Redishred Capital Corp (Pre-Merger)
XTSX:KUT
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2.63
4.87
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Redishred Capital Corp (Pre-Merger)
You don't have any saved screeners yet
Welcome to the Redishred Capital Corp. Third Quarter 2020 Financial Results and Business Update Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]I would now like to turn the conference over to Jeffrey Hasham, Chief Executive Officer. Please go ahead.
Thank you very much, Ariel. Good morning, everyone. I appreciate you joining us this Friday morning especially those on the West Coast. It's very early so thank you again.We're here to discuss the third quarter 2020 results. And as everyone can see from the press release, I think we had a pretty good quarter given all that we have to face.And I think just -- I want to take this moment before we start just to thank everyone that has contributed to these results especially those on the front lines, our drivers and our helpers that -- they go out and work with our clients every single day. And they do it safely and they do it carefully. And they show a lot of care and character as they proceed in their daily duties. And without them, these results certainly could not have happened. So I want to thank everyone out in the field, everyone out in the front lines for their contributions to our successful third quarter.I do want to just start a little bit just to remind everyone of our strategy and really 3 points to the strategy. The first point, driving same-location revenue and EBITDA growth, focusing on our recurring revenue streams directed at small and medium-sized enterprise. So our target market being small and medium-sized enterprise, focusing on its recurring revenue stream and driving same-location revenue and EBITDA growth. And while revenue has been a challenge during the COVID-19 pandemic, we've done anything and everything we can to mitigate that. And we'll have some further conversation on what we've done to mitigate and particularly driving of our purge revenue stream while our scheduled customers come back online slowly but surely. And that's the good news is that they are coming back online.The second component to our strategy is to conduct accretive acquisitions, purchasing franchisees as they wish to retire or exit the business and independence in both existing markets where tuck-in opportunities show themselves and into new markets.And last, support our franchisees to help them grow a durable and sustainable revenue and EBITDA streams. And by doing that, of course, they contribute royalty revenue to our bottom line. And of course, they create a good business for them to sell when they wish to exit. So that's our 3-point strategy. And I think it's important that we remind ourselves of that from time to time.On the consolidated level, I'll talk on the consolidated level. Then I'm going to pass it to Kasia to get into some of the corporate store details.Overall, the company generated CAD 6.7 million in revenue in the third quarter and that's up 25% versus Q3 2019. And the driver of that, of course, has been the acquired revenue from Chicago, which we purchased on October 1, 2019, and then our Connecticut location which we purchased on March 1, 2020, just before the COVID-19 pandemic took foothold in the country.Our consolidated EBITDA for the third quarter of 2020 was CAD 1.9 million and that grew 65% versus the third quarter of 2019. That growth has come by way of looking at our routes. We've implemented new routing software last year -- late last year that has assisted in that better routing and better gross profit margins. And then in addition to that, of course, we looked at our cost structures through the year and made sure that we were mindful of our costs and we weren't spending any dollars that did not need to be spent, particularly, obviously in the second quarter and even to begin in the third quarter, when there was a lot of unknown with respect to the pandemic.I do want to make a statement that the EBITDA does not include the $1.7 million in subsidies that we received from the government particularly the U.S. government. And that would equate to about $0.022 per share in added EBITDA. So just as we're thinking about the business and as you're doing your analysis, be mindful that, that $1.9 million does not include wage subsidies of any sort. So hopefully, that gives you a good apples-to-apples comparison between this year and last year and you'll be able to really identify the impact of the pandemic on the business.So again, consolidated EBITDA margin for the quarter was a solid 28%. That's a 700 basis points improvement. And I think that's where you see the impact of not only the cost containment in the SG&A area but, of course, the stronger routing leading to better utilization of our team, our drivers and our helpers as well as better fuel consumption. So all of those things sort of play a role in attaining a pretty strong EBITDA margin.And paper in the third quarter, while slightly higher than last year, was not massively higher. And paper continues to be an up [indiscernible] at the moment. So we're pleased to see a good improvement in our EBITDA margin. And again, noting that the Connecticut and Chicago locations also provided good growth in our EBITDA, total EBITDA. I'll let Kasia speak to the corporate stores, same-store locations as well as total store locations. So that way, you get a breakdown of the impact for both. And of course, the MD&A that we have will highlight that.So that's the consolidated high level. I'm going to turn it over to Kasia to walk through the corporate location results as well as the balance sheet as we took some actions on the balance sheet to continue to improve that and be mindful of that.So Kasia, I'll let you take it for a little bit.
