Redishred Capital Corp (Pre-Merger)

XTSX:KUT

Earnings Call Transcript 2019-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the RediShred Capital Corp. Fourth Quarter and 2019 Year-end Financial Results and Business Update Conference Call. [Operator Instructions] And 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.

[Jeffrey I. Hasham, CEO, President & Director]

Thank you. Good morning, everyone. I appreciate you joining us today for our fourth quarter and year-end conference call. I would first like to wish everyone well during these times. I know these are very unprecedented times. I will speak a little bit about our COVID-19 response. I know a number -- we've had a few calls on that topic with many of our investment banking firms, and we appreciate them hosting that. But we'll do an update at the -- towards the end of the presentation. Let me start. Just -- I'm going to go over the consolidated results, both for the year and for the quarter. We'll turn then -- Kasia will jump into the corporate location highlights, just to dig into those numbers a little bit more. And then again, I'll tee it up with -- finish it up with the -- a little bit of an acquisition update and then the COVID-19 update. So on the consolidated results. First and foremost, and I'm going to start with the year, and then I'll jump into the quarter and do a dig into that. For the year, consolidated EBITDA was up to CAD 5 million. We grew 43%. Obviously, we were looking to grow more than that with the addition of Kansas City and Chicago during the year. And in fact, we had reasonable growth muted by paper. Overall, just -- and you can see here in the press release and in the MD&A, on a same-store basis, the decline in recycling revenue was $872,000. And when you look at the decline in the acquired locations, we were north of $1 million in reduced recycling revenue. And of course, as everyone knows, that's a highly profitable revenue stream for us. So that $1 million, the vast majority of it comes off the bottom line. So when we're talking about our EBITDA numbers, both overall and on the corporate locations, that weighed -- that was the material item and weighed heavily on our results. And we'll talk a little bit about what we're doing to mitigate against paper going forward. So we did see that reduction. So again, 32% when you sort of look year-over-year just on the same location stores. Overall, we generated CAD 22 million in revenue. Again, that was up 53%. Again, the addition of Kansas, Chicago and also North New Jersey, should never forget our friends in Jersey. Consolidated operating income was up 3%. So that was $2.4 million. When we take out the paper or neutralize the paper and use a -- and we'll be producing our usual investor presentation and we're going to have this statistic in there using a 10-year average paper price. And the 10-year average paper price, about $135, we saw 51% growth -- we would have seen 51% growth in our operating income. So just keep that in mind, as we're sort of trying to evaluate the fundamentals of our operations, which is essentially getting trucks and people to our clients. That end of our business continued to perform well. We'll talk about some of the things that we've done in that regard to allow for strong performance. That's on the year. Obviously, in the quarter, the fourth quarter continued to see very strong declines in paper prices. We were down into the 60s by the end of the year. And that was -- I don't think anyone could have forecasted that we would have continued to see the continued reduction in paper prices. So -- and when I look at that fourth quarter of $605,000 EBITDA on a consolidated basis, obviously, declining significantly, 39% over the prior year, paper prices accounted for $0.5 million. And that's just same location recycling. And then when we look at the acquired, there was another $300,000 there. So that fourth quarter, we were really, really impacted both on the same location basis and on the acquired basis. And when you look at our MD&A, and we do the math, I think you'll see, just by adding those 2 numbers back, we're almost par -- we're actually ahead of where we would have been last year on a consolidated basis. On a same-store basis, we're almost at par. So what were the differences that would have, on a same-store basis, taken us away from par, I'm going to let Kasia talk about that in more detail. I think one thing I want to make note is, is that we invested year-over-year an incremental $100,000 in sales and marketing. In the sales and marketing, we're really aimed at driving scheduled revenue, also driving purge revenue with the view to converting the scheduled. And those are really investments in the fourth quarter to 2020. One of the things, with the paper prices being so low, we felt that -- and Q1, barring COVID, would have hopefully proven that, that we had an opportunity to take some market share away from Shred-it. We had some opportunity to really use surge pricing on our purge, and it was starting to work and -- which was a good sign. So that investment was made. There was an adjustment for IFRS 15 of $80,000. And then there was some acquisition-related costs related to our accounting and valuations related to the acquisitions. And of course, we also brought in a safety consultant. Given our 2 newest acquisitions had baling facilities, we want to make sure we were OSHA-compliant. We wanted to make sure that we were managing a proper culture of safety, so we brought in a safety consultant to help us with that. So that was -- those 2 costs there were $150,000. So overall, on a consolidated basis, as I mentioned, the core operations of bringing trucks and people to our clients was solid. Paper prices certainly hurt us pretty bad. And then we had a few onetime costs and investments that will certainly pay dividends into the future, and we were seeing those positive momentum going into the first quarter of 2020. So I'm going to pause for a moment and turn the baton over to Kasia. She'll talk more in detail about the corporate store locations and what we've done there to set ourselves up positively for the future.

