter was a interesting quarter. It was a good quarter overall despite some of the major headwinds from the COVID-19 pandemic. We generated 27% more revenue in the first quarter of 2020 versus 2019. And I'd like to make the comment that one of the things we've been focusing on and working on as a business is to be a durable and sustainable business, i.e. drive more recurring scheduled revenue, drive that revenue to a diverse set of customers, particularly small-, medium-sized enterprise. I think one of the things that we didn't recognize and was of good fortune was many of our clients were essential services, government, health care, pharmaceutical, grocery and the like. And those customers continue to be open throughout the first quarter -- end of the first quarter and into the second quarter where we are now. And that is also evident in the results that we have presented for Q1. When I look at $6.5 million -- or $6.6 million in revenue, 91% of that revenue was from corporate locations. And as everyone knows, we've been growing our corporate location footprint at a good clip over the last 2 years. And in the last 15 months, we've bought our 3 -- well, 2 of our largest and the third one, Connecticut, was a top 5 locations. So we've been driving our corporate location revenue. We've also been driving our corporate location EBITDA, and I'll let Kasia speak to the corporate stores in a moment and what we've done there to improve our operational EBITDA in the light of our revenue from paper coming down. So overall, if I look at what's driven our revenue, same location shredding sales were up 4% in the first quarter of '19 over 2020, and Kasia will get into a little bit more detail. But I think the key here is in the last 2 weeks, COVID impacted our revenue by an estimated and conservative estimate in our view of $350,000. And that had a material impact on the growth rate. We grew, we would have grown more. Acquired corporate location shredding sales were up $1.44 million. Again, would have been more, had it not been for COVID. Paper prices were down 62% and that impacts our same corporate location revenue by about $0.5 million. And -- so that's a big number. And again, we've got some incremental analysis that Kasia will do a high-level overview of today. And of course, we have our investor presentation at redishred.com, and you'll be able to see a little bit more detail there. But overall, the quarter was a good quarter operationally. The headwinds of paper and COVID-19 continue to -- or paper continued to impact our business. However, we've been mitigating very well, and we were starting to get over that. And then, of course, COVID-19 hit, and we're now starting to see some signs of life as well. So overall, on a consolidated basis, the company performed. And we were -- we are continuing to build a foundation to grow the business even more. So we're very bullish on where this business is going to go, and we're very pleased with how the business has performed throughout the COVID-19 challenges. So again, overall, when I look at the consolidated level, the company performed well for 2.5 months, and the last couple of weeks were a bit challenging, but we'll get through that. So I'm going to pass the baton over to Kasia because I think the key here right now is: a, let's talk about our corporate stores. We'll talk a little bit about the balance sheet as well. And then at the end, I'll give a little bit of COVID-19 update as well and then we can open it up to the Q&A.
Great. Thanks, Jeff. Good morning, everybody. So I'll speak to the corporate location results in U.S. dollars, just to eliminate the foreign exchange impact. So in terms of our same location shredding revenue, we grew 4%, as Jeff had mentioned, which was $111,000 in Q1 2020 over Q1 2019 and that was despite the impact of COVID-19 on the last -- the second half of March. So obviously, the stay-at-home orders were implemented during that time and our nonessential clients closed their offices. So although Proshred was deemed as essential, approximately 40% of our clients were not categorized as essential. And as a result, our same location revenue in the second half of March was 68% of the revenues in the first half of March. So when prorating the first half of March results, we estimate the impact of COVID-19 on our same location EBITDA to be approximately USD 160,000. However, the direct cost of servicing our clients were also down during Q1 2020, which led to improved gross profit margin. So operationally, the same locations improved year-over-year, and up to March 15, we are on pace to have one of our best quarters operationally and from a margin perspective. Unfortunately, the fall in paper prices continued, which led to $392,000 decline in recycling revenue, and that accounted for 94% of the EBITDA decline year-over-year. In Q1 2019, we were at very high paper prices at $176 per ton. And in Q1 2020, we were at $67 per ton. Now in April and May, we've seen significant increases in paper prices, and we're currently sitting at an average of around $150 per ton. During the quarter, we also had increased sales wages of about $54,000 year-over-year, and that was to grow our shredding sales, which we are on track to achieve double-digit growth in shredding sales prior to the COVID-19 impact. And when neutralizing paper prices to the 10-year average paper price of $135, our same location EBITDA margin was 34%. And our results for acquisitions, those under the non-same corporate locations included the Chicago results as well as the 1 month of Kansas and Connecticut results. So Kansas was acquired on February 1, 2019. So we didn't own that location for the full quarter last year. And then we had Connecticut, which was acquired on March 1, 2020. So the EBITDA from our acquisitions was $470,000 with a 33% EBITDA margin. And of course, the low paper prices led to lower margins for the acquisitions as well. So comparing the recycling revenue at Q1 2020 paper prices of $67 to the Q1 2019 paper