Great. Thanks so much, Jeff. Good morning, everyone. I hope everyone has been healthy during this time.I will start by speaking to the third quarter corporate location results. And then I'll briefly touch on today's corporate location results as well.So our same-location shredding revenue declined by 7% in Q3 2020 over Q3 2019. And this is in comparison with 21% decline in Q2 2020 over Q2 2019. So as the restrictions [indiscernible] the number of customers returning to office and recommencing services as well as some contract demand in many reopened offices. And many of them just want to sign in kind of similar to the initial clients which helped drive unscheduled sales during the quarter.Same-location recycling revenue declined by 5% in Q3 2020 over Q3 2019. And that was as a result of the lower tonnage, similar to the level of shredding revenues. Paper price was slightly mitigated against that -- against the lower level of tonnage as paper prices were 16% higher in Q3 2020 over Q3 2019. However, in terms of paper prices quarter-over-quarter, though, we saw a 20% decline in price of paper over Q2 2020 as we had a substantial but short-lived increase in paper last quarter. In total then, same-location total revenue declined by 10% in Q3 over last year's Q3. However, we continue to keep costs minimized wherever possible and we continue to curtail all discretionary expenditures. And that led to improved same-location EBITDA margin of 200 basis points to 33%.So despite the $461,000 decline in same-location revenue, we were able to recover almost entirely this amount with the cost control measures since then. And therefore, our EBITDA came in within $36,000 of the 2019 EBITDA level.Our corporate location, as Jeff mentioned, continues to optimize routes through the existing routing software. And our marketing team was very [ agile ] with our marketing expense to talk some more on [ shredding ] revenue. And our sales team were really on the ball. We just closed as many possible as we can. So overall, we are very pleased with the results given the daily challenges around COVID. Our results from acquisition, which [indiscernible] call non-same locations included Chicago and Connecticut results. And these results were not in comparative prior year. So the EBITDA from acquisitions was $706,000 in Q3 2020 and the EBITDA margin was strong at 37%. As a result of the acquisitions we conducted, our total location revenue grew 31% and EBITDA grew 47% this quarter over last third quarter with EBITDA margin improvement of 400 basis points to 35%. Now let's speak briefly to some of the first 9 months of the year results. During the first 9 months of 2020, same-location shredding revenue declined 13% and that's with COVID having a significant impact on the second quarter results. Recycling revenue declined by 38% for same location in the first 9 months of 2020 over the first 9 months of 2019 as the average paper price year-to-date this year is down 23% over the average price of last year, year-to-date. In the first 2 quarters of 2019, we saw quite high paper prices. And the second factor driving the decline [indiscernible] as a result of the decline in shredding revenue.Same-location operating costs, those have declined 8% year-over-year given the cost-cutting measures we've taken. However, the reduction in costs has not been able to fully mitigate against the sales decline year-to-date due to COVID and the decline in paper prices.So as a result, same-location EBITDA declined 23% in the first 9 months of this year over last year with EBITDA margin of 31%. And our EBITDA from acquisitions for the 9 months was $1.9 million with a 34% margin. And in total, our corporate location sales have grown 26% year-to-date over the prior comparative period and EBITDA has grown by 16% to $5.6 million. And as Jeff mentioned, well, just to keep in mind that the corporate location results that we're discussing don't include the U.S. and Canadian subsidy amounts and that year-to-date total is $1.5 million.And I'll just briefly touch lastly on our capital management and balance sheet and then turn it back over to Jeff. During the quarter, we strengthened our balance sheet by retaining our most expensive bank term loan of $936,000 while continuing to grow our cash balance by $141,000. And this helps improve our total debt-to-asset ratio by 200 basis points over June 30 to 42%.During the third quarter, we also received payments on all of our truck loans that we deferred in the second quarter. And our bank term loan principal payments, those resumed in October in the fourth quarter. So we ended the quarter at September 30 with a cash balance of just shy of $9 million. And we also have access to $4 million in additional capital through our credit facility.Now I'll pass it back over to Jeff.