[Katherina M. Pawluk, CFO & Secretary]

Good morning, everyone. I'll dig into the corporate location results. And I'll be speaking to the results in U.S. dollars, just to eliminate the foreign exchange impact as well as the results excluding the IFRS 16 adjustments, which we did not apply retroactively. So I'll start with the Q4 results, and then I'll speak to our fiscal 2019 results. Our same location shredding revenue grew 3% or $54,000 in Q4 2019 over Q4 2018. And our direct cost of servicing our clients was down $32,000 over the same period, which led to improved gross profit margin. So we were pleased to see that the focus on the improvements we made on our routing led to these improved results on the gross profit. However, of course, as Jeff mentioned, unfortunately, the continued fall in paper prices led to a $381,000 decline in recycling revenue, and that accounted for 96% of the EBITDA decline year-over-year. Now during the quarter, we also got increased sales and marketing spend, which led to an increased number of unscheduled clients that we have serviced. However, our average size per unscheduled client declined. And so as a result, as Jeff mentioned as well, we continue to emphasize our marketing programs toward the acquisition of scheduled clients and the conversion of the unscheduled clients to scheduled to focus and drive the recurring revenue. Now our results from acquisitions included the first quarter of Chicago's results as we acquired the business on October 1, 2019. The acquisition results under non-same corporate location in our MD&A also included the results of the Kansas and Secure E-Cycle businesses. And the EBITDA from acquisitions was $500,000 for the quarter, with a 26% EBITDA margin. And again, the low paper prices led to lower margins for the acquisitions as well. Comparing the recycling revenue at the Q4 paper prices of $67 per ton to the 10-year average paper price of $135 per ton, the paper price decline on acquired EBITDA was $220,000 in the quarter. So this would have put our acquisition EBITDA margin at 37% for the quarter. And the acquisition results, or non-same location results, as we call them, also included $74,000 in vendor-related consulting fees, and that accounted for 3% of our non-same revenue and 1% of our total revenue.Now in terms of fiscal 2019, we saw organic shredding revenue growth of 6% for our same corporate locations year-over-year. And the decline in paper prices led to a $699,000 decline in recycling revenue, which then led to the same decline in EBITDA. Now our operating income, excluding recycling revenue, which removes the volatility of the paper prices, declined 20% year-over-year for same location. Some of the items that impacted 2019 includes some driver shortages and turnover that we had in the first half 2019, and this led to increased driver wages. However, with the implementation of a 401(k) program and the enhanced routing technology, we saw year-over-year improvements in the second half of 2019. We also incurred an increased amount of depreciation on our trucks due to the investments made in new shredding vehicles to allow for maximum uptime and the capacity for future growth and as well as reduction in future repairs. And our non-same corporate locations, our acquired acquisitions, they earned $1.8 million in EBITDA during the year with a 30% margin. Total corporate location operating income grew 10%, despite the $800,000 decline in paper prices on our revenue, EBITDA and operating income. And if we look at operating income, excluding recycling revenue, the growth was 19% year-over-year. And as Jeff has mentioned, we've been looking at the corporate location results using the 10-year average paper price in our system to get a more constant and neutral view of the operational business, and that does include the impact of our tonnage on the results. So when looking at the 10-year average paper price of $135, using this measure for 2019 and 2018 results, the total corporate location operating income growth was 43% year-over-year, and that would have been the result of the acquisitions that we've conducted over the last year. And I'll just do a little bit of an update on the capital management side, and then I'll pass it back over to Jeff. So on capital management, at December 31, our working capital balance was CAD 4.4 million, and we had a debt-to-total-asset ratio of 44%. And we ended the year with $10 million in cash. So with the combination of the equity raised funds of $10.5 million, which we completed in July, and the debt financing we closed on $26 million of acquisitions during the year. And we advanced $12.6 million on our credit facility for these acquisitions. And then subsequent to year-end, in March, we closed on the acquisition of our Connecticut franchisee, and that was with cash at closing of $5.3 million. And we advanced $2.7 million on our credit facility. And the advances on our senior facilities were for term loans, and those are 84-month amortization periods with fixed interest rates of 3.5% and 2.99%. And I'll pass it back over to Jeff to talk about the acquisitions and the COVID-19 update.