prices, the decline on acquired EBITDA was another $238,000 in the quarter. And the EBITDA margin for acquisitions using the 10-year average paper price was 39%. So in total, despite the lower paper prices and the COVID-19 impact, our total EBITDA grew 4% year-over-year, and our operating income less recycling revenue grew 39%. And I'll just speak a little bit about our capital management, and then I'll turn it back over to Jeff. So on March 31, our working capital balance was CAD 938,000 with the debt-to-total-asset ratio of 45%, and we finished the quarter with CAD 7 million in cash. During the quarter, we used CAD 5.8 million in cash at closing for the Connecticut acquisition, and we advanced CAD 2.7 million on our senior credit facility for that acquisition. The advance on the facility was for a term loan with a 84-month amortization period and a fixed interest rate of 2.99%, very favorable terms there. And in response to COVID-19, we have been able to defer our term loan principal payments for 6 months, and we've also deferred 87% of our truck loans and leases for 3 months. And lastly, we've also frozen all capital expenditures during this time, and we still have access to CAD 4 million of additional capital through our credit facility. I'll turn it back over to Jeff to -- for concluding comments, then conclusion. Jeff, are you still with us?
Sorry, I had myself on mute. That's typical. I'm having phone problems today. I'm so used to Zoom now, so I'm sure many are. Look, COVID been the story, and I do want to give an update on COVID. April, in particular, April, same locations, we're down about 40% versus prior year. We've been conservatively projecting a worse April. So April came in better than we had anticipated, which is good. Really, the heavy impacts have been in New York City and Northern New Jersey. I mean that's been the epicenter. And as everyone knows, we have very strong corporate store presence there. Having said that, there has been easing of restrictions in Kansas, Upstate New York, Connecticut, North Carolina and Florida. And we are seeing now upticks and return of some clients to business. Not all clients yet, but there is a graduated process because, again, the shelters tend to be lifted in phases, some states have 3 phases, some states have 5 or 6 phases. So overall, we've actually got a chart on our dashboard, and we look -- we were looking for flattening of the curve as well. How much revenue have we lost due to COVID? And that's now flattened out. And now what we should start to see is declines as those customers that have been tagged with the COVID-19 tag in our database to know that they were closed due to the COVID-19. Now we're hoping to start to see those reopen. And in those states, we have, which is good. We also have turned on a little bit of our marketing spend that we had cut back a little bit at the beginning of the pandemic, and we've been slowly turning that back on. And obviously, in the states that are open or that we knew were going to open, we started to turn it on a little bit in advance, and we started to see some good upticks in those of clients needing to get their purges done and of course, those turning back their scheduled service. And we're actually seeing some scheduled service come back to us as well, new scheduled service, new clients. So that's been good. As Kasia mentioned, on the cost side, we've done anything and everything possible to defer and reduce our costs. And simultaneously, we've received the Wage Subsidy and Paycheck Protection Program, Wage Subsidy Program in Canada and the Paycheck Protection Program in the U.S. what we have used those funds for, in particular, the Paycheck Protection Program in the U.S. is for those on the front line. Our drivers are going into situations that may -- some may be risky. We would deem some of those situations risky and we're making sure that they're protected. We're making sure that they're taken care of. We're making sure that there's not an incentive to go on unemployment and the reality in the U.S. is that the unemployment payouts are pretty generous at the moment. And so far, so good. Our team on the front line has done an unbelievable job of taking care of our customers during this time. And so we'll be working -- we have bonus programs and programs in place for them as we gradually come out of this as well. So I think that's very important. And those people will be with us a long time. They've been with us a long time. And as we come out of this situation, where is the pup going? And I think the pup is going to a place that we actually have an advantage in targeting. Number one, our small-, medium-sized enterprise clients have been a solid benefit for us at this time, especially those with essential services. Those without essential services. We're going to start deploying programs in place so that they can get the paper out of their homes and into the main facilities. And the security risk is real, even when people are printing at home. It's real when they're using their computers at home. And so we're working with our clients there. We also have some direct to residential programs that we're working on as well. So these are now starting to be executed on, and we'll continue to execute on to them probably for the long term. And so we're able to be agile here, and the sales and marketing team have done a tremendous job working on those programs. Acquisitions, I think will be an opportunity for us as we come out of this. There will be some distressed situations, unfortunately, and we will be there to work with them. And we have been seeing in very close communication with all our acquisition candidates as well as some new ones that have come out as a result. And, of course, complementary services such as e-waste and scanning are part of our offering. And those were not heavily impacted by this, so those are great diversification strategies as well. So overall [Technical Difficulty]
Please stand by while I reconnect Mr. Hasham.
Sorry, everyone. I got -- for some reason, I'm having a technology challenge today, so my apologies. But closing remarks is we're going to come out of this better, stronger than ever before. And we appreciate everyone's support. We appreciate the many conversations we've had. We're going to continue to update the market on a more regular basis as we have been doing to make sure that you know what we know. And the good news is we're starting to climb back and that makes us all happy. We're bullish about that. And it will be a gradual climb back. We're not climbing the Mount Everest. We're finding a slow hill, but we're going to get there. And we're seeing very good movement at the moment. So we appreciate everyone's support again. So I'm going to turn to -- open it up for Q&A.
[Operator Instructions] Our first question comes from David Ocampo of Cormark Securities.
My first question is kind of centered on the acquisition environment and you've provided some pretty good slides in your presentation deck. But first, on the franchisee side, I just want to get a sense on how many contracts are up for renewal this year? And probably, more importantly, does the COVID situation sort of expedite those franchisees looking at kind of exit and selloff to you guys?
Yes. There is 2 -- no, 1 renewal this year. We bought Connecticut just before its renewal. So we do have 1 renewal this year. We have a number now coming up next year and the year out, like the next couple of years are actually very busy from a renewal perspective. So the conversations are actually starting now, right? Because you typically don't have it in the year of the novel, you tend to get out in front of it 9, 12 months. So a number of them we're having conversations with, as we speak, there has been like a lot of folks, people react differently to these moments, and there's been some that they're not even at renewal, and they're going in, do I really want to have to go through something like this. And so the franchise candidates, acquisition candidates that we had in our pipeline, they're still in our pipeline. They're on hold for obvious reasons. And we're going to assess are sort of high-level pipeline over the next 30 days. The reality is, is that I think there's going to be a bit of churn on clients. There's going to be some clients to shut down. That's just the way it is. However, we're also growing our clients out. So we need to sort of find out where those businesses are. Does the valuation model hold true? It may not. There's probably a good probability that it doesn't. Now there are some of our franchise locations that just have a lot of recurring revenue and a lot of essential services. Maybe it holds more true for them than others. So we're going to have to relook at that. We're also going to have to relook at how we've structured these deals as well. So we're, like anything, we're using this moment to say, "Hey, does it hold true?" If yes, then we'll proceed more or less as we were. If it doesn't hold true, which is probably likely, we're going to have to relook at them and do they want to sell under a revised model, I don't know. Some will, some won't. But I think, overall, there's still going to be folks that want to exit given age, given the situation, all of that. So on the franchise side, we've got a lot of activity brewing over the next 18 months, given the renewals that are coming up, especially next year.
No, that's great. And kind of shifting over to the other part of the acquisition strategy, the independents. You noted that some of the smaller guys may be facing financial difficulty here in this environment. Does that kind of skew the acquisition multiples to more asset base take-up prices versus, say, an EBITDA multiple of 3 to 4x?
Yes. I mean, we -- even during the good times, you would look at companies, and there were some companies, some situations where we did an asset-based approach. Typically, an asset-based approach and a little bit of cash upfront and pretty heavy earn-out. And I think that's -- there's going to be more of that going out. I mean, the reality is, is that there's companies out there that are distressed. They can't afford perhaps to bring on another truck or they can't afford to repair a truck or they can't afford something, right? They just did run out of cash. And then we'll be able to step in and maybe a little bit of cash upfront and a lot of earn-out. And what -- in those situations, David, we're looking for those tuck-in opportunities, right? That -- I'm not looking to buy a 1 truck independent in Tulsa, Oklahoma that doesn't do anything for me. We'll buy a 5 truck independent in Tulsa, Oklahoma, that's for sure, but not a small one. But those 1, 2 and 3 truck operators that are in our markets, they're going to be hurting. Right now, the Paycheck Protection Program is helping them out. But that money is going. That money is going in 4 weeks. So there's going to be an opportunity after that to reassess some of this. And I've been having some good conversations with a number of them. We're staying close to them. And as soon as it's logical, there's going to be some opportunity for us.
Okay. And kind of tying that all in together when I think about your balance sheet, you have around CAD 7 million of cash today. Have you given any thought process on kind of what you think about your balance sheet going forward? Is this going to be funded with your revolving line? Or are we going to have to kind of tap the equity markets here? I know it's a little tough with where your share price is today.
Yes. Look, I mean, no one wants to go to the equity markets at this point in time. Look, I think for me, I just want to go back old school, the way we did it before, right? You put your head down and you and work on the business. And you do a couple of tuck-ins using your existing cash because they don't -- an existing structure because they're not going to deplete your balance sheet. So go back to doing that, and that does move the needle. With our existing balance sheet, we might be able to get a franchisee across the line once we deem that to be logical and smart, we'll do that. And the share price will take care of itself in that position, and then we'll take stock and that sort of no pun intended, but we'll look at it at that point in time. And if we need to do something with a little bit of equity and a little bit of some other instrument, we'll look at that to continue to be -- we don't want to miss an opportunity. So we're not going to miss an opportunity. So we're going to look -- use what we have, and we need to go to the markets to raise more money, we will, but we'll be mindful in the way we do it. And yes, where the share price is we'll dictate that. For the time being, the best way for us to drive share price, to work on the business, go get more revenue, be better operators, do some tuck-in acquisitions, maybe do one franchise acquisition, if that makes sense. That's the way we'll get the stock price up.
Yes. And last one here for me. Paper pricing has kind of shot up with the pandemic here. Kind of what are the reasons for that? And do you expect it to check back as the shelter-in-place orders are eliminated?
Yes. Look, supply -- the basic supply demand, less supply coming -- our industry is the primary supplier of sorted office packs. So we're -- most of the sort of office pack, which is a valuable paper product, the fibers are long and all and going to all the technical components, but it's an important input. And then, of course, with the demand out there for paper products, it just shot up. Now the reality is, is this artificial? Probably. Will it come down? Probably. Will it come down to $67 a ton? I don't think so. I don't know for sure. As everyone knows, I've been wrong on this before, but I don't think it will, but I think it will come down to some more normal level. When you sort of look at the investor presentation that I put out, there's like a good 3- or 4-year period there where it was sort of between $100 and $150 a ton. That's a normal reasonable level for paper.
Our next question comes from Devin Schilling of PI Financial.
Just had a bit of a question here on the opportunity you guys are looking into in both residential and home office jobs. Are you guys finding route density to be a bit of an issue with this opportunity? Or is there any way you guys can centralize the pickup process here?
Yes. Hey, great question. So from a residential perspective, I guess, the good thing about our business is we can geo-target sales and marketing. We've got a pretty -- our VP of Digital Marketing is pretty -- or marketing, in general, he sort of -- he knows this stuff pretty well and can really be laser or surgical, if you will in where we market. So the ability to service residential is easy. In fact, we hold our pricing better there. And so from a route density perspective, we can do it. Now how do you convert a customer, a residential customer into a recurring customer? How do you make it even easier? That's what we're working on right now. That's something that our team is working on as a high priority on. And I think that is where the puck is going. As I mentioned, there's 2 programs we're working on, channel programs through our current business clients. And then direct to residential. And route density is an important piece of that because what has happened here is routes of now sort of crumbled in a way early on, and we've been rebuilding routes. And in fact, the team has done a great job. We now have the tools to manage our routes way better. And we're actually looking at the opportunity to how do you do your routes better? How do we get to 4-day work weeks with a spare day for big purges and repair and maintenance and all that? Those are the kinds of things that we're working on. And then the sales and marketing team are going, okay, now we know what we've got. Now let's be surgical and where we want to fit clients in. So I think there's still improvement that we can make in that regard. And again, a little bit of a reset button sometimes isn't the worst thing in the world. Frankly, obviously, we were moving along -- we were moving that way anyhow. We're just this like so many things, this moment is causing some acceleration of things.
Yes. No, that makes sense. And just looking at your margins here. We've obviously seen that pretty nice pickup in Q1 here over Q4, despite paper prices still being below the average during that time period. Can you maybe talk a little bit about some of the things you guys are doing operationally behind the scenes to drive these margins higher?
Yes. We -- obviously, we knew paper was coming down. In Q2 of '19, we started to go location-by-location, starting with our, let's call them, red locations, locations that weren't doing well. And we just started to look at routes, and we started -- now the nice -- again, the nice thing about this is, okay, how do we redo a route so we can get a certain margin? We call this number managed margin. Managed margin is simply service revenue minus the cost of drivers. And that's the first indicator of how well your routes are, right? Because everything sort of drives off of that. Fuel consumption drives off of that, repair maintenance even does because if you can get those routes tight, then you create opportunity for more preventive maintenance programs. And so we started there. We brought on a pretty experienced general manager to work with us on the routing side internal. And we started to create the programs around that using our existing vendors. And then we brought in a new route telemetrics vendor that also had communication capabilities, all of that together, so it wasn't just one thing. As you can imagine, there was a number of things that we layered on and then we saw our margins starting to improve throughout the year a little that the operating margins improved. But Q1 really is when it hit, and we're happy that it hit, and there's more to do. There's still some locations we're working through some things. But overall, the team has done a great job at improving the operational end of things.
Our next question comes from Scott Smith of Shred Research. Our next question comes from [Marcus Latimore ], a private investor.
Just a question for you and maybe just a reminder for me. When you think about your scheduled revenue, can you just remind me whether that's primarily fixed like a per visit sort of a fee versus volume-based?
Yes. It's typically, typically, it's a fixed fee. So typically, we'll go into a customer, and there will be that 3 or 4 containers, it will be $100 a visit kind of thing. So that's typical. In some cases and some contracts, it will be based on the number of container service. So sometimes you do get a little bit of variability there. And that -- the contract says, "Hey, we've got 10 containers", but -- and we have handheld, so we can report all this. And if you only scan through late and 2 were empty, then we pay for 8. That's more the exception than the rule. Most of our customers, small-, medium-sized enterprise, we put it in 1, 2, 3, 4 containers. We come in there, we service them all. Typically, we'll get a box or 2 extra in most -- a lot of the times. That's actually more the rule as well as we'll get a box or 2, and we'll charge extra for the box or 2. And that will get grouped in with scheduled because it's part of the recurring service offering, typically an unscheduled client. If there's a scheduled client then they have a big purge to do a separate visit, that will get booked into unscheduled revenue.
Got it. And then as I think about the kind of revenue trajectory from here, now taking guidance into consideration, a good context on your customers that were essential services and so we're in operation during the COVID crisis. But now as you think about the shelter-at-home restrictions being lifted and your customers that warrant essential services coming back online, I'm just curious to get your view on how you think maybe customer behavior might adapt coming out of that, especially given that we've heard so much about people maybe keeping in place some sort of optional work-from-home policies? Like, do you expect customers in that scenario to maybe if they're producing volume to move to more of an unscheduled approach, just curious to get your view on that?
Yes. No, so a great question, and the puck is going there. And so our response to that is, number one, we -- everyone and everyone on this call should realize if you're working from home, you have 2 security risks, physical and cyber. And you sort of think about it, at your home, you don't have a firewall. There's real deal of cyber risk, and there's also real deal of physical risks. And my wife is a good example. She works at home, she's printing paper and where does that paper go, right? And so it's our job as a solution provider to go to our companies and say, look, make sure that everyone has a Proshred bag, a Proshred box, something at home, where they can bring it back to the office on a time -- in a timely manner and discard of these things safely. They're going to be secured, they're going to be shred, they're going to be recycled. So that's the solution that we're looking to put in place with a number of these customers. Now not every customer can work from home. With manufacturing clients, they're not working from home. They're just -- it's impossible, right? They're producing stuff. But there's certainly going to be a shift that way. And we're thinking of how do we address that shift. And we're doing it now. We're not waiting for 6 months from now. We're doing it now to work with our customers to bring that paper back. Now look, if a customer goes from -- has less volume, we're still going to have a service there, right? We're just going to say, okay, instead of having 4 containers, let's go to 3. We'll charge you a little bit less, but we got you. And the thing about having them is that opens the door to other services, purges, scanning, e-waste, hard drive destruction, whatever it may be. So we're not going to be shortsighted here. We're going to work with our customers to provide the solution that they need. That's how you win, I think. And so far, our customers right now, at the moment, we haven't seen any churn, but there is going to be some stay-at-home solutions that we need to put in place.
Got it. And then I might have missed it, but one last question. Did you guys see a benefit from lower fuel prices in Q1?
Yes, a little bit, not much. It really -- I mean, a little bit. I mean, in the last couple of weeks, it certainly helped. And then, of course, in April, it has helped. In May, it's coming back a little bit, but still, it's much lower than the historical numbers. So yes, we're seeing a benefit of fuel. Really the tailwinds we have at the moment, really our, a, shelter-at-home restrictions are being lifted now slowly, but surely. Fuel prices are lower than they were a year ago. Paper prices are coming or back to something more normal. And foreign exchange has been in our favor as well, right? So now I don't control most of that, but we're going to take it at the moment. We think anything we can get at the moment, right?
Our next question comes from Steve Hansen of Raymond James.
Just wanted to perhaps explore the organic opportunities a little bit further here as opposed to M&A in a more distressed environment. Are there opportunities to pick up business from the 1- to 2-truck operators that you described that might be distressed as opposed to acquiring? Is there an ability to pick up, I guess, organic market share just by default of others struggling?
Absolutely. Those are -- we're not going to acquire every distressed location. Even during good times, I remember communicating with distressed locations that we were on our target list. And then you find out they've closed or run in the bankruptcy court. And I'm like, why didn't you guys just call us, right? And then you win the customers anyhow, right? And once we know someone's under, right, what do we do? Well, I mean, like everybody, you bid on their key names and you do a bunch of marketing around how do you get those customers, right? And I mentioned the thought of being surgical. Well, that's what we do. And we've got a good team doing it. So that's fortunate for us that we have that ability to be pretty agile when those situations happen. So there's going to be some of that. So organic growth for us comes in a number of ways: number one, we have a sales and marketing engine that goes out and drives both onetime sales and recurring sales. And that engine is there and that engine is being fine-tuned even now. The other method is our competitors, particularly shred-it when they translate a customer from on-site to off-site or they add another surcharge, we tend to get some churn from there. The other part of it is distressed situations, which probably will be more going forward, and we'll look at those opportunities. So we're -- you're absolutely right that there will be opportunities and we're not going to win every acquisition and nor do we want to win every acquisition. Sometimes the best deal you do is the one you don't do, right? So...
Yes. No, certainly. And just perhaps a follow-up on the fleet. You didn't mention any changes to the fleet. But do you take an opportunity, like the current crisis, if that's the right word, and adjust the fleet, do you refresh it? Do you lay-up older vehicles? I'm just trying to get a sense for your broader fleet composition and utilization rate in the current environment?
Not wasting a good crisis here, no. So first thing we've done is we're not using the entire fleet. So we're able to now rotate trucks in for -- there are some trucks that are good, but needed some work, and we were really busy and we were adding trucks. We added a lot of trucks in the first quarter. In a way, that's a good thing because we're now being able to go back to some of older trucks and refurb them. They're in good shape, but they need a refurb. And getting these things in for their PMs is a good thing. There's been some trucks that we've retired. We've sold some trucks, like really old trucks back to some of our partner vendor partners. That's great. I mean, we don't need an old truck, make a little bit of money on it and get rid of it. So we have been looking at our fleet. Our fleet is relatively new. Our strategy with our fleet is sort of after 5 years. We want to turn the trucks in and get new trucks. Just at the 5-year mark, that's when you start to get into the real repair and maintenance cost issues and the downtime issues. So we're in transition moving to that model and adding 4 new trucks this year already assists in that model. So again, we want to come out of this with a good team. First and foremost, good people, good team; second, having good equipment, so we don't waste the opportunity that's in front of us.
And we've also been able to work with our insurance broker just to reduce our truck insurance costs for those trucks that haven't been going out. So we've temporarily sort of been able to get some cost benefit out of that as well.
Yes. A very good point.
That's helpful. And just the last one, if I may. It's just really a point of clarification. I think you described April, same-store sales down roughly 40% and you described a slow recovery. Can you just give us some context for how May is trending specifically as we get towards the end of the month here? I'm just trying to get a sense for the shape of that recovery as we sort of ponder past second quarter.
Yes. May is bipolar. First part of May was similar to April. But -- and that makes sense because most places still had shelter-at-home restrictions. Having said that, we knew that some were coming off. So the marketing and sales team started to crank up the marketing, crank up the sales. And then as these shelter-at-home restrictions lifted in certain areas, we started to see some upticks. We've seen, the last half of May has been a different story. Not in New York and New Jersey, unfortunately, New York and New Jersey, we're still shelter at home. Other than Upstate New York, where we are seeing some good uptick. So second half of May, so far, so good. Usually, the second half of any month is better, but it's better, better. So compare it to the last half of April, it has improved. So we are headed in the right direction. In the majority of our markets, not all.
[Operator Instructions] Our next question comes from Scott Smith of Shred Research.
Jeff, I think I had the Zoom problem that you had earlier when I was on mute. So hopefully, you can hear me now.
Scott, good to hear from you. Just for those on the call, Scott founded Proshred in 1986. So very good to hear from you, and glad you're on the call.
I'm also now a current shareholder officially. So...
Even better.
Jeff, my question goes around to, obviously, what drives revenue your scheduled services and trying to route density and things of that nature. I'm going to speak a little bit more about some of the incremental potential revenue, and we've had some discussions before with regards to shred events and how that might be able to start to plant the seeds for increased additional incremental revenue. And I did notice on the Proshred website that there has been some initiative and efforts to improve that area. And I'm wondering if you could speak specifically to the plan going forward for incorporating shred events, particularly in that, again, stay-at-home issues and residential shredding people working from home, I think this is going to be an incredible opportunity for companies like Proshred to extend that not only the security issues that you talked about, both physical and cybersecurity issues, but also to address the identity theft issues, which is, obviously, on top of people's minds. So long-winded, but can you speak to sort of shred events and incremental revenue and what the plan is going forward for that?
Yes. Look, shred events has always been a very important part of our business. We typically classify those in the unscheduled revenue bucket and the whole idea, so really 2 types of shred events. The first type of shred event is the one we do for charities, and we still make a little bit of money on those because we get paper revenue, so at least, it covers our costs. And the biggest one we do is with the American Institute for Cancer Research. It's our shred cancer event. That actually has been postponed until the fall due to the COVID-19 items. The other -- the majority of our shred events are paid. We get paid anywhere between $150 and $300 an hour. And typically, there are 3 hours. And so that -- so it is a great opportunity for banks, typically, banks and churches to contract us. We provide the shred service. They can charge whatever they want to charge or they can be free, whatever it is. And we make money and we provide a very good benefit. That's always been a strength area for us. It's something that Google is now recognizing as well in terms of events and trying to monetize that. So it's important. And as we come out of COVID-19, this is not going to -- this is probably going to be another area where, number one, there'll be more demand. And we are already seeing demand. People want these. Number two, we have to be careful. We -- in the Northeast, we've actually -- there was some demand actually in May, and we just said we can't do it. We have to do it the right way. So we have a rigorous policy and procedure on safety, social distancing. In markets where we're only in Phase 1 of the recovery, we need to get health department and police department permission, franchisees and corporate stores, they need to get permission. Once you move into Phase 2, 3 or 4, we right now would notify the police authorities, just to let them know we're having one and to, if they have an objection, then they can file that. So far, so good. In Texas, as an example, where they're open, they're doing shed events every weekend now. They're already doing it. In markets such as New York City and New Jersey, we can't even think of one right now. So in Kansas City in our corporate location, we've had one. And it went well. And we had all the procedures in place. So it is a very good source of revenue, but more importantly, it's a very good source of brand building and awareness and community goodwill. Those I can't measure on -- I'm an accountant, as you know, and I like to measure through the stuff, and we can't measure it, but it's important.
This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hasham for closing remarks.
Well, everyone, appreciate your time, appreciate everyone, joining the call, pleasure. Thank you for your support. So many of you are shareholders and -- have been tremendously supportive through this. Our partners, investment banking partners, and appreciate everything you're doing as well. Please, everyone, stay safe. We will -- please stay well, and we will continue to update you as things develop. So all the best, and we'll talk soon.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.