Thanks, Kasia, for the overview on the corporate locations as well as the balance sheet. I'd like to sort of wrap this up with a quick COVID update. And obviously, the update is a little easier to handle this quarter than it was back in Q1 and Q2.And so I think, a, to reiterate, we took the necessary steps in the second quarter to not knowing where these subsidies would land to protect the balance sheet. Unfortunately, we had to furlough some employees with temporary layoffs and defer salaries and, of course, eliminate bonuses. And we did those things for all but the senior team. The salary -- all deferred salaries have now been returned or in the process of being returned. So by the end of the year, that will have happened, which is very good.And of course, we put a temporary pause on all the capital expenditures other than the material items that were absolutely required. We didn't purchase trucks during that time as an example. Now that we're starting to grow again, we are relooking at our truck fleet and determining which ones are old and even need replacement and, of course, which markets are growing and may need new trucks going into the new year.So the good news is we can see a pathway going forward where we continue to grow the business. There will be some bumps in the road. There'll be some seasonality that occurs, of course, particularly in the fourth quarter. But we are continuing to see good demand from the sales team and the marketing team. So I think that those are important.As Kasia mentioned and as illustrated in our MD&A that in July, we were down 12%; August, we were down 12% on same-location shredding revenue. And this is for the system, including franchisees and in September, down 2%.Our corporate stores saw similar trends where September was extremely strong. And September is typically a good month and I think people are returning to work through the summer and getting back to the office. We can see what happens. And I think we'll see that again come January and February. So we're looking pretty forward to January and February as we proceed through the last part of the year and into the new.Kasia mentioned that we continue to spend more dollars on marketing and we have. And the marketing dollars are providing a return by way of driving purge revenue, which is great. And we're also focusing a little more of our messaging not only to our traditional small and medium-sized enterprise clients but also to the residential clients and the employee that is working from home. So we are seeing increased residential service as well.And we're increasing where -- the types of sources we're offering, such as our e-waste service out of Kansas. We've been broadening the geography there because we can. We can bring things back to Kansas. And we also are increasing our ProScan services, which -- our corporate location in Charlotte is the base for that.So overall, we've continued to take proactive measures to see where we can gain new business, enter new markets, expand our service offering. And so far, in all of those areas, we've had good success.So with that, I'd like to once again thank our employees, our frontline employees, all the employees that have really sacrificed through the year both by deferment of salary and by sacrificing to go out and take care of our clients. And they've done it safely and properly and the clients have been happy.I want to thank our franchisees for doing the same. I want to thank my management team for holding the line and holding course and staying steady. They did a great job. Without a doubt, I'd like to thank our Board of Directors for their support and sounding board and their good questioning of the management team. And of course, our shareholders who continue to support us as well. So thank you to everyone there. And Ariel, I'll turn it over for some Q&A.
[Operator Instructions] Our first question comes from Miguel Ladeira of Cormark Securities.
I'd like to start on the acquisition front. Correct me if I'm wrong. But if you were to have about 9 franchises up for renewal in the next 3 years, has anything changed since last quarter with regards to discussion around selling? I'm assuming San Diego was renewed.And then in addition with PPP running out, how does your pipeline look with regards to independents? Any distressed assets that fit the PROSHRED mode?
Yes. Good layered question, Miguel. So let me start with franchisees in the pipeline in general. The pipeline is building well, which is great. Then we started to reengage the franchisees that were in our pipeline. We started to reengage with them back in the summer. And as we've continued through the fall, we're working with a number of them to take them through the pipeline. And I suspect that there will be some acquisitions going forward, which is good. That was the plan.Our franchisees, as you can see from the results, have performed very well as well. And so that's the good news there. And then -- yes, there are some franchisees that renew and that's fine. They have the right to renew under the U.S. law. Very good standing and -- our franchisees, I mean they tend to be in good standing. And as you can tell from the results, they do the right thing.With PPP money running out, you're very right that there will be some distressed assets. And we've had more conversations with independents over the last little while. A number of them though are still hanging on to that money because what happened is the government changed the rules and allowed for a longer period to consume the money. So they're sort of hanging on to that and they really have until the end of the year to consume the dollars.So yes, our independent pipeline is built a little bit. We haven't triggered anything yet. I suspect that there's some pressures both on the PPP side. And with the paper continuing to be low, that will -- we will see some opportunities and potentially some good value opportunities for us. We've sort of now adjusted to this lower paper environment. Whether the paper goes up or stays where it is, we're very well positioned to continue to move forward. We've always been very much about the service and not about relying on the paper revenue. So we've made those adjustments fairly easily and I think we will see opportunities. So thanks for the question, Miguel.
Awesome. That's great color. So talking about -- I guess this ties into your franchise performance. It looks like total sales were down around 4% when excluding recycling but same-store corporate was down about 10%. Is the delta just driven by corporate locations having higher exposure to the New York market or perhaps some FX move-ins? So any drivers here for this delta?
Miguel, very astute. We have a very high concentration of locations in the Northeast, I mean, New York State, Connecticut, Northern New Jersey. And all of those areas, including Pennsylvania and our Philadelphia franchise locations were seeing similar results. They had the hardest lockdown and they were the slowest to get out of the lockdown. In fact, even now, the easing of restrictions was very, very slow. And frankly, those areas also had the largest downtown, right?So now let me give you a little extra layer to that. Our locations such as Connecticut and New Jersey are seeing a little better recovery than, say, Philadelphia or New York City or even downtown Chicago as an example because those downtown cores continue to have more people working from home than they are working downtown. And I think you can probably see that in Toronto, right, where you have the capability to work from home.Those firms are -- they're well funded, well capitalized. Call them rich businesses. They have that infrastructure, wherein the suburbs, you're dealing with -- are more of our target markets, small and medium-sized enterprise. So that -- they're back to work and they're back in their stores and they're back in their facilities and their manufacturing plants. And in many respects, it's good that we target who we target, that the small and medium-sized enterprise is who we target.So your observation is absolutely correct. It is a Northeast issue in terms of the government restrictions and then more downtown locations. So good observation.
That's perfect. And then last one for me. So you touched on this a bit in the opening remarks. With regards to e-waste, it was up 21% year-over-year and 25% sequentially. Is this a trend you see continuing? And can you maybe provide some color on the traction you're gaining here or areas -- other areas where this can be deployed other than Kansas, which was previously mentioned? And if you had to put a blue sky opportunity on it, if you could provide any granularity there, that would be great.
The blue sky, right? It is a good business. And we took -- we were deliberate in evaluating the business. The business is more chunky. So I think the negative of that business is it's chunky. You get things in waves where our traditional business, we've built this nice recurring revenue stream and it sort of hangs in there together.Having said that, we target our PROSHRED customers. And so we can go to our PROSHRED customers, more of our medium and large customers. And they tend to turn their materials or the computers over more often. And those computers might be 3, 4, 5 years old. And those are great to take in and then refurbish and resell. And of course, we charge our customers on the front end for disposing of the asset and then we resell the asset. And those assets get resold typically in the third-world market. So we have the buyers. The buyers can use more materials. And of course, we're expanding our client base where we're accepting the computers.The broadening of the geography, the nice thing is with volume, the shipping costs are very low. So if I have truck or trailer load from Chicago, which we've actually done, I can get pickup materials out of Chicago from clients in Chicago and bring them to Kansas.Now at some point, the -- we have the room in Chicago. The Chicago will become big enough to be its own facility. It potentially could. But right now, we're taking advantage of the fact that we do have availability of space, and we do have capacity in Kansas and even broaden that geography well beyond Kansas, which we are doing. And so we hope to see some growth there. If we were to take this to the next level, let's call it blue sky. I call it the next level. There are other markets that we can replicate this in.So my view is first stage, let's broaden the geography in Kansas. And then let's look at places like Charlotte in the Southeast, perhaps New Jersey in the Northeast. Real estate plays a big factor in this because you do need to have warehouse space. And so the cost of that warehousing becomes very important. But this is a good business from what we've seen and I think we can extract good value from it. So good question.
Our next question comes from Nick Corcoran of Acumen Capital.
I was just wondering what the trend in your shredding revenue has been in October and November.
Yes. And it's more like our summertime. The fourth quarter tends to be softer. So we're probably to give you a range, negative 10% to negative 17%, depending on the market. But it's more consistent with the summertime when we compare to prior year, which we expected. In fact, we're doing still better than we thought we would at this point in time, which is good.In November, December, just -- we have more holidays, right? So now December, we tend to sometimes -- December can be a bit of a mixed bag. So I'm just going to ask you to be okay because some people want to sneak things in utilizing prior year budgets.So our focus is really to continue to drive [indiscernible] revenue right now. And I think that will continue to help us mitigating in some of those clients that have been staying at home still.
Great. And then maybe can you comment on where you are or where you're tracking compared to your COVID recovery plan that you spoke of earlier in the year?
Yes. I mean we're definitely ahead of that. Now my thoughts were -- and it's interesting because we thought we would be at 90% of pre-COVID levels in the fourth quarter and we were 90% of pre-COVID levels in the third quarter. In fact, the fourth quarter is showing a little bit of softness. But overall, if I were to combine sort of the third and the fourth quarter, we are ahead of that plan, which is good, the top -- both the top line plan and of course, importantly, the bottom line plan. And the EBITDA has been much improved. And again, kudos to the team for doing all those kinds of things. I think the key here is the marketing team and the sales team have been very focused on, "Hey, let's get this purge revenue in, that purge revenue in." So they've been very busy with the marketing, very busy with the bookings. Going to past clients and also going to prospective clients that are in our CRM, if you will, and targeting them and just getting them to work on a purge. Purges are a little bit higher margin, which is great. We can -- we have the availability because we have some customers that are still at home and we're able to tuck those in. And then, of course, you're able to convert those either now or later to a scheduled customer.So by spending -- right now, we're spending pretty darn close to our full marketing budget. But that pays dividends because, a, we can get that inbound. The purges are higher margin. We get them into our CRM to continue to market to them next year or later this year for scheduled service and that's bridging the gap, if you will. And I think that's another part of why we're having some margin success, just knowing who our customers are and understanding that the market -- that there are independents out there that can't spend as much as they used to. They're being mindful because their PPP money may run out.
Great. And then just thinking about the fourth quarter, what risk do you see from a second wave of COVID?
I mean, look, I think in the Northeast, it comes back to the Northeast, we will see some potential restructuring. I don't think they're going to go -- and again, I don't know for sure, right? But we haven't seen, for example, New York City go to, let's say, what we're doing here in Ontario, which is shutting down certain large regions such as Toronto [indiscernible]. We haven't seen that yet in New York but -- they're utilizing more curfews but they're still allowing business to remain open. And we can always debate whether that's the right approach or the wrong approach. But that's what they're doing at the moment in the Northeast, which is a little bit different than what we've done here in Ontario.Most of the other markets, southern markets, midwest markets, they're controlling dine-in and bars and things like that. But for the most part, businesses are also continuing to remain open. So that's what we've seen.So that continues in the fourth quarter. It should continue, again, softer than the third quarter, which is traditional. That's fairly seasonal but that's certainly that's what we see now.Look, does that change at some point? I don't know. I think the good news is we do have vaccines coming out, which is -- I mean the vaccine is very important for us because we service a lot of hospitals and health care facilities. And so they'll be getting the vaccine. That's a very -- that's a good market for us. And maybe they've been holding off on some purges that now we can go and get those done as well.So I think overall, the vaccine is going to have a positive benefit to us next year. Fourth quarter is seasonally soft and that's what we're seeing at the moment.
Our next question comes from Devin Schilling of PI Financial.
Congrats on a good quarter here.
Thanks, Devin. Appreciate it.
Just looking at your SG&A this quarter. Obviously, we've seen a pretty nice decrease year-over-year. Should we be looking to set it as a new run rate at these levels moving forward? Or is there more room to go lower yet?
Yes. We always want to go lower on those costs. I think Kasia and her team and Ron Gable, our VP of Ops, they've all done a good job managing SG&A and discretionary costs and watching those things like a hawk. And how low can you go? I don't know.I think -- so I think there's a couple of things. Number one, how -- what costs have we pulled out that -- as we turn things back on, such as M&A, right? As you turn M&A on, there are costs associated with that, legal costs, professional costs. So as that gets turned on, those costs will go up. And they're not -- as you know, they're not cheap by any means. Lawyers are expensive and valuation folks are expensive. So those costs will play a role for sure. And so I don't know how sustainable a 12% or 11% or whatever it is. But we're going to do our best always be looking at the costs, whether it's good times or bad times. And you can see the trend. Even during good times, we were always bringing it down. And part of that, of course, is adding new locations. So with new locations being added, that will drive the percentage down more than any further cost cutting. And so I think that's a real important fact.So we're doing what we can to mind the costs, Devin. But simultaneously, there are some costs that come back online as we aim to grow by acquisition and, again, some increased marketing expenditure this quarter. But it's logical because it's going to drive the revenue. So those 2 should offset or more than offset. And then acquisitions will bring -- continue to help us bring that line down. So I hope that answers the question. If it doesn't, just let me know and we can keep going.
Yes. No, that's really helpful. I guess looking at paper prices here, it looks like we've seen a bit of a drop on in Q4. Would you expect a little bit of EBITDA margin pressure, I guess, in comparison to this quarter, where we've seen that pretty strong 28%? Or do you see an increase in purge revenue in the mix maybe helping to keep margins closer to the 28% we've seen this quarter?
Yes. I think you will see -- I mean I think you might see a little bit of a reduction in the fourth quarter on margins simply -- I mean look, paper prices come down. It does erode that cash flow, if you will. Having said that, it's not far off in the -- when you sort of do the compare to the last year, it's not going to be far off. And our purge revenue is showing to be very good so far. So I think we should -- if you look at the P and the Q, the Q is sort of holding its ground. It's not quite at last year's level because of the scheduled customers that we've lost -- or not lost but have been delayed and furloughed, if you will. But paper prices, of course, when you compare the quarter-over-quarter, they're coming down. So you'll see some pressure on the margins.Having said that, the team is still doing a very good job on the routing and on the cost containment. So we'll see a little bit of a reduction would be my comment on that. But again, nowhere near the drops that we saw last year when paper was just plummeting. And of course, nowhere near the drop that we saw in the second quarter when COVID hit us.
[Operator Instructions] Our next question comes from Marcus Latimore, private investor.
As others have mentioned, congrats on the strong quarter in a challenging environment.Question that I had was related to the one that was just asked about costs. Looking at the margin benefit that we got this quarter, can you help us understand if you were to take out the cost benefit from lower acquisition costs and the cost benefit that is related to variable related expenses that are naturally going to be a little bit lower in a lower sales environment -- just wanted to get an understanding of like the benefit that is included in the Q3 numbers from like more management-driven cost initiatives. Do you have a rough estimate of that?
Good question. So let me just clarify. And I mean -- so I guess you're looking at what are the costs perhaps that we save by not doing M&A as an example or not traveling or those kinds of things that potentially -- I just want to make sure I'm clarifying that.
Yes. So there's this question and the follow-up. And I'll explain where I'm trying to go with this.I'm looking at the numbers here. Obviously, the EBITDA has benefited from, as mentioned, lower acquisition costs and also certain variable expenses which are naturally going to be lower because there's lower -- there were lower sales year-over-year. So if you exclude that kind of natural cost benefit there and just look at the cost benefit that's been generated from management taking specific cost actions, like some of the discretionary spend items that you've mentioned, I wanted to get a sense of like if we look at the EBITDA year-over-year in Q3, like how much would you say is the specific management-driven cost initiatives?
Right. That's -- and I think you can get that -- I don't have that number offhand. I think it's a very good question. We certainly sort of look at those items. I mean travel has been next to nothing. Professional fees have been much lower although will be increasing as examples. There were some initiatives around rent as an example, where we did get a little bit of rent relief. Those are now gone. Those are going to -- those will be restarted. Those aren't huge but they were initiatives that we took.And then in the -- really in the second quarter and a little bit in the third quarter, our marketing expenditures were lower than last year, much lower than last year. In the second quarter, they were virtually next to nothing. And then third quarter, we ramped them up. And then in the fourth quarter, we're ramping them up again but there'll be some -- there'll be good benefit on the purge side.So we can certainly dig into that market and get you a little more pinpointed. But those are really -- those are the key areas. Sort of the travel, the professional fees, a little bit on the rent and then the marketing costs, which are now more or less back.
Okay. And then the related question that I had to that is -- and I think somebody may have just asked it previously. But as you look at those specific management-driven cost initiatives and if you look forward to as the business ramps back up to maybe what they were pre-COVID in terms of just activity levels, if you look at those cost actions, do you think -- well, I'd be curious to get your perspective on what percentage of those might stick versus ones that are going to come back with the resumption of normal sort of revenue activity.
Great question. And I probably should go back in -- we have reorged our sales organization as an example. And we have -- while we have better leadership in our sales organization, that leader has sort of looked at it and made it more efficient. So that's an area where pre-COVID, we had an organization. In the COVID, we furloughed, we reorged. And now coming out of COVID, we're going to come out with a slightly leaner, definitely leaner sales organization. So we're going to have lower cost on -- slightly lower cost on the sales side, which will stick. So that's a good thing.I think the other thing that will stick is we are regionalizing some locations. So here's a benefit of now migrating into more regional centers that we can share certain resources regionally. And so we're starting that initiative. So that should also -- and we did a little bit of that during COVID, where we had some sales folks covering a couple of markets and some managers covering a couple of markets. So those kinds of things will stick. Obviously, the things that won't stick as we do M&A activity, that will come back online. The marketing is already back online. So those things will come up.Travel is one that will be interesting. There is the need to do some travel, particularly when you're doing M&A and supporting franchisees. They do need to do a bit of a travel. Having said that, we've been very successful with the Zoom format and I think we will continue to use that more and more. So I think we'll probably see some reduction on the travel side as well.So no, that's -- feel bad for the airlines. They made a lot of money off of a lot of companies. And -- but we won't see as much travel next year. At least regular travel, I don't think we'll see as much.
This concludes the question-and-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks.
Yes. Thank you. So first of all, thanks, everyone, for joining. Appreciate everyone's support. I look forward to having some one-on-ones. I know a number of us will have some one-on-ones. We'll chat over the next little while and I look forward to that.And everyone, be safe. If I don't speak to you between now and then, all the best for the holidays. Please enjoy them. And again, stay safe. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.