[Jeffrey I. Hasham, CEO, President & Director]

Great. Thank you, Kasia. So just a little bit of an update on -- obviously, Proshred Chicago was purchased October 1. It has performed to expectation. Even with paper prices being reduced versus the prior year, the business has performed quite well. And obviously -- and we'll talk a little bit about where paper prices have gone because it is important to note that. Proshred Connecticut, which we bought on March 1, again, that for the first couple of weeks was going better than planned. We actually had done another little tuck-in acquisition at that point in time as well, so right out of the gate. So that was going quite well. And obviously, the last couple of weeks, not so well. The end of March was -- didn't go quite according to plan due to the COVID-19 results -- COVID-19 crisis, sorry. Overall, our pipeline at -- as at February 28 was extremely good, both tuck-in operators due to paper price reductions as well as franchisees that were getting closer to renewal were populating the pipeline. So we had a good pipeline. We still have a good pipeline. Obviously, times have changed. What I would like to also make note of is that since the start of the year, as you know, paper prices continued to be flat in January, February and March. We actually saw a little bit of an uptick between 10 -- around $10 in the first quarter. For April, paper prices have gone up anywhere between $40 to $50 a ton in single month. We're still below the 10-year average. However, in our larger centers of Chicago and Kansas, because we bale paper, we start to see incremental increases. We also potentially have opportunity to earn bonus revenue per ton or price per ton depending on volume. So obviously -- and I think the good news there is those locations, knock on wood, have been less impacted by shutdowns and closures, and I'll talk about that in a moment. So just to give you a little bit on the paper markets and the pipeline and the existing acquisitions. I think, again, the acquisitions we did, overall, are performing as expected. On the COVID side, and a number of you probably heard this from us, but I want to give an update because it's been a couple of weeks since my last one. The Northeast is starting to sort of flatten out. We're probably about 40% to 45% down from plan. So it would be less than -- the reduction will be a little bit less when you compare to the prior year. And I think being an essential service has helped us in those states, particularly New York and Connecticut and Jersey. Those are 3 states that we are one of the stronger players. Having a BIC license to get into Manhattan has helped. The government is really monitoring who's entering Manhattan. If you don't have a BIC license sticker on the side of your truck, which many independents do not but were going into Manhattan, they've been shut out. So we're seeing a little bit of plateauing in that area. We're also seeing a higher concentration of residential pickup. So that's good from that perspective. The Mid-Atlantic, where we saw a 25% reduction to start, we're now more in the 35% to 40% as I think they were a little late on their shutdowns. However, again, we're seeing a plateauing here. In the Southeast, that would include Florida and Charlotte, where Florida was actually impacted heavily on the front end, we're now seeing a little bit of recovery in Florida. And in Charlotte, sort of our North Carolina area, we've seen also a flattening. We haven't really seen the reductions that everyone has seen. And then the Midwest, Kansas and Chicago and Milwaukee, again, that 25%, 30% is sort of where we've been hanging out. So we've seen the bottoming, knock on wood, so far like we've seen some couple of weeks where we're sort of been bouncing around the same level. So on the COVID side, we seem to have found where we are. And in fact, we're starting to see a little bit of increased lead flow and increased sales activity, and it is starting to weigh more residential. As people are working from home and producing paper at home and/or cleaning out their homes, we're starting to see some of that turn as well. Our response to that is we are working with employers on channel programs, and we're working on direct marketing. So as we come out of this, we will have programs in place to address the new market. And I think that's very important that we continue to address where the market will be, and that's where our marketing and sales teams are focusing. And yes, we will always be very focused on small, medium-sized enterprise. We will be always focused on scheduled recurring revenue, that will not change. However, going after more essential services, going after more of the home-based worker on a recurring platform is where we will be going under COVID. What have we done? As mentioned last time, our driver hours are in line with revenue, which means we've had to conduct temporary layoffs. Some of the challenges that we've had with drivers is that the wage -- the unemployment programs in the U.S. have been topped up. It's almost to the point where people are better off at home than working at the range that we've been paying. Having said that, we have some programs in place, bonus programs in place for our frontline drivers, who've done tremendous work, for them, and that seems to be working at the moment. We've been able to defer truck financing. We're not spending anything on anything discretionary, including CapEx. And of course, we're looking at all fixed costs and seeing what we can do to defer, postpone or eliminate. So those are the actions being taken. And obviously, the goal of all those actions is to rightsize the business temporarily with our revenue and minimize the cash burn that we have. We have applied for the U.S. Paycheck Protection Program. We will be obviously utilizing the Canadian Wage Subsidy Program once available. We're all waiting. And we're doing anything and everything to turn all sources of cash into our business. So we're doing anything and everything possible to try to keep those core group of folks that are driving the business and also to max -- consolidate our balance sheet and hold the balance sheet strong. All salaried employees have taken pay cuts. The salaried employees that haven't been temporary laid off have all taken pay cuts. And -- so I think all those measures will help us. So as noted, just the opportunities. One is residential home office. The other opportunities coming out of this will be complementary services, such as scanning and e-waste. Our e-waste business in Kansas has performed well through this time. It is down a little bit, but no -- not down as much as the shredding, and -- so that's positive. In acquisitions, there will be acquisition opportunities coming out of this. There will be, unfortunately, some independents that will not be able operate coming out of this, and our hope is to be able to be in a good position to take the opportunity as it presents itself. So I wanted to give everyone those updates because I think it's important that coming out of -- we're fortunate to have a good balance sheet. We're fortunate that we're taking the actions to protect both our financial capital and our human resource capital. Both are important to come out of this strong, sort of balancing the 2. And we should be in a very good position, as we gradually come out of this, to look at opportunities going forward. So I'm going to pause there. I know we've thrown a number of concepts out today and a number of -- I'm sure there's a number of questions that are waiting for us. So thank you.

[Operator]

[Operator Instructions] Our first question comes from David Ocampo of Cormark Securities.

[David Ocampo, Analyst of Institutional Equity Research]

I want to drill down first on SG&A, especially at the corporate location level. For the first 3 quarters of the year, it looks like it was running around $140,000, and then it jumped up to $790,000. Maybe you could provide some color on the discrepancy there and kind of how we should view corporate costs on a run rate basis going forward.

[Jeffrey I. Hasham, CEO, President & Director]

Yes. Kasia, do you want to talk a little bit about the SG&A? I think, just, David, just -- we'll provide a little more reconciliation there. I know Kasia and you have been working together on a couple of those items. I'm going to just pass over to Kasia because she might have a little bit of incremental color, and then we can provide further color after that.

[Katherina M. Pawluk, CFO & Secretary]

Sure. So the SG&A that we estimate for, essentially our corporate overhead SG&A that we estimate to our corporate location is essentially an estimate during the first 3 quarters of the year, typically based on the prior year. And then at Q4, we will do the actual calculation together with our -- essentially our transfer pricing team to determine the actual results and allocation of those costs. So it's really at the end of the year where we look at time spent by management on the corporate location. We take total SG&A at the corporate overhead level and do the detailed calculations of that. So Q1 to Q3 is typically an estimate based on the prior year. And then Q4, we are sort of doing the annual true-up of the calculation. The year-over-year increase will primarily be due to the acquisitions that we've conducted, North New Jersey, Kansas, Secure E-Cycle business and Chicago, all being our largest acquisitions to date. And so our team here in Toronto and our management team has spent increased time with bringing on those acquisitions than we have in the past. So the allocation of our corporate overhead has decreased really primarily due to that.

[David Ocampo, Analyst of Institutional Equity Research]

No. That's great color. And sort of on the same kind of wavelength here, the SG&A for franchise locations, it seems like it's held in steady, even though kind of the store count has dropped. Is there any reason for that?

[Katherina M. Pawluk, CFO & Secretary]

Sorry, can you repeat just the end of your question there?

[David Ocampo, Analyst of Institutional Equity Research]

The SG&A for franchise locations has looked like it's held in steady, even though the store count has fallen. I thought that it would kind of go the other direction.

[Katherina M. Pawluk, CFO & Secretary]

Yes. We do consider our own locations as franchise locations. So there's a little bit of that in there. So we have invested in our franchise support as well. We have a new franchise support director leading our franchisees. So I think that's really why the cost has sort of remained as is year-over-year.

[David Ocampo, Analyst of Institutional Equity Research]

So is the expectation that margins would be lower because there's a higher amount of support for the franchises?

[Katherina M. Pawluk, CFO & Secretary]

I think there will be some margin decline on the franchisee side. Obviously, as franchisees grow, we have the reduced royalty structure, but we do not plan to sort of increase further costs on the franchise side at this point. It's sort of a step function every couple of years, what they need and the sort of support that's needed there. But with the new director of franchise support, we don't see sort of additional costs in this year or in the next few years on the franchisee side.

[Jeffrey I. Hasham, CEO, President & Director]

And David, just to elaborate a little bit there. Obviously, that franchise support director, as we start to migrate more corporate, that individual just -- it's logical for us to assume that it's not going to be purely franchise, right? Because as you move from 11 corporate locations where we are now to 15 or 16, there is going to have to be some toggling there. And there will be. One of the things that this gentleman is an expert in is routing. He's supporting all locations on routing, not just the franchise locations. And of course, they cut their teeth on our corporate locations, and then provide the support into the franchise location. So I think we'll see some toggling. But back to the corporate side, as we grow and add more acquisitions, and I think that's the nice thing, is that we can lever the similar resource going forward as we migrate more corporate, which will happen over time.

[David Ocampo, Analyst of Institutional Equity Research]

Okay. And Jeff, I appreciate the color on COVID, sales being down quite substantially from planned expectations. How should we think about margins heading into 2020 as you face lower sales? Essentially, can you take out enough expenses to sort of defend your margins of kind of where the historical range has been?

[Jeffrey I. Hasham, CEO, President & Director]

Unfortunately, no. I think that's the short answer. Although -- I mean, rent, depending on the landlord, right? There are some landlords that are willing to work with you, as an example, and some that are not. Just -- so it depends [ which ] the landlord is. And I think the unfortunate thing is a lot of landlords mortgage their facilities to [ begin then ] because rates were so low. And now there's no opportunity for them to help us out, if you will. We're not asking for anyone to take it on the chin, we're asking for deferments and the like. So rent is one that's difficult. Technology and telecommunication are ones that are difficult. And in fact, we need them more than ever given the situation. Having said that, labor is where we focused, and the big focus on the labor side in all locations here in Toronto is who's gone on temporary layoff. There's people who are on temporary layoff, and the rest of us have taken pay cuts. And that's how we're sort of sharing in the pain and reducing it. So look, our plan is to continue to have EBITDA. Our plan is to continue to look at every cost below the EBITDA line as well, such as truck financing and the like and see what we can do to defer, postpone to try to minimize cash burn. We're looking at cash flow now more importantly than anything else. So we will see margin erosion as we go forward into Q2, potentially Q3. Hopefully, Q3, we start to come back the other way. And then hopefully, Q4, we continue that trend. But April is going to be tough. May, we'll see. There is -- it's looking hopeful in some markets that we're going to see some reopening. And June, maybe a little bit more. So the short answer and then the explanation for you.

[David Ocampo, Analyst of Institutional Equity Research]

Yes. And just a quick follow-up on that. Do you have a sense of what your daily cash burn is, if you can provide that for us?

[Jeffrey I. Hasham, CEO, President & Director]

Our daily cash burn, do I have that? Good question. We are working on our monthly -- our quarterly and monthly cash burn. And we'll make note of that, David, and we'll get some incremental information. Some of it's going to depend on the wage subsidy. So we can get you something, what sort of it looks like now, before and after. But let us park that and come back to you on that.

[Operator]

Our next question comes from Nick Corcoran of Acumen Capital.

[Nick Corcoran, Equity Research Analyst]

You gave some comments in your prepared remarks about how much revenue is being down in certain markets. Where do you expect the trough to be?

[Jeffrey I. Hasham, CEO, President & Director]

Well, I'm hoping now. Again, it seems to be, we've been holding pretty steady. We've been holding pretty steady right now, last couple of weeks. So this week -- and the nice thing, I guess, what's happened over the last 4 or 5 weeks is, remember, 80% of our customers are 4 -- are every 4-week customers, right? So we've now tracked sort of who's shutdown due to COVID, who's still an essential service and open, who might be having reduced frequency, those kinds of things. So there's still maybe some 6- and 8-week customers that we haven't gotten to. But again, that's the minority that we're still finding out about. But I -- but on top of that, we're also seeing some increased purge booking, residential and even essential service businesses. So that's sort of filling a bit of the gap on the new ones that we're finding out on the scheduled basis. So I think we're seeing where we are now, I mean that's, knock on wood, that seems to be -- we seem to have hit the bottom. Again, that could change depending on anything. So I'm not taking anything for granted at this moment. And management continues to meet weekly on a formal basis to evaluate people, cost and where we are.

[Nick Corcoran, Equity Research Analyst]

Great. And then in terms of the U.S. Paycheck Protection Program and the Canadian program, have you done any calculations what the cumulative amount that would be?

[Jeffrey I. Hasham, CEO, President & Director]

Yes. The U.S. Paycheck Protection Program could be up to $1 million. So that's positive. Again, just, I think it's important to note the nuances and the important things, but it's forgivable, as long as you're spending it on employees, and you're sort of going retroactive to what you were spending. So some of it will be forgivable, and then some of it will be a very favorable SBA loan, if you will. And favorable, meaning very low interest rates, 3-ish percent. And you can term it out over a period of time. And then if you have the cash, you can prepay it, you can pay it back without penalty. So that's the good thing on the Paycheck Protection Program. On the Canadian Wage subsidy, we're still trying to determine that. But we're sort of looking at, over the period of time, about $120,000. And again, some of it may go to our entry-level employees, not a lot of it, but some of it will go to them because some of them are now working at minimum wage since they've taken the pay cut. So we might provide a little bit of support to them. They're the ones who need it the most. Management certainly will not be doing any little bit of, let's call it, top-up, if you will. So let's -- after taking that out of the equation, there'd still be cash in from that. And certainly, the Paycheck Protection Program provides cash in.

[Nick Corcoran, Equity Research Analyst]

Great. And then with EBITDA coming off, how comfortable are you with your covenants right now?

[Jeffrey I. Hasham, CEO, President & Director]

For Q1, we will be in good shape. In Q2, we'll come off covenants. As you can imagine, the banks, we are in continuous conversation with our banks. And right now, the words that we've been provided are, the covenant calculations will be temporarily halted during the second quarter, although we're working on a proposal with our banks to see what they can do to help during this time and, obviously, looking for relief on -- a formal relief on the covenant calculation. So that's still pending. We're working on that now. Again, I think the good news for us is we've been with the bank. We've been a good customer, always paying our debts back. And so I think -- and always been on side with the covenants. So I think all that being said and having a good balance sheet, all those things will be positive for us, I do believe.

[Operator]

Our next question comes from Devin Schilling of PI Financial.

[Devin Schilling, Special Situations Analyst]

I was just hoping, Jeff, if you could walk through the decrease in EBITDA here on maybe a quarter-over-quarter basis. Looks like paper decreased by about 25% over this time, where we've seen about a 50% drop in EBITDA. And also, I guess, we should have the Chicago acquisition numbers built in there. So I was just hoping you could kind of walk us through that decrease on more of a quarter-over-quarter basis.

[Jeffrey I. Hasham, CEO, President & Director]

Yes. So I mean, paper was the -- I guess, there's a couple of things that factor into there. Number one, paper was a big reduction on the -- a big impact on the EBITDA during the quarter. A couple of other things that were -- and remember, it's not just the EBITDA on the same locations, but also on the acquired locations as well. So that had an impact, like the anticipated drop. The other piece of it is, we did increase some sales and marketing spend. As noted, that paid off in more purges in the fourth quarter, but it actually paid off more in the first quarter than in the fourth quarter. So we had some of that erosion there. I view that more as an investment. The fourth quarter is also normally softer, right? So we typically see -- because we lose business days in the fourth quarter. You lose about 4 business days in the fourth quarter versus the third quarter. The third -- first -- second and third quarter tend to be our strongest quarters from a number of business days and also just from a purging view. And then again, we had some onetime costs related to the safety consultants and the like. So Kasia, do you have any other color that you wanted to add to help Devin out? And again, we're always happy to do some incremental calcs, if needed.

[Katherina M. Pawluk, CFO & Secretary]

Sure. I mean, just on the same location, the paper prices, that accounted for 96% of the same location EBITDA decline. And then, as Jeff mentioned, on total EBITDA, we had the -- we had an IFRS 15 franchised fees revision to our estimates. So year-over-year with, sort of the adoption of that and working through that, that accounted for about $80,000 in decline year-over-year. We also had the valuation and accounting fees that came in $100,000 higher year-over-year with the acquisitions that we conducted. And then as Jeff mentioned earlier, the safety consultant fees of about $60,000.

[Devin Schilling, Special Situations Analyst]

Okay. No, that's great. I guess, just also following up on the question earlier on the corporate location costs. I know we've seen some wage inflation in the past. Obviously, looking forward, we should see some potential reductions there alongside potential decreases in fuel prices. Can you guys maybe just provide a little bit more of sort of insight on how -- where you guys see these corporate costs kind of, I guess, averaging out to after we get through this slowdown over the next little while here.

[Jeffrey I. Hasham, CEO, President & Director]

Yes. Look, fuel prices certainly have been helpful. The route -- and I think there's a couple of things. So I think I want to break it into a couple categories. I think the first category is the things that we did in the third and fourth quarter of 2019 such as relooking at routes and putting routes together the right way, that was having impact on reducing our direct operating costs, right? Fuel coming down is going to have an immediate impact on that, of course. Driver, the driver situation, look, right now, it's still tight for drivers because companies like Amazon and Instacart and all that are still hiring, right, and more so now. I think as we do come out of this situation, I think we're going to be entering into a recession, if you will, and probably a pretty strong recession and that tends to alleviate wage pressures on drivers, right? And that happened in the last one many years ago and probably likely to happen on this one. So we should see some good opportunity there to hire good drivers and hire them at good wages. I think one of the things that I'm hoping that comes out of this is that our current bank of core drivers looks at this and goes, look, as a company, we -- yes, we did what we have to do. But there's -- our core, we're working with them, and we're hoping that they see, hey, you know what, we stood by each other and we both won, and they stick around. So retention as much as attracting new drivers is going to be important for us. And I think we'll see a little bit of relief there in the fourth quarter of 2020/first quarter of 2021.

[Operator]

[Operator Instructions] Our next question comes from [ Marcus Latimore ], a private investor.

[Unknown Attendee]

I had a couple of questions. First one that I had was, I just wanted to clarify the December 31 liquidity that we had. I know we ended with about $10 million of cash. But just wanted to confirm our liquidity at year-end, and then kind of pro forma for the Proshred Connecticut acquisition?

[Jeffrey I. Hasham, CEO, President & Director]

Yes. Kasia, do you want to take just sort of where we are maybe now after the acquisition of Connecticut and the financing we received from the bank on that?

[Katherina M. Pawluk, CFO & Secretary]

Sure. Yes. So we ended with $10 million. We did purchase Connecticut in March. So essentially, sort of at the end of Q1, we are sitting around sort of $6 million, $6.5 million in cash on the books. In terms of sort of debt financing going forward, the bank has been working with us to increase our facility for each acquisition as it comes, and we still have approximately $4 million of debt available as well.

[Unknown Attendee]

Got it. So we should think of it as like $6.5 million, and then plus another up to $4 million on our existing facilities?

[Katherina M. Pawluk, CFO & Secretary]

Yes, that's right. Yes.

[Unknown Attendee]

Right. Okay. Got it. Okay. And then I guess the second question...

[Katherina M. Pawluk, CFO & Secretary]

Sorry, just to note, the $4 million is there, but usually what we've been able to do with our bank is sort of increase our credit facility independent of the $4 million that's there. So that's been nice to sort of keep that in our back pockets, while being able to leverage the credit facility and increase that with each acquisition instead.

[Unknown Attendee]

Got it. Okay. And then, Jeff, just wanted to follow-up on some of the comments that you've given on kind of what you've seen so far year-to-date 2020. Of the revenue performance that you've seen, obviously, coming in below what you'd budgeted at the beginning of the year, in terms of where the shortfall has been coming, has that been more on the scheduled or unscheduled side?

[Jeffrey I. Hasham, CEO, President & Director]

Yes. It's a mixture of both. So there's -- the scheduled that it held has been essential services, right? So it's our -- typically, our lawyers or accountants, those that can work from home, those have been put on postponement, right? So they've been put on hold. It's like, just like here in our office, we're not ordering bottled water, right? And there's nobody here other than me. And -- so that's -- I don't drink gallons of water a day. So that -- those folks are certainly on postponement and waiting for them to come back. So they're still scheduled. We've also seen originally, initially, we saw purge drop, the lead flow on purge dropped. We've now seen a little bit of an uptick on the purge, and the purge has been a combination of both essential services and residential. We have seen an increased uptick in residential shredding. And so that's been positive. And that's sort of now filling in a little bit of the gap, and I think that's why we've seen a little bit of plateauing in our existing results.

[Unknown Attendee]

Okay. And then the comment that you gave on paper prices year-to-date were helpful. Good to hear obviously that things are coming back a little bit in April. When we think about, though, the recycling revenue, obviously, the price is 1 piece. On the volume side, should we think about that kind of trending in line with your comments on kind of how revenue overall is trending? Or should we think about it in a different way?

[Jeffrey I. Hasham, CEO, President & Director]

Yes. No, correct. I mean, it is going to trend. They're highly correlated, so the tonnage is going to come down unfortunately. The good news is that the price is up. We're going to see a good impact from the price being up that much, but tonnage is down, unfortunately.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks.

[Jeffrey I. Hasham, CEO, President & Director]

Thank you very much. First of all, everyone, I know many of you, our investors, are on the call. I want to wish you all the best, be safe. I want to thank you for your support. I've spoken with many of you over the last month, and your support has been wonderful. We appreciate it. We've taken steps in the fourth -- third and fourth quarter to tee ourselves up well for 2020 without COVID. 2020 was off to a solid start, and COVID hit. We are going to get through COVID. It may look crappy right now for many of us. We're going to get through it, and we're going to get through it very strong. And I've got a great management team here that have done tremendous work to get us through that. So I want to thank you for your support. I want to thank the management team for their tireless work during this time and all of our employees, front line and our Board for their support as well. So thank you, everyone. If there's anyone who had questions and couldn't make it, shoot us a note, and we can always set up a phone call. I know I've got a couple of individual calls later as well. So thank you very much.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.