You should be highly skeptical of any and all get-rich schemes ... except for the super-simple formula I'm going to show you below. Because this one really works.

It works so well that it's been used by the world's billionaires -- from moguls of yesteryear such as Rockefeller and Ford to today's tycoons Carlos Slim and Warren Buffett.

But enough already. Let's get to the formula.

The formula
It is, simply:

FV = PV * (1+r) ^ n

Where:

FV = future value
PV = present value
r = rate of return
n = time (or number of years)

Compounding 101
Now, some astute finance brains will know that equation not as some mystical secret but as the "future value of money" (FVM) equation taught in college.

The FVM formula simply states that your future wealth (FV) is a function of three variables: the amount of money invested today (PV), the rate of return generated (r), and the length of time in which that money is put to work (n). So maximizing future riches requires three steps.

Step 1: Increase PV
It takes money to make money. But by actively and consistently slivering off a portion of your earnings every month to save and invest, you'll have more and more of that money working for you.

All things equal, the greater amount you invest today (PV), the greater wealth you'll build for tomorrow (FV).

Step 2: Increase r
Next, you'll need a way to grow that capital. Historically, the stock market has been the most effective wealth-building vehicle of all. Plowing your money into a low-cost index fund wouldn't be a bad idea.

But if you really want to maximize r, you'll need to allocate a portion of your portfolio to the best segment of the market over the past 50 years: small-cap value stocks. The reason is simple. Unlike behemoths such as $260 billion Microsoft (Nasdaq: MSFT) and $120 billion Hewlett-Packard (NYSE: HPQ) -- whose spectacular growth days are behind them -- reasonably priced small caps have tons of room to rocket. Take a look at Fama and French data, which tracked stocks from 1956 to 2005:

Not adjusted for inflation.

All things equal, the greater your rate of return (r), the greater wealth you'll build for tomorrow (FV).

Step 3: Increase n
The last ingredient in our super-simple wealth-building recipe: maximum time in the market.

Look back at the equation. You'll see that n is an exponential function -- meaning that for every year you're not invested, you give up the awesome (almost magical) benefits of compounding.

All things equal, the longer you're invested (n), the greater wealth you'll build for tomorrow (FV).

Plug and chug
To get a feel for the three-step process in action, let's go back in time to see what kind of wealth would have been generated had someone:

1. Invested $40,000 in the stock market.

2. Started 10 years ago.

3. Divided the money among five stocks having: market caps less than $2 billion (to screen for small size), sales growth greater than 15% (to screen for above-average opportunities), and price-to-sales ratios of less than 1.5 (to screen for a good price).

Here's what it would look like:

By having bought into five high-quality, reasonably priced companies while they were still babies, that $40,000 stake would be worth more than $500,000 today.

Of course, you can always fiddle with the numbers to generate different levels of FV, but our objective should remain the same:

1. Maximize PV by sticking to an investment plan.

2. Maximize r by devoting a chunk of your portfolio to superior small caps at attractive prices.

3. Maximize n by investing as soon as possible and for as long as possible.

The final Foolish variable
So don't waste another "n." Start plugging whopping returns into your own real-life wealth equation today.

If you need a few small-cap ideas to start you off, our specialists at Motley Fool Hidden Gems can help. Advisors Bill Mann and Seth Jayson make sure subscribers get the absolute most from the FVM formula.

Since the newsletter's inception in 2003, the team's picks are up an average of 26%, versus 5% for like amounts invested in the S&P 500. You can see their five favorite small caps for new money with a free, 30-day trial. To learn more, click here.

This article was first published Oct. 12, 2007. It has been updated.

Fool contributor Brian Pacampara tried to get rich quick once, but his idea for a cold-air balloon never got off the ground. He owns no position in any of the companies mentioned. Microsoft is an Inside Value recommendation. Activision and Quality Systems are Stock Advisor picks. The Fool has a mathematical disclosure policy.

Image source: The Motley Fool.

RISE Education Cayman Ltd (NASDAQ:REDU)
Q1 2020 Earnings Call
May 15, 2020, 9:00 p.m. ET

Contents:

• Prepared Remarks

• Questions and Answers

• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the RISE Education First Quarter 2020 Earnings Call conference. [Operator Instructions]

I'd now like to hand the conference over to your first speaker today, Ms. Mei Li. Thank you. Please go ahead.

Mei Li -- Investor Relations

Thank you, operator. Hello, everyone and welcome to RISE Education's first quarter 2020 earnings conference call. Today, you will hear from Ms. Lihong Wang, Chairman and CEO; and Ms. Jiandong Lu, CFO. Ms. Wang will go over recent business updates, operations and the Company's long-term strategy, Ms. Lu will go over the financial results of the quarter. Both will be available to take your questions in the Q&A section that follows.

Before we proceed, I would like to remind you that today's discussion may contain certain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. To understand the factors that could cause results to materially differ from those in the forward-looking statements, please refer to our Form 20-F filed with the SEC on April 17th, 2020. We do not assume any obligation to update any forward-looking statements, except as required under applicable law.

Throughout today's call, Ms. Wang and Ms. Lu will be referring to the earnings presentation that has been uploaded to our IR website as a supplement to today's call.

Now I'd like to turn the call over to Ms. Wang [Phonetic]. Ms. Wang, please go ahead.

Lihong Wang -- Chairwoman and Chief Executive Officer

Thank you, Mei. Hello, everyone. Thank you for joining our earnings call. I'd like to begin by expressing our deepest sympathy to everyone across the globe that has been impacted by the COVID-19 pandemic. We sincerely hope that the situation improves quickly and allow everyone to return to work safely. I'd like to begin my remarks on slide 3. The outbreak of COVID-19 8th [Phonetic], January, 2020 had a significant and material adverse impact on our operations during the quarter. In accordance with government regulations to contain the outbreak, RISE learning centers were temporarily closed starting on January 19th, 2020, and all our self-owned learning centers remain close as of today. This has adversely impacted our ability to generate cash and GAAP revenue from regular courses and limited our ability to make -- to market our services and acquire students through our learning center network.

While we have resumed online operations, the extent of the disruptions on offline operations and the related impact on our financial and operational results and outlook depend on COVID-19's further development as the global pandemic.

Before going to details, I however, would like to make three key points regarding our business. Number one, we have ample liquidity to make this extended period of uncertainty. As of March 31st, 2020, we had RMB925.1 million in cash, cash equivalents and restricted cash. Number two, we now can run our business smoothly both online and offline. With resuming regular courses online, we achieved close to 90% participation rate, meaning most of our students are learning online with their teachers from offline learning centers before the pandemic. Number three, we are transforming into an online merging offline model. We also expanded our classes beyond English. So the OMO model, which is developing as we speak.

Turning to slide 4. Over the Chinese New Year holiday, which marks the beginning of China's shutdown, we immediately began stable -- strategizing a road map to navigate this challenging environment. The first stage is to stabilize our business by controlling costs and reserving ample liquidity. The second stage is to optimize our business by conducting our business online and enhancing digitalization capabilities. Now we are in a transformation stage to pursue our long-term strategy to transition into a digitalized cross-disciplinary skill-based OMO educational platform.

I'd like to begin by addressing our efforts during the quarter to stabilize our business and offset the impact from the pandemic through targeted cost controls and adjusted capital expenditure and liquidity plans to reserve cash. With limited visibility on when our offline operations will be able to resume, we immediately roll out a series of initiatives to cut rental, personnel and overhead costs, which are laid out on slide 5. We negotiated hard with all our landlords for rental concessions and were able to obtain a roughly 20% cut in monthly rents which will remain in effect until learning centers are able to reopen.

At the same time, we began prolonging underutilized and unutilized support staff, restructured compensation schemes for management, reduced the social security contributions by RMB8 million per government policies and strengthened the support we offer frontline teachers and sales staff to ensure business continuity and higher productivity throughout the period of disruption. This resulted in personnel costs falling by approximately 23% sequentially. Overall, G&A expenses fell by 35% sequentially during the quarter.

Turning to slide 6. You can see the measures we have taken to manage and preserve cash. Following a careful assessment of our expansion plan for the year, we rescheduled the openings of certain new learning centers to 2021, which will allow us to substantially reduce capital expenditure from the original RMB140 million to less than RMB50 million throughout 2020. The cutdown on physical learning center rollout will not impact our growth going forward. The growth can be driven by a combination of ramping up the existing offline classrooms, leveraging our OMO model to free up capacity and adding online classroom capacity. The new OMO model will improve capital expenditure efficiency.

Turning to slide 7. The disruption to the cost of normal work business by the pandemic has compelled us to accelerate the execution of our strategy to digitalize our operations by moving OMO sectors online, including marketing, teaching, training and communications with parents and students. As I laid out during last quarter's call, our IT team was able to transform Rise Plus [Phonetic] into a robust open technology platform that is capable of supporting interactive online teaching nationwide within 20 days. This was spearheaded by the official launch of online small group classes for our existing and new students in late February, which we began monetized in early March. As of March 31st, 2020, approximately 127,000 students across 144 cities had taken online small group classes. We also leveraged Rise Plus to provide over 40 online training sessions to over 20,000 teaching and sales staff in franchised learning centers during the quarter.

Rise Plus rapidly proved to be a reliable, stable and solid foundation for us to transition all regular courses online in late April. I'm proud to say that in just under four months, we have been able to successfully build and launch online platform and online products that offer a truly unique value proposition and experience to an increasing number of students who choose to resume their courses online.

On slide 8, we've laid out the tangible results from moving our business online. We did not simply move our regular offline courses online, we actually modified our regular courses by adding sessions with foreign teachers and created a pure online small group classes to supplement our existing students or students who prefer online courses only. The first online small group classes was launched early March and have enrolled over 31,000 students and generated RMB38 million cash revenue.

The second significant effort was to resume our regular courses online. The overall participation rate is close to 90%, a very impressive high participation rate which reflected the trust and loyalty our customers have in our brand and service online.

Early May, we started to sell dual-teacher small group classes. This is a pure online courses that we are likely to continue going forward. I believe these solid initial results reflect our ability to offer high quality classes and services online. This is enormous growth for -- there's enormous growth potential ahead of us as we scaled up our online efforts and further accelerate our digitalization strategy.

On slide 9, you can see that RISE has strong brand, unique curriculum, deep academic capabilities and 13 years of proven educational experience and results. This pandemic also helps RISE to build a proprietary technology platform suitable for online teaching and learning, train thousands of teachers that can teach both online and offline. All these attributes position RISE well to be an OMO, an Offline-Merge-Online [Phonetic] player. As we have experienced ourselves, brick-and-mortar model has seen growth slowing down as a result of strong competition from online players and the disruption impact from the pandemic.

At the same time, most of the pure online players still haven't figured out the economic model yet, often suffered from high acquisition costs and weak unit economics. The OMO model allow us to utilize our strong presence offline and online and combine it with our core competitive advantages in curriculum development, nationwide student base of over 130,000 students and proprietary platform to emerge from the pandemic, bigger, better and stronger and drive our transformation into a digitalized cross-disciplinary and skill-based OMO educational platform.

On slide 10, we've outlined the two steps that will drive this transformation. First, delivering courses online, and second, completing our digital transformation. As part of step 1, we will strengthen our core OMO curriculum by migrating portions of our offline regular courses online, freeing up space in our offline learning centers to enhance utilization and improve our return on capital expenditures. We will then diversify our product offerings beyond courses talk in English to include STEAM, math and other subjects to expand cross-selling opportunities and increase average revenue per user, ARPU.

Step 2, we will focus on generating higher ROI on digital marketing through social media and word-of-mouth, leading reference -- word-of-mouth lead referrals, while at the same time leveraging private traffic to reduce customer acquisition costs and improve monetization. This will be followed by leveraging data from across our nationwide network to standardize processes through a more detailed business intelligence system.

To help drive our digital strategy to the next stage and navigate our business through its transformation, we have brought on onboard additional highly experienced and seasoned industry professionals which can be found on slide 11. The appointment of Ms. Tai Hui, in particular, as our Chief Operating Officer, is exciting as she brings with her extensive experience in enhancing enterprise's operational excellency and digital transformation, which will be critical for transforming RISE into a digitalized education platform.

The strengthening of our management team with the new COO, Head of Strategy, Head of OMO Product Development and Head of New Media Marketing truly reflects our commitment to building a more digitalized platform.

While the pandemic came as a shock to everyone, I'm proud of the progress we have made in stabilizing our business during the quarter and look forward to working closely with my colleagues to further optimize and transform RISE. We understand there is still a lot of work to be done. Strong branding, high-quality curricular and teaching resources and the ability to offer both online and offline classes, all of which we have already had are critical to thriving in the post-pandemic era of education in China. Building an effective OMO model will ensure RISE's long-term growth and success.

We all look forward to the exciting journey ahead. Now I will hand the call to Jiandong to go through the financial results.

Jiandong Lu -- Chief Financial Officer

Thank you, Lihong. Let me now go through the financial results for the first quarter of 2020. Before I begin, please note that all numbers stated here are in RMB. As Lihong mentioned earlier, COVID-19 caused huge disruption to our business. As an online education company, we rely heavily on our offline learning center network to offer services and market our products to students.

Starting in late January, we temporarily closed all our learning centers in compliance with government regulations to contain COVID-19. All our self-owned learning centers remain closed as of today. The temporary closure of our offline learning centers has inhibited our ability to offer offline classes and market our products to prospective students. This has adversely impacted our ability to generate cash and recognize revenue. Our learning centers were in operation for only 18 days in January and were closed throughout the remainder of the first quarter of 2020, which significantly and materially impacted our financial performance for the quarter. Total revenues during the quarter, decreased by 67.5% year-over-year to RMB109 million. The decrease in revenues was driven primarily by a 64.7% year-over-year decrease in revenues from our educational programs to RMB102 million. Starting this quarter, revenues from educational programs will include revenues generated by Can-Talk, which more accurately reflects our focus and long-term strategy going forward. Revenues from educational programs in previous years have been adjusted to make them comparative.

Revenue from regular courses, namely Rise Start and Rise On was RMB74.4 million, the result of 18 days of offline operations in January. Revenues from other RISE courses, including Rise Up, Can-Talk and short-term online small group courses, and courses offered by The Edge were RMB27.6 million. Franchised revenues decreased by 84% year-over-year to RMB6.1 million during the quarter, primarily due to a decline in recurring franchise revenue, impacted by the closure of our franchised learning centers since late January. Other revenues decreased by 89.2% year-over-year to RMB0.9 million, primarily due to the impact of travel restrictions on our study tour services which have all been postponed to the summer or even a later time.

Cost of revenues for the quarter decreased by 7.7% year-over-year to RMB142.6 million. Non-GAAP cost of revenues for the quarter decreased by 8.1% year-over-year to RMB138.3 million. The decrease was primarily caused by a decline in business resulting from the COVID-19 disruption. Furthermore, we made rigid efforts in cutting costs, we managed to cut the rental expenses by about RMB8 million, about 13% compared with the last quarter. Personnel costs decreased as a result of the reduction in teachers' headcount and reduced teaching hours during the period.

Gross profit for the quarter was RMB33.6 million compared with gross profit of RMB180.6 million in the six -- in the same period of last year. Selling and marketing expenses for the quarter were RMB43.2 million, a decrease of 34.2% year-over-year from RMB65.7 million. Non-GAAP selling and marketing expenses were RMB42.2 million, a decrease of 34.8% year-over-year. The decrease is primarily due to the reduced offline marketing activities and reduced personnel costs, which were associated with the sales team downsizing and decreased incentives as a result of the lower enrollment.

G&A expenses for this quarter were RMB54.6 million a decrease of RMB11.8 million year-over-year. The decrease was mainly attributable to the reversal of share-based compensation expenses due to the actual forfeiture in the first quarter of 2020. Non-GAAP G&A expenses were RMB55.5 million, a decrease of 6% year-over-year. The decrease reflects our initiatives to cut administrative costs and to offset the adverse impact of COVID-19.

Operating loss was RMB131.4 million as compared with operating income, RMB53 million for the same period of last year. Non-GAAP operating loss was RMB127.1 million compared with non-GAAP operating income, RMB60.7 million for the same period of last year. Adjusted EBITDA loss was RMB108 million compared with adjusted EBITDA income, RMB80.5 million in the same period of last year. Income tax benefit for the quarter was RMB19.7 million compared with income tax expense, RMB18.7 million in the same period of last year. Net loss attributable to RISE for the quarter was RMB103.8 million, non-GAAP net loss attributable to RISE was RMB99.5 million. Basic and diluted net loss attributable to RISE per ADS for the quarter was RMB1.84. Basic and diluted non-GAAP net loss attributable to rise per ADS was RMB1.78 -- RMB1.76.

Turning to our cash flow performance. Net cash flow used in operating activities during the quarter, was RMB82.4 million compared with RMB5 million of cash generated from operating activities in the same period of last year, mainly due to reduced cash collection for our regular courses, which resulted from the temporary closure of our self-owned and franchised learning centers. As of March 31st, 2020, the Company had a combined cash and cash equivalents and restricted cash of RMB925.1 million compared with RMB1,022.8 million as of December 31st, 2019.

As of March 31st, 2020, total deferred revenue and customer advances was RMB776.3 million, an increase of 2.7% from RMB755 million as of December 31st, 2019. The increase was primarily due to revenue recognition for offline and online courses lagging behind cash collection. As a reminder, starting last quarter, we began reporting the number of students in class and the new students enrolled, which we believe are more accurately reflective of our business performance and provide a more meaningful comparative analysis than the previously reported student enrollment matrix. Please refer to the earnings material we issued for the fourth quarter of 2019 for a more detailed explanation for the change in disclosure.

The slide shows as of March 31st, 2020, students in class for regular courses, including Rise Start and Rise On programs was 52,585, an increase of 901 from 51,684 as of March 31st, 2019. New students enrolled for Rise regular courses in the first quarter of 2020 were 1,507 compared with 7,406 during the same period of last year. The significant decrease in student enrollment is the direct result of the closure of our learning centers throughout the majority of the first quarter of 2020, which severely limited our ability to leverage our offline channels to acquire prospective students. Students enrolled for other Rise courses, which were taught in line -- online, including Rise Up, Can-Talk and online small group classes, and other Rise short term courses and courses provided by The Edge was 32,404 -- 32,494 in the first quarter of 2020 compared with 1,470 during the same period of last year. Students enrolled for online small group classes were 31,882 in the first quarter of 2020, 92.6% of whom are RISE existing students.

Turning to the next slide. With the effect of the pandemic in China beginning to ease, we expect our performance to gradually improve on a sequential basis. Starting from the second quarter of 2020. On April 20, we transitioned Rise Start and Rise On courses online with approximately 90% of our students signing up for the online courses to resume their original academic schedule. We also launched upgraded online small group classes earlier this month, which combined with the initial online small group classes, are expected to contribute revenue in the second quarter.

With back-to-school schedules being rolled out in increasing number of regions, some of our franchised learning centers in certain parts of the country have already resumed the business offline. Taking into account all these recent developments and excluding any potential revenue from our own -- self-owned learning centers, which are expected to resume operations sometime in the second quarter of 2020, we expect revenue in the second quarter of 2020 to be in the range of RMB135 million to RMB145 million. We'll continue exercising rigid controls over cost and expenses going forward, and we also expect our EBITDA loss to narrow substantially in the second quarter of 2020. The second half of 2020 should see our business rebound from the lows of the first half of the year.

With that, I would now like to hand the call over to the operator so we can begin the Q&A session. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question today comes from the line of Sheng Zhong from Morgan Stanley. Please ask your question.

Sheng Zhong -- Morgan Stanley -- Analyst

Hey, thank you for taking my question and very impressed with cost savings. My question is on the digital and online strategy. It seems like that you accelerated this online movement. So wondering what the positioning of the online path in your overall business? And any -- and can you share with us the plan to -- on the operation of online including the student acquisition? Is it mainly from your existing students or are you targeting more broadly? And related with online student acquisition, my second question is the sales and marketing spending in second quarter and maybe the full year. So given the offline in gradual [Phonetic] resumption, so what's the plan for the summer season sales marketing spending and longer term? Because we see a smaller spending in sales and marketing in first quarter, but also the new student enrollment also lower. But I understand it's also because of the coronavirus. But going forward, what's the plan? Thank you.

Lihong Wang -- Chairwoman and Chief Executive Officer

Yeah. Sheng, thank you for the question. I will ask the strategy of the online business or the OMO business -- OMO model. And then Jiandong, you can talk about the sales and marketing plan. Sheng, as I mentioned, now we are able to offer classes both online and offline smoothly. Going forward, the thinking is, one, we will modify our offline classes to be online class/offline combination. The proportion of online will be around 25% to 30%. On a higher grade from S1 to S6, we will have 30% to 40% online. And then for the younger age K1, K2, most of the classes will still be offline. And to supplement these classes, we will offer what we call targeted enhancement classes, which are purely online with a combination of foreign and Chinese teachers. So this is the OMO model.

At the same time, as I mentioned, the online small group classes was actually pretty successful. Then we upgraded to a dual-teacher model, so one Chinese teacher, one foreign teacher. Foreign teachers mainly to teach students regarding knowledge and also the so-called the listening and speaking part of the language training. And the Chinese teacher will be more focused on how to complete a project, so-called the inquirer-based learning online. And this class has started to sell May 8th. The first bunch, we target existing students. At the same time, we will roll out to prospect students as well. This is a lower, so-called, ASP and shorter term on pure online classes which we think will continue. So this student segment is different from our existing offline students or the future OMO model students, so this target a little bit lower spending preference and pure online students.

Jiandong Lu -- Chief Financial Officer

Okay. Sheng, it's Jiandong. Let me address your question on sales and marketing. So for the first quarter of 2020, our sales and marketing expenses in total is about RMB43 million. So half of that will be the personnel costs related to sales and marketing and then half related to the market branding and also marketing expenses.

Since the culture of our offline network, offline learning centers closed, we started to try the new media marketing channels, and we watch very closely on the investment in the new channels and try to maximize kind of the return on the investment in the new channels as well. At the same time, because we just started marketing online, and it's a period for us to actually accumulate experiences, in the new media marketing. Looking for the whole year, basically, when business resume in the second quarter -- second half of this year, and we try to actually invest more in marketing in order to increase our total student enrollment. Having said that, we'll still watch very carefully on the acquisition cost per student, and we'll try to maintain the percentage of the investment in sales and marketing in line with our total -- in line with the cost and marketing expenses as a percentage of revenue in 2019. So throughout the year 2020.

Sheng Zhong -- Morgan Stanley -- Analyst

Thank you.

Operator

Your next question today comes from the line of Alex Xie from Credit Suisse. Please ask your question.

Alex Xie -- Credit Suisse -- Analyst

Hi, management. Thank you for taking my question. My first question is about second quarter guidance. So would you please give us a breakdown of your second quarter guidance? What are the assumptions for regular courses? What is the portion from the new, upgraded new online class and what's the expectation for offline resumption contribution?

Secondly, I would like to ask about your headcount in terms of teachers. I think in this quarter, you achieved quite significant cost reduction in G&A and sales and marketing, but there's a decrease in personnel costs in COGS is lower, so can you share your thoughts on that? And thirdly, I think there is still a long term loan with CTBC, have you talked with the bank? Is there any chance for the bank to ask [Phonetic] for the early repayment, or is there a risk? Thank you.

Lihong Wang -- Chairwoman and Chief Executive Officer

Yeah. Alex, thank you very much for the questions. So I'll ask Jiandong to answer the first one, the second quarter revenue guidance and the composition, then I'll talk about headcount. The CTBC loan, back to Jiandong. Maybe you'll answer the first and third -- the third question.

Jiandong Lu -- Chief Financial Officer

Okay. Thank you, Alex. On the guidance, since our offline regular course students already resumed their study online, starting from the 20th of April. And as Lihong explained, the participation rate is around 90 -- more than 90% for senior age group and around 88% for the junior age group and much higher than our originally expected. So majority of the revenue for the second quarter will be from the resumption of the studies for our offline students online. So on the normal business environment, our offline revenue per month is more than RMB100 million. So you can do the math, 90% of the students resume their classes online. And another factor you have to consider is when we move the students online, they only consume half of their course hours as compared to their offline class hours. So this offline regular courses online will contribute roughly like 80% of our revenue in the second quarter.

And we continue to harvest from our online small group classes. As Lihong mentioned, we had a cash revenue of about RMB38 million recognized in the first quarter. And only about half of that, less than half of that has been recognized in the first quarter. So the online small group classes will continue to contribute roughly RMB20 million in the second quarter. And also because our franchised revenues will increase, because the franchised learning centers already started operations, which cover roughly about 100 -- already 15,000 students. So we do see the increase in the recurring revenues recognized in the second half -- second quarter of 2020 for our franchise revenues. But we didn't take into account the fact that some of our own learned -- our own -- self-owned learning centers may resume business probably in the second half of the second quarter. So that's going to be another addition. However, in our guidance, we didn't take that into consideration. Is that clear to you, Alex?

Alex Xie -- Credit Suisse -- Analyst

Yes. Thanks.

Jiandong Lu -- Chief Financial Officer

Okay. So your question on the financing. We did start a conversation with our lender, the CTBC and shared with them the impact on our business from the COVID-19 and what happened to our cash burn in the second quarter and likely to be in the first quarter and likely to be in the second quarter and the situation. And so basically, our lender has already verbally granted approvals to waive our covenants compliance. At the same time, they are going to -- in terms of the principal repayment, which is about RMB19.25 million due in September 2020, that's going to be divided in two installments. RMB9.25 million will be paid in September, and the balance will be postponed to the first quarter of 2021. So with ample cash in the bank, cash balance in the bank, we don't see any liquidity issues. And we are pretty -- very confident that we will sustain given the uncertainty environment.

Lihong Wang -- Chairwoman and Chief Executive Officer

Yeah. So overall, I think the second quarter guidance is very conservative because we cannot predict when the self-owned learning centers will open. But very likely, you see that government issued guidance for kindergartens to open in early June, both in Shanghai and Beijing. So we do believe that we will be the next one to resume operations. In terms of the head count, in fact, the number we disclosed by the end of March, in some way, is only about -- sorry, just [Speech Overlap].

Jiandong Lu -- Chief Financial Officer

[Indecipherable]

Lihong Wang -- Chairwoman and Chief Executive Officer

Yeah. The number of headcounts continue to decrease along the way. In March, we disclosed the number around 37,000. And in fact, even within that, around 400 are furloughed, which is underutilized or unutilized. By the end of April, the total headcount already reduced to 34,000. And so this is a 15% down from beginning of the year. The government actually did not allow enterprises to lay off people in February. So we started in March, and we continue to optimize personnel compositions.

We do mostly keep high productivity sales person and teachers, but we also optimize who are not productive. Right now, the teacher headcount and the sales force headcount are slightly down, but we do think it is the opportunity that we can later on add on better, more qualified people to have the growth in the second half of the year.

Jiandong Lu -- Chief Financial Officer

Sorry, Alex, let me just correct one number. I think Lihong was mistaken in quoting the headcount numbers. By the end of March, in 2020, our total headcount is 3,700.

Lihong Wang -- Chairwoman and Chief Executive Officer

Yeah, yeah, 3,700, yeah. Yeah, yeah, it's not 37,000.

Jiandong Lu -- Chief Financial Officer

As of early May, the headcount is about 3,400.

Lihong Wang -- Chairwoman and Chief Executive Officer

That's right. Yeah.

Alex Xie -- Credit Suisse -- Analyst

Thank you, [Indecipherable].

Operator

[Operator Instructions] I think that we have no further questions on the line today. [Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Mei Li -- Investor Relations

Lihong Wang -- Chairwoman and Chief Executive Officer

Jiandong Lu -- Chief Financial Officer

Sheng Zhong -- Morgan Stanley -- Analyst

Alex Xie -- Credit Suisse -- Analyst

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Blue Bird Corporation (NASDAQ:BLBD)
Q2 2020 Earnings Call
May 14, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks

• Questions and Answers

• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Blue Bird Corporation fiscal 2020 second-quarter earnings conference call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mark Benfield, executive director of profitability and investor relations.

Please go ahead, sir.

Mark Benfield -- Executive Director of Profitability and Investor Relations

The audio for our call is webcast on our website, blue-bird.com, under the investor relations tab. You can access the supporting slides on our website by clicking on the presentations portion of our IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to materially be different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC.

Blue Bird disclaims any obligation to update the information in this call. This afternoon, you will hear from Blue Bird's president and CEO, Phil Horlock; and CFO, Phil Tighe. Then we will take some questions. So let's get started.

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Phil?

Phil Horlock -- President and Chief Executive Officer

Well, thanks, Mark. Well, good afternoon, everyone, and thank you for joining us today for our second-quarter earnings call for fiscal 2020. Before I jump into the presentation, I'd like to give a brief introduction on how I assess our position today. A lot has changed since our first-quarter earnings call in January, and these are clearly not normal times, but let me just state that Blue Bird is well positioned to weather this unprecedented pandemic and we will continue to grow and thrive in the long run.

We're in a very strong financial position with ample liquidity. We have a history of robust cash generation, a culture of winning and leadership in growing segments, a fully defined margin growth strategy and an experienced team with a proven track record of delivering results and handling difficult times. COVID-19 has not changed any of these factors. As you will see shortly, we had a great second-quarter result.

We expect the third-quarter volume will be down from last year, as not surprisingly, all this have slowed with schools being closed since mid-March and shelter-in-place mandates established throughout the U.S. and Canada. However, as states reopen and school transportation teams return to work, we expect to see new bus orders increase, with higher fourth-quarter production in support of school start. We have strong business fundamentals evidenced by our year-over-year profit growth into the past seven consecutive quarters, and we have taken austerity measures to preserve cash.

We increased our revolving credit facility as an insurance measure, and we've acted swiftly and decisively to protect our employees and to secure our supply chain so that we continue to build and deliver buses to our customers on time. In particular, I'd like to give special thanks to our incredible employees for their commitment and dedication to Blue Bird over the past several weeks. The coronavirus has impacted almost every aspect of our daily lives, and we are all facing personal uncertainties that have -- that are not of our own making and over which we have limited control. Despite these unprecedented challenges, I've been so proud of the positive attitude and outstanding morale of the Blue Bird team in ensuring we stay open for business and to deliver buses that will keep our children safe and our company healthy.

So with that introduction, let's move on to Slide 4 and take a closer look at the state of our business. As the headline says, we are confident in the state of our company and our business outlook despite the uncertainties we are all facing. We delivered strong financial results in the second quarter with substantial growth in volume and net sales. Importantly, our average selling price was 7% higher than a year ago, reflecting a combination of annual pricing and a richer mix of higher-priced alternative fuel-powered buses, which is a new record mix for the second quarter.

Together with cost savings from our ongoing transformation initiatives, our three-pronged profit growth strategy, namely pricing for economics, growing alternative fuels and reducing structural costs, delivered results once again this quarter as it has done over the past two years. In the second half of March, we took decisive action to address increasing employee concerns over the growing number of coronavirus cases in Middle Georgia, where our Fort Valley production facility is based. Despite the fact we have no confirmed COVID-19 cases among our employees at the -- additionally, since several of our suppliers have been forced to shut down their operations, we took a decision to suspend production for three weeks, commencing in the last week of March. Operation employees were furloughed, and we assisted them in applying for federal and state unemployment benefits during this period.

We were successful in achieving classification as an essential business in both Georgia; and Ohio, where our parts distribution center is located. And we're able to restart full production on April 20th. We have instituted strict measures to control the risk of employee infection in the plan, which I will cover later. I can tell you the employee morale and enthusiasm of being back to work has been outstanding.

Early this month, we increased our bank revolving capacity from $100 million to $142 million, and we now have ample liquidity to manage through this uncertain time. We also implemented a number of austerity measures to preserve cash, including limiting capital expenditures, virtually eliminating travel and significant SG&A reductions. As a consequence of our business continuity actions, we have now filled our production slots through June and are now working on filling fourth-quarter slots covering July through September. Turning to the industry outlook and the present market in general.

Not surprisingly, COVID-19 has had an impact. Since mid-March, we have seen incoming orders for school buses at a lower rate than prior year, which should not come as a surprise to anyone with schools being closed and shelter-in-place mandates being widespread. Our expectation, supported by the views of our dealer network, is that the order rate will increase through June as states reopen and school transportation employees return to work and the demand for new buses for school start will be significant. Nevertheless, we believe it unlikely that the full-year industry will recover to the prior forecast level of 34,000 buses and anticipate an industry of between 30,000 to 31,000 buses or 10 to 12% below the prior forecast.

We do expect that some buses required for school star will spill over into the first quarter of fiscal 2021, as the lower order rate over the past several weeks cannot be recovered by school start. Bottom line, we are well prepared to manage our way through this pandemic, but the uncertainty of predicting the economic outlook requires that we withdraw guidance at this time. We expect to have a clearer view of the outlook over the next four to six weeks as states reopen and school transportation teams return to work. Let's now turn to Slide 5 and review the key financial results for the second quarter.

We had a very strong second-quarter financial performance. Adjusted EBITDA of $12.7 million was $0.5 million over last year and our second highest profit for this quarter in more than 10 years. Importantly, this profit included production cost penalties of about $3 million due to COVID-19. As I mentioned earlier, this was also our seventh consecutive quarter where profits increased over the prior year.

Unit sales of almost 2,600 buses were 14% above last year, with net sales revenue at a substantial 21% higher than a year ago. Our average bus selling price grew by 7%, representing increase of more than $6,000 per unit. So overall, this is a really strong revenue growth performance. Adjusted free cash flow in the second quarter was $38.2 million, an increase of about $25 million over the last year.

And adjusted net income of $2.8 million and adjusted diluted earnings per share of $0.10 were down $1.1 million and $0.05, respectively, from a year ago. Operationally, there were three significant results in the second quarter that bolstered our profits, another cornerstone of our margin growth strategy. First, at 49% sales mix for alternative fuel-powered school buses, we beat last year's second-quarter record by seven points. We remain the undisputed market leader in the fastest-growing segment of the business.

Second, we saw earlier that the pricing we took in July 2019 to recover economics is holding and is a key contributor to the $6,100 increase in average bus selling price. And third, our transformation initiatives to reduce structural costs encompassing purchase material, bus design and manufacturing are delivering ongoing savings and are on track. As I've communicated on prior earnings calls, these three initiatives represent our key strategy to drive ongoing profit and margin improvement. And finally, we are in a strong liquidity position to weather the COVID-19 pandemic.

At the end of the second quarter, our liquidity was $97.2 million, and we have since strengthened that position with a $42 million increase in our revolving credit line. Overall, I am very pleased with our second-quarter financial results, which we achieved despite the cost impact of COVID-19. And in particular, I'm pleased with our underlying operating accomplishments. Let's now take a closer look at our second-quarter financial results on Slide 6.

I touched on many of these financial results earlier, and Phil Tighe will run through the details later and provide more texture behind the overall numbers. I think I can summarize this very easily by saying that, for the second quarter and for the first half, adjusted EBITDA and net sales revenue were up from last year for both the bus business and the parts business. Through also the momentum we have coming out of the first half, total net sales were up 11% and adjusted EBITDA was up 7% in the first six months of the year. Turning now to Slide 7, let's take a closer look at our alternative-fuel bus sales performance.

Despite the adverse impact of COVID-19 and inherent slowdown of bus orders, the mix of bookings and backlog of alternative fuel-powered buses remained strong at 46%, equal to last year's record mix at this time of the year. Our market share remains a strong as ever in this segment and is presently running at about 65%, led by propanes with a share of almost 80% of that segment. Significantly, 216 customers have purchased or ordered alternative-fuel buses from us for the first time ever this year. That's on top of more than 400 customers who tried alternative fuel options last year for the first time.

Importantly, our alternative fuel-powered buses have enabled us to conquest new business from our competitors, bringing 99 new customers to the Blue Bird family so far this year. Those are compelling facts, and with the high customer loyalty we achieve from these products, it's a great endorsement of our exclusive alternative-fuel buses, the Blue Bird brand and our dealer network. So it's clear. We are not slowing down in this segment of the industry.

No other school bus manufacturer comes close to our alternative fuel sales mix or our market share. So far this fiscal year, we have either sold or have firm orders in hand for more than 130 electric bus orders, and we expect more to follow with all the customer interest we are seeing for the newest addition to our alternative-fuel lineup. In fact, this number will grow to more than 150 orders by the end of this week. This is a very dynamic order process that we operate in.

Looking forward. A vast majority of the VW mitigation funding is still ahead of us and will help us boost sales over the next three years or so, with many states earmarking specific funds for school bus purchases. We are really pleased with the success we've had so far from these funds that have been issued. With the widest range of alternative fuel-powered buses; the most modern and proven propane, gasoline and CNG engine in the industry which is exclusive to Blue Bird through our expanding partnership with Ford and ROUSH CleanTech; and our leadership position in low NOx emissions, we are well positioned to capitalize on the VW funding and other growth opportunities going forward.

In summary, I'm very proud of our strong and undisputed leadership position in alternative fuels. And with less than 15% of school districts having purchased an alternative fuels-powered school bus today, we have plenty of runway ahead for continued growth. Let's now change gears somewhat and turn to Slide 8 and spend some time looking at how the COVID-19 pandemic has impacted Blue Bird and, importantly, how we are dealing with it. Schools were one of the first institutions to react to the pandemic, with the first closings starting on March 15.

By the end of March, over 90% of U.S. states and Canadian provinces have closed all their schools. Since then, almost all regions have confirmed that schools will be closed until the next full year. Not surprisingly, school closures have resulted in major disruption to our business, and we have seen a significant slowdown in school bus orders from mid-March to present.

Key to the slowdown in orders is that school transportation staff were confined to working from home. And school bus service operations came to a standstill. Additionally, school board meetings were eliminated or postponed, and when they did meet, agendas were focused on continuity of education and school reopening and not necessarily procurement of school buses. But as states begin to reopen from mid-May and shelter-in-place restrictions are being lifted, we are now seeing a return to work and increased interest and quotes for new buses as school transportation staff focus on their school bus needs for school staff.

Through June, we anticipate a significant step-up in demand as new bus orders are placed for school start delivery, and this view is supported by feedback from school transportation directors. Following the slowdown in orders for more than two months, however, it is infeasible to deliver all bus needs for school starts. Consequently, the new school sales in fiscal 2020 is now forecast to be in the 30,000 to 31,000 units range, some 10 to 12% below prior forecast. We do anticipate additional sales in the first quarter of fiscal 2021, however, as bus deliveries will need to be made at the school start.

There is simply too much uncertainty today around the economic and social impacts of COVID-19, such that, as I mentioned earlier, we are withdrawing financial guidance for fiscal 2020 at this time. We should have a clearer picture in the next four to six weeks as business resumes. Let me now turn to Slide 9 to cover Blue Bird's response to the COVID-19 pandemic. Classified as an essential business in both Georgia and Ohio, along with virtually all of our dealerships, our prime objective is business continuity.

As you can see on this slide, successful business continuity requires three critical elements: one, the safety and well-being of our employees; two, continuous production and timely receipt of material from our supply base; and three, sufficient liquidity and robust plans to generate and preserve cash at Blue Bird. We have focused on all three of these elements. First, robust protocols are in place to ensure a safe workplace, including a mandatory temperature check of all individuals entering the plants each day, wearing of masks and social distancing in the plant environment. We are also working with the Georgia National Guard to have all Blue Bird on-site employees tested for COVID-19, and to date, more than half of our plant employees have been tested.

Two, we work as well with the suppliers to address critical inventory needs, necessitating expedited shipping as needed and shuffling of production sequencing to handle timing of parts and component deliveries and bringing onboard additional suppliers where practicable. And three, our own austerity measures to preserve cash include significant capital expenditure reductions and expense cuts on all nonessential items, furloughing production employees during shutdown while facilitating state and federal payments of their unemployment benefits and increasing liquidity through our revolving credit line. All of these actions are helping us to manage through this difficult time, with employee well-being and business continuity as the major objectives. As we face these uncertain times, we haven't taken our focus away from driving cost reductions.

Let's now take a closer look at how transformation initiatives to improve cost structure are helping us today and in the future. Let's turn to Slide 10. We've shown this slide over the last two earnings calls, and it illustrates the progression of our transformational initiatives of over the past two years and into fiscal 2020. Importantly, you can see this as a cumulative approach where additional processes and tools are being added as we strive to drive down total costs.

We began Phase 1 in fiscal 2018; and our initial focus was on reducing purchased material costs and services through a combination of initiatives, including new commercial agreements with suppliers and resourcing, with minimal product design change. In fact, you might recall that in fiscal 2018 we recorded savings of over $20 million from these actions. We continued to pursue this initiative in fiscal 2019 and began to add design changes to our process to reduce costs without compromising quality. In this second phase, we also focused heavily on the build and launch, testing and validation of our all-new robotic paint facility, which also necessitated plant rearrangements to optimize our process.

We achieved additional savings of $18 million in fiscal 2019, and these actions continued into fiscal 2020. In fiscal 2020 and beyond, Phase 3 now supplements the other processes by driving down the costs of production both in our fully operational robotic paint facility and from focused plant productivity initiatives. Our new automated paint facility provides the opportunity to reduce rework with increased first time rate capability, to reduce labor and material costs through robotic application of paint and to achieve service and warranty expense and to deliver higher rate time capacity. We are applying engineering resources to focus on design-for-manufacturing capability targeted at reducing production costs and improving quality and rework.

And we are confident of achieving significant efficiencies in the months and years ahead. Many more efficiency actions are planned over the next few years. This systemic and cumulative approach to driving down total costs over multiple years is key to delivering higher gross profit and EBITDA margins. We will continue to share the results with you in our quarterly earnings call.

I'll now turn it over to Phil Tighe, who will take you through the financials. And I'll be back later for the fiscal 2020 outlook and wrap up the formal presentation. Over to you, Phil.

Phil Tighe -- Chief Financial Officer

Thank you, Phil. And good afternoon to everyone. It's my pleasure to be able to share with you the financial details of Blue Bird's second quarter for fiscal year 2020. The material that we are discussing today is over close of April 4, 2020, and March 30, 2019, or FY '19.

Detailed material is available in our 10-Q which was filed today. We encourage you to read the 10-Q and the important disclosures that it contains. You will note that we have included two new items in our 10-Q filing. The first is a discussion about the potential impact of COVID-19.

This is included in both the MD&A and as a new risk factor. The major issues that Blue Bird and most other companies face is uncertainty on many levels: demand, availability of funds to buy products, safety of people and supply of components. As Phil has mentioned, the uncertainties have forced us to withdraw guidance for fiscal year 2020. We also included a subsequent event, and Phil has already touched on this.

Blue Bird did go to our bank syndicate for an increase to our existing revolver. We have recently successfully closed the second amendment, and the revolver is now at about 142 million, up by 42 million from the prior level. We see this as prudent planning to ensure adequate liquidity in most potential risks environments. The appendix attached to today's presentation deals with reconciliations between GAAP and non-GAAP measures mentioned in this review, as well as important disclaimers already mentioned by Mark.

There were no significant accounting pronouncements adopted in the second quarter of FY '20. And so now let's move to Slide 12 and take a look at a summary of key results for the second quarter. So this slide summarizes some important GAAP and non-GAAP measures for our second quarter and for the same period last year. Blue Bird, as Phil has discussed, remains very focused on our ongoing margin growth strategy, improving our alternative fuel mix, improving the revenue that we get for each bus and transformational cost initiatives.

Net revenue, as you can see on the slide, was 255.4 million, up 43.8 million or 28 -- or 21% versus last year. Higher bus volume of 323 units was worth about 28 million of improvement. And in line with our strategy for higher bus revenue per unit, 16 million was contributed by an incremental 7% revenue for each bus sold, which translates into about $6,100 per unit. The bus revenue per unit increase was due to pricing actions that we took in July of fiscal year '19 to offset the impact of inflation; as well as the higher mix of electric vehicles, alternative vehicles; and a successful program implemented by our sales team to really try to improve the revenue we get on each site.

Gross margin, you can see, was 9.5%, down about 280 basis points versus a year ago. The deterioration in margin is almost entirely the result of the unusual cost factors into the second quarter, including the impact of COVID-19 and launch costs associated with rearrangements being made in our assembly facility. We will talk more about this on future slides. Blue Bird reduced the net loss incurred in the second quarter of fiscal year 2020 to about six tenths.

Improved EBITDA was largely offset by higher interest costs and higher depreciation, plus some favorable income tax. On an adjusted basis, net income was 2.8 million, down 1.1 million versus last year. Adjusted EBITDA of 12.7 million was up by 0.5 million compared with prior year, and details will be discussed on the next slide. The EBITDA margin was 5%, and the deterioration versus the prior year is more than explained by the unusual actions that we've previously described.

Diluted earnings per share of -- was a loss of $0.02, and this was $0.01 better than the prior year. Adjusted diluted earnings per share of $0.10 in the second quarter was $0.05 less than in the prior year. Cash at the end of the second quarter was 34.1 million. This was up by 8.5 million compared to last year.

At the end of the second quarter, we had 30 million drawn on our revolver versus 20 million last year. Importantly, this left us with an additional 63 million available, and that was prior to the 42 million that we recently had approval from the banks. Debt was 208.6 million. This was down by 1.3 million, including the additional amount that was drawn on the revolver of 10 million.

In conclusion, we made good progress on improving top line revenue and importantly revenue per new bus sold. We made good progress on generating cash and meeting required covenants in this critical COVID-19 environment, and we still have a way to go to get our costs of production moving in the right direction. And again we will talk about that on the next slides. If we now move to Slide 13.

This slide shows the key drivers in the change of adjusted EBITDA from second quarter of fiscal year '19 to second quarter of fiscal year 2020. Some key takeaway items: Market factors, these are volume, product mix, pricing and customer mix within parts sales; and improved about 10 million versus the prior year. Volume was up by about 323 units. This was worth 3.6 million.

The balance of the improvement came from pricing, product and customer mix. We continue to benefit from the favorable mix that we've seen over prior quarters and the pricing that we continue to take, and this is clearly a very positive impact on our results. Transformational cost initiatives added about 3 million in the second quarter. And we continue, again, to benefit from these aggressive cost-reduction actions, and there are more to come as the year progresses.

Two key factors had a substantial impact on the second quarter, about 6 million, but are considered to be probably confined to fiscal year 2020. Launch costs are due to continuing inefficiencies until all of the plant and sourcing changes are in place to enable the achievement of the full benefits from our new paint shop and other plant rearrangement activities. We expect these changes to be largely completed during the second half of fiscal year 2020. COVID-19 precautions caused us to close the plant in Fort Valley during the last week of March and for the first two weeks of April.

Costs incurred included costs to continuously sanitize the plants, protective gear for workers and equipment to monitor worker temperatures as they enter the plant, expenses to support our employees during shutdown and a loss of overhead absorption. In addition, our JV plant in Canada was also closed for almost the whole of March and, by the way, was closed for all of April as well. And this contributed to the loss that we see in the second quarter. Efficiencies and other costs were unfavorable in fiscal year '20, and that also was worth about 6 million.

These included higher healthcare costs; a cleanup of obsolete and scrap material, as we had moved all of our inventory from the Fort Valley facility to a central warehouse making the team really did a deep dive onto obsolete and scrap material. And we have written that off, so I think that's largely behind us. And then higher overtime and other labor costs. Importantly, we've experienced improved efficiencies since the plant started operating again on April 20, and our team is working on plans that will improve manufacturing costs through the balance of the year.

We continue to work on improving both the per-unit revenue and cost structure of Blue Bird as key enablers for achieving our long-term profit objectives. The results in the second quarter are encouraging despite the impact of ongoing [Inaudible] COVID-19. Bus revenue per unit, as we said, was up by $6,100 a unit or 7.1%. Transformational initiatives continued to result in cost reductions, and on a year-to-date basis, our team has improved costs by $5 million.

And these activities will continue with the launch of new actions in the second half. And finally, manufacturing efficiencies since the plant reopened on April 20 are running at or above 90% compared to the mid-80s,in prior weeks, in the second quarter. Let's move to Slide 14 and turn our attention to free cash flow. Generation of cash and maintaining adequate liquidity is critical at anytime in business, as we all know, and it's even more so during an unusual time such as the present pandemic. Fiscal year 2020 second-quarter adjusted free cash flow was 38.2 million, as compared to 13.5 million for the same period last year.

This was a significant improvement, as you can see. Free cash flow also was 32.8 million, which was 23.3 million better than the prior year. The favorable results in free cash flow were largely from normalization of trade working capital. Our trade working capital is very seasonal and fluctuates with volume.

As you know, the first quarter is very low, and we'll start to build second quarter. We typically see a cash drain in the first quarter due to lower volumes and December holiday shutdown. As operations resume to a normal level in the second quarter and volumes increased, we see our traditional negative working capital model providing us with incremental free cash flow. For those who are interested: You can see on our balance sheet that accounts payable were 75 million in first quarter and grew to 116 million in the second quarter.

This included no changes in supplier terms and conditions, and all suppliers were paid on a timely basis. It is purely a reflection of the increase in activity. We reduced our cash outflows of capital spending year over year by 7 million, and taxes were improved by $2 million. During the disruption caused by COVID-19, we have strengthened our focus on cash and cash flow.

Three items: One, we assigned one of our senior VPs to take charge of the cash conservation team, covering all aspects of our business. This was an important step, and the team is presently charged with delivering about 40 million of identified cash improvement items in the second half. No.2, we have adopted a 13-week cash forecasting process that forecasts cash sources and usage by week and allows a weekly analysis of cash movements versus forecasts. And finally, No.

3, as we have discussed, we added 42 million to our existing revolver of 100 million. Last slide addresses improving debt, leverage and liquidity, Slide 15. Liquidity was at 97.2 million at the end of the second quarter. After giving effect to the May 7 amendment to the credit facility, which increased our available revolver by 41.9 million, our pro forma liquidity would have been 139.1 million at quarter end.

We believe that we are well positioned in terms of liquidity to weather further disruptions from the coronavirus issue. We took a three-week shutdown in the last week of March and first two weeks of April, which caused the majority of our cash inflows. During that period, we continued payments to our suppliers, which amounted to a weekly amount of 15 to 20 million. Our bus assembly operations restarted on April 20, and we are now seeing a normalized level of cash receipts.

So the combination of the reopening of production and having an order backlog that has now flown through early July provides a steady and predictable revenue stream. Increasing our revolver adds further cushion to liquidity, and significant cash conservation actions worth up to 40 million are being pursued and have already been identified. We believe the combination of these three factors provides us with a strong outlook for liquidity for the balance of the year and enables us to meet all of our obligations. Importantly, our net leverage ratio for the second-quarter stood at 2.4:1, which is well below the 3.75:1 threshold.

Debt at the end of the quarter was 208.6 million, which was down 1.3 million versus prior year despite an additional 10 million drawn on the revolver and a high amount of trade working capital. I will now turn the discussion back to Phil Horlock for some important comments about the outlook for the balance of fiscal year '20 and the actions we are taking. Over to you, Phil.

Phil Horlock -- President and Chief Executive Officer

Thanks, Phil. So let's now cover the fiscal 2020 full-year outlook. Turn to Slide 17. As the headline says, we are confident in our ability to weather the storm we're all experiencing, but the economic and market outlook remains uncertain.

This headline isn't unique to Blue Bird, as you've seen many companies giving the same message over the past several weeks, but we are confident in our ability because, as our second-quarter results showed, Blue Bird's business fundamentals remained strong. And we'll continue to deliver on our profit growth strategy as we have done so over the past two years. Turning to the market, it's worth noting that customer demand remains very high for new school buses, as 25% of the U.S. and Canadian fleet of buses are 15 years of age or older.

This represents more than 150,000 buses that customers want to replace, so customer demand is very high. The limiting factor is funding availability. While property values and property taxes should continue to be the major funding mechanism for school buses, and we expect them to remain strong in the near term, the impacts of lost state sales taxes and state income taxes could impact overall future state funding for education, which includes school buses. The precise impact and potential federal government assistance are unclear, although the recent CARES funding action provided $16 billion in late April to assist in education needs for K-12 public schools.

However, if we're putting into context the size of school bus expenditures versus the total annual costs of education for K-12 public schools, at about $2 billion a year, the annual capital outlay of the new school bus purchases typically represents less than 0.3% of the total capital and expense budget of $700 billion for education in the United States. I think it's important to recognize the small portion of the education budget that is used to purchase school buses each year, with property taxes being a major funding source. It remains to be seen, however, how states will allocate their funding going forward. Our immediate focus at Blue Bird is on protecting our employees' safety so that we can ensure business continuity.

In this regard, we have lowered our production rate through June while meeting this lower incoming order rate we have been seeing since mid-March, when schools closed and shelter-in-place mandates were set. We are now beginning to fill our fourth-quarter production slots. And we expect a significant increase in orders in the coming weeks as school transportation staff return to full-time work and focus on their bus needs for school star. We are preparing to meet an increase in fourth-quarter demand, but the third-quarter volume will be down from last year because of the slowdown in orders over the past several weeks.

We also expect strong volumes for the first quarter of fiscal 2021, with the recent delay in orders for school buses causing deliveries to spill over into the next fiscal year. Like many public companies have done, however, we are withdrawing guidance at this time. As I mentioned earlier, we expect to have better clarity on the outlook in the next four to six weeks as states and provinces open up and business resumes. While our latest outlook for the industry in fiscal 2020 is now between 30,000 to 31,000 buses or 10 to 12% below our prior forecast, it's worth noting that the school bus industry has averaged about 31,000 units a year over the past 30 years.

I think this helps to put the new industry forecast into context. It is still a relatively strong industry forecast even in these difficult times. In responding to the lower industry forecast, I am announcing today that we have taken the decision to pull forward our plan to move to a single-shift production schedule from two shifts today, and we'll implement this action on June 1st. We believe this to be a prudent move and will improve cost and efficiencies going forward.

This will require moving our operating pattern, moving from four 10-hour production days per week on two shifts today to five 10-hour days per week on one shift at straight time. Looking forward, we will be addressing production capacity constraints in the first quarter of fiscal 2021 to ensure we can meet second half peak season demand next year with a sustained single-shift production schedule. This is a great example of Blue Bird restructuring its business in response to these difficult times and making us more competitive in the future. In conclusion, I just want to end with my comment that I made at the beginning of this call.

Blue Bird is well positioned to weather this unprecedented pandemic. We have ample liquidity. Our business fundamentals are strong. We will take whatever restructuring actions are necessary to get through this period, and we will continue to grow and thrive in the long run.

That concludes our formal presentation. I will now pass it back to our moderator to begin the Q&A session.

Questions & Answers:

Operator

[Operator instructions] And first, we'll hear from Eric Stine with Craig-Hallum

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Hi, everyone. Thanks for taking the questions. So you just mentioned it a little bit on the funding side. And I know that near term, some of the issues, it's more about timing rather than availability, but even though it's a small part of spending, school spending, talking about school buses, I mean, what are your thoughts long term given municipal budgets stretched given what's going on right now? Is that something that you feel like would be relatively insulated from maybe some of the other needs of the municipality? Or how do you think about that?

Phil Horlock -- President and Chief Executive Officer

Well, I think, Eric, that's why we talk about withdrawing guidance at this time. It's really tough for us to say, I think, what the outlook is. Businesses are just starting to reopen. States are reopening.

Shelter in place are being lifted. And we're going to see what the outlook is. The federal government, do they have an appetite to support the states? Because obviously states have lost significant amounts of sales taxes with -- over the last couple of months or so. State income taxes have been obviously impacted too, so I just -- we're going to see how that plays out.

I mentioned that a relatively small piece of what -- the school budget is for bus purchases and only just to give a reference point there. And because our major funding method is that 70% of school bus funding is still from property taxes, and we expect they'll stay high. Housing prices are still holding up. The collection of those funds is critical for our bus business, so -- but we're just going to see how this rides out.

Obviously, we've taken out 10 to 12% this year from a full industry outlook. So that's the near-term look. We're just going to see how the government reacts and when budgets start to get released. The first sign of that will be in June time typically.

That's when education budgets for schools are set and approved by school boards, and that then triggers the buying of buses late in the seat as schools start. So we should start to see that in the next four weeks or so and get a clearer view of what -- the picture, but unfortunately, right now, like everybody else, I'm just, we're just -- we can conjecture. We can try and do a forecast, but we have just limited information, I think, at this point. We should -- these things move so rapidly around.

I do – I would say, we feel confident -- I do feel confident, into the balance of this year, that we'll see an increase in volume and increase in the requirements coming through from June onwards to support at school start the need for new buses. I don't think that will happen.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Yes, OK. And maybe just turning to cash generation. Obviously, you're pulling guidance. In your previous guidance, you've been talking about for the last three quarters of the year generating, I think, $120 million plus.

I mean I know, with that withdrawn guidance, is a lot of uncertainty, but just any commentary on the cash generation expectation going forward? I mean clearly that's still a big objective and very likely for you. Is that fair to say?

Phil Tighe -- Chief Financial Officer

Eric, this is Phil, the other Phil. So cash generation from the traditional source, which is sales and -- which will be down as we go through at least the third quarter. The fourth quarter is still a little hard to predict, as Phil said. And we want to get a lot of input on that until we -- I mean until some of the school budgets start to sort themselves out.

We did mention in the call that we've put a team in place to reduce a lot of our cash spending for the balance of the year. They've got a target of 40 million initially. And they've identified all of the items to get to that target, so we're very comfortable that they will succeed. And if need be, we'll squeeze that a bit more, but I still see that we will have positive cash in the second half.

And we just can't predict exactly where advantage is.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

No, I get that, I mean, but it sounds -- I mean, yes, uncertainty, but I mean, from a high level, the typical pattern of that first quarter there's a big usage and then that flips for the remainder of the year, it sounds like that's still in place.

Phil Tighe -- Chief Financial Officer

Yes.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

OK. Maybe last one for me -- yes.

Phil Horlock -- President and Chief Executive Officer

I just say, I think there are still -- I just think -- I wanted to say I think, as Phil mentioned, I mean, well, yes, well, our volume is down. I think the combination of lower volume, but we have been working on these cash preservation, cash conservation initiatives and cash generations, I will call them -- will cause us to be cash flow positive this year. We don't anticipate we're eating into our base core business. We are -- we intend to be positive this year.

And we'll see how that unfolds, but we have plans in place to do that and that's the goal.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

OK, got it. Last one for me. I -- one of the unintended consequences of COVID, I think, is just more of a focus on the environmental side. Any thoughts about, given your leadership position in alternative fuels, ability to pick up share as things "normalize," whatever that looks like going forward?

Phil Horlock -- President and Chief Executive Officer

Well, we certainly always like to try and pick up share. And I think, when you look at the fact that even in a bumpy last month of the year and the last quarter we just had, we still picked at least -- We've done quite a bit of conquest business, which frankly is share growth for us. I think I mentioned on the call that 65% market share for us in alternative fuels actually is up a little bit from last year. And we're almost 80% on propane.

So yes, we always try to emphasize those products. I think it's great for the environment. It's great for the children who ride our buses. It's the right thing to do.

And the fact we're growing it again a significant 7 percentage points up in our mix in this last quarter, I think, bodes well for us. So yes, we intend to keep trying to go forward. And obviously we can pick up share, particularly in what I call school district business. That's our bread-and-butter business, selling directly to our schools, through our dealer channel to the school districts.

So that's our goal, to keep pushing on that front.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

OK, thanks.

Phil Horlock -- President and Chief Executive Officer

Thanks Eric.

Operator

[Operator instructions] Next, we'll hear from Craig Irwin with Roth Capital Partners.

Craig Irwin -- ROTH Capital Partners -- Analyst

Good evening and thanks for taking my questions. So your prepared remarks seem to point to your confidence in a V-shape recovery and a strong inflection up out of what you've been working through right now. Can you maybe share with us the specific data points that give you this confidence and this optimism about the next few months? And second part of the question is, what portion of your production slots for the fourth fiscal quarter are covered by orders in hand? And how does that compare to last year?

Phil Horlock -- President and Chief Executive Officer

Well, let's take -- let's -- without giving specifics because we don't want to give too much specific on what we call our bookings and backlog and where we stand today. But I think, if you look at the decline we're showing in the industry projection, that's pretty much what we see right now in our bookings and backlog, yes. And that's what's really happened in the last couple of months as pandemic has really taken hold. So that number of, I think we'll say, 10 to 12% is probably about where we think we would be looking to be down.

And that's what we're seeing right now, on that pace. Well, in terms of where we are right now to filling our slots, we're into July. So if -- we know our volume in the third quarter. We know what we have to build.

They're all filled through June, and we're filling July right now. So we've got August, September and about three weeks in July still to go. That's where we are. When it comes to optimism on what it'll look, I -- first and foremost, we talk to transportation directors.

I mean these are the guys who are out there every day trying to keep kids safe, and they're the guys who buy our buses. They're the guys who talk to their school boards about what their needs are. And these are our dealer network, as well as feet on the ground out there. In terms of real hard data points, we look at property values.

We correlate -- our business correlates very closely with property taxes. And as values of homes still stay high, no one's having collapsed in the last couple of months, we remain optimistic about that being the major funding mechanism. As I said before, though, the big unknown is we're not going to have the overall state budgets because we've clearly lost sales tax revenue. We've lost state income tax revenue.

We don't quite know what the federal government is going to do to support that. What we found interesting was, last week of April, as I mentioned on my -- in my comments earlier, the CARES funding did allocate $16 billion to education for public schools. These are a -- pretty powerful doing that so quickly in this pandemic process. So I think, looking at that, house prices, talking again to directors; and while we still wait to see as June unfolds and hearing what are school boards approving for their budgets for this coming year.

That's the most important thing. Virtually all states finalize their budgets through June and release funds in July, beginning of July. So that's, hence, the four to six weeks I talked about. And I think it will become very clear for us.

Craig Irwin -- ROTH Capital Partners -- Analyst

Great. So the most important question on the minds of your largest shareholders and the institutions that look at your stock are the parallels back to the financial crisis '07, 08, '09. It took a few years, actually a handful of years, to us -- for us to actually scrape in the bottom in overall school bus sales in the market. Is there anything that you would point to specifically that would have the speed of shorter duration? The obvious onset of COVID and the pandemic and work from home for everybody has obviously been much more abrupt, but can you point to anything that would point to a more rapid bottoming process and potentially a much shorter process of us finding the bottom in the market than that handful of years from similar to last time?

Phil Horlock -- President and Chief Executive Officer

Yes. Let me take that one. And I'm sure Phil will have some comments on this too, but when the last crisis happened in 2008, it was driven really by -- it was a banking financial crisis. I mean that's where I learned about credit default swaps and all sorts of things going on.

We learned about people grabbing mortgage and foreclosing. And that took a while to actually bed in. And house prices precipitously fell between 2008 -- and in fact, the trough for us was 2011. We lagged significantly because it took a good three years for house prices to hit the bottom, and that was as foreclosures increased and defaults on mortgages occurred.

You had people defaulting on their car loans, I mean, all sorts of things. We don't -- we aren't in that situation here. That -- because that is the major funding method for school buses, so once profit taxes fell, we saw eventually over that three years a precipitous drop from the 35,000 units we sold in 2007 to about a 24,000-unit industry in 2011. And then we clawed our way out of that as housing prices recovered.

The difference is here we don't see a precipitous drop in housing prices. We just don't see. Is anyone talking about that? We've researched it. We've talked to some of those experts who look at that thing.

This is a different issue, right? This is a pandemic that shut business down significantly for the last two months. I look at it that way. And we're all trying to get out and get states reopen. I think the other factor is it remains to be seen what the federal government does.

I mean the federal government acted quickly with a stimulus package. In fact, they supported education quickly with that $16 billion injection from the CARES funding. I think it shows their willingness there to support the economy aggressively, probably more so than in the past. So I think that's what we -- I think the way I -- it's quite a different situation here we're in right now than we were in 2008.

I'll say one thing too. From our business standpoint, when we walked into 2008, the average age of a school bus in that fleet I talked about earlier, 600,000 buses in North America, was about eight years of age. That's about half the duration of a bus. A typical bus lasts for about 15 years.

That's the useful life of -- until operating costs get too high. It was eight years. Right now, it's 11 years. And as I mentioned before, there are still 150,000 buses still over 15 years of age.

That's a lot of costs to run those, a lot of concerns about the emissions on those buses. So I think that does bode well for what I would say a good argument, when the school budget is set, to say we've got to carve out money for school buses. We've got to get these old, dirty buses off the road and replace them and because that's -- it's the right thing to do in the -- with children riding those products and keeping our environment clean. Phil, have you anything to add that you just want to stay on the what's different between now and what we had back in the last downturn? OK, it looks like Phil has got nothing else to say.

OK --

Craig Irwin -- ROTH Capital Partners -- Analyst

That's all right --

Phil Tighe -- Chief Financial Officer

I was on mute. I forgot to push my button. I think -- and you've covered it, Phil, but there's a really big difference between the state funding -- from the central state coffers driven by sales tax and income tax and the property tax funding. And Phil mentioned the property tax was -- is about 70% of the funds for school buses.

The reason it took so long to come back in the last one is that, once property taxes bottomed, it took some years to get back to the prior levels. And quite frankly, we are a little ahead of the prior levels now. We think that, with the state income and sales tax, that can come back pretty quickly, as long as the states can get up and running in a relatively shorter term. There's no doubt that it will probably be less because there'll be a lot of businesses that could get hurt, but the majority of it should get up and running much more quickly than the curve for the rebound on property taxes which took, as you've rightly pointed out, three or four years --

Craig Irwin -- ROTH Capital Partners -- Analyst

OK. So my last question I wanted to ask is about the ability to flex spending. So you've obviously been really proactive in managing your expenses, and the SG&A number in the March quarter is obviously testimony to tightening the screws and doing what you need to do. Can you maybe talk specifically about whether or not you've sought a waiver from the EPA for the environmental obligation you have to meet next year with a new engine package, one of the things that you've been investing in? And whether or not you've made a decision yet about whether you would defer the investment in the next-generation bus, actually the "lower cost to manufacture," higher-reliability design that you guys have been working around for the last number of quarters as you design for the future.

Phil Horlock -- President and Chief Executive Officer

That's a very specific competitive question to us. And given talking about our product plans and what we're going to try, we try and stay clear of that. We announce things when we're ready. I will tell you this: We talk to the EPA regularly.

We talk to CARB regularly. And when we look with our new products with our partners at Ford or ROUSH CleanTech -- they're obviously connected very closely. So yes, we do whatever it takes to ensure we meet all the requirements and we meet them on a basis that recognizes the environment we operate in. That's all we want to say on that matter at this time, but I think it's a good comment you've asked.

Unfortunately, I can't get into too much details, for the competitive reasons, on that one.

Craig Irwin -- ROTH Capital Partners -- Analyst

Completely understood. Congratulations for the strong deliveries number, and you guys should be commended for the proactive stance on cost controls and positioning for this market. So congratulations again for the quarter.

Phil Horlock -- President and Chief Executive Officer

Thanks very much, appreciate that.

Unknown speaker

Thank you.

Operator

And there are no further questions at this time. Mr. Horlock, we'll turn the conference back over to you for any additional or closing remarks.

Phil Horlock -- President and Chief Executive Officer

Yes. Thank you, Belinda. And thanks to all of you for joining us on the call today. We appreciate your continuing interest in Blue Bird.

As you can see by our second-quarter results, we made significant progress on multiple fronts. And we will work our way through the this COVID-19 pandemic, adapting and restructuring as needed. And we will continue to strive and grow profitably over the long term. I have no doubt about that.

We've got a great team who is focused. Before I drop off the call, though, I want to take this opportunity to thank my colleague and friend for more than 25 years. He's on the call today, Phil Tighe. After eight years as CFO of Blue Bird, Phil will be stepping down from this role at the end of May.

It's been a real pleasure to have been on this whole journey with Phil taking Blue Bird from a privately held company to a public company in 2015. I'm also delighted to say that Phil won't be leaving us but will be staying on a consulting capacity, working with me and our leadership team on strategic issues and special topics. I want to thank Phil for his endless number of contributions during his time at Blue Bird. I want to wish him all the best.

Many of you on the call have got to know Phil well over the past few years, and I'm sure you share my sentiment. And please feel free to give him a call and thank him for everything he's done for us. So as Phil moves on, I'm pleased to recognize that Jeff Taylor will be coming in as the new CFO, effective June 1st. Jeff has enjoyed many years as a public company CFO, most recently as CFO of Wabash; and actually was on our call today.

Jeff will be a great asset to our company, and I'm sure many of you will be meeting him over the coming months. So thanks, Phil, for your terrific service to Blue Bird. And welcome, Jeff, to the school bus business. And thanks to all of you for joining the call today.

We're well positioned for dealing with this pandemic that faces us, and we look forward to continued profitable long-term growth. So please don't hesitate to contact our head of profitability and investor relations, Mark Benfield, should you have any follow-up questions. Thanks again from all of us here at Blue Bird, and have a great evening.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Mark Benfield -- Executive Director of Profitability and Investor Relations

Phil Horlock -- President and Chief Executive Officer

Phil Tighe -- Chief Financial Officer

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Craig Irwin -- ROTH Capital Partners -- Analyst

Unknown speaker

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Oportun Financial (NASDAQ:OPRT)
Q1 2020 Earnings Call
May 14, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks

• Questions and Answers

• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Oportun Financial Corporation's first-quarter 2020 earnings conference call. [Operator instructions] Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Nils Erdmann, vice president of investor relations. Mr.

Erdmann, you may begin.

Nils Erdmann -- Vice President of Investor Relations

Thanks and good afternoon, everyone. Joining me today to discuss Oportun's first-quarter 2020 results are Raul Vazquez, chief executive officer; and Jonathan Coblentz, chief financial officer and chief administrative officer. Before we get started, let me remind you that some of the remarks made today will include forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements.

A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in today's earnings press release. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe will provide useful information. A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, our first-quarter 2020 financial supplement, as well as the Appendix section of the first-quarter 2020 earnings presentation.

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All of which are available on the Investor Relations website at investor.oportun.com. In addition, this call is being webcast and an archived version will be available after the call on the Investor Relations portion of our website. With that, I will now turn the call over to Raul.

Raul Vazquez -- President and Chief Executive Officer

Thank you, Nils, and good afternoon, everyone. We appreciate your taking the time to join us, and we hope that you, your families, and friends are all healthy and safe. I will start with a brief review of our response to the pandemic crisis. I'll discuss some of the decisive actions we have taken in recent weeks, as well as our three areas of near-term focus to successfully operate throughout this period.

Jonathan will then present our first-quarter financial results, followed by an update on our preliminary credit and financial performance for April, as well as a few early reads for May. Now let me take you through our three near-term areas of focus: one, serving our customers; two, credit; and three, capital and liquidity. I'll start with what we are doing to serve our customers. The health and safety of our employees and customers is our top priority, and we are taking all necessary precautions in accordance with the guidelines from the Centers for Disease Control and state and local authorities.

As a financial services provider, Oportun is deemed part of an essential critical infrastructure sector by the Department of Homeland Security. So we are continuing to serve our customers through our omnichannel network, in person at our retail locations, over the phone through our contact centers and online through our end-to-end mobile solution. As of April 30, 337 of the company's 342 retail locations remain open to serve customers. And with the exception of our stores in New Mexico that were closed by state order, everyone who wants and is able to work at full schedule can do so.

Our contact centers also remain in operation, which enables our customers to apply for a loan over the phone by speaking directly to one of our contact center representatives. Thanks to our omnichannel technology, our contact centers have continued to meet all service levels with an average time to answer a call of less than 10 seconds despite significantly increased call volumes. We proactively increased our customer service and collections capacities through new hires and cross-training of existing personnel. We have also made investments in technology that allow a significant portion of our contact center staff to work remotely if they have to.

I am incredibly proud of how all of Oportun's employees have come together as a team during the last eight weeks and how much we have accomplished as a business. I am especially grateful to our retail and contact center employees who have been working tirelessly to help our customers throughout this pandemic. Moving on to credit. Because of our technology investments, we were able to move quickly to tighten our underwriting criteria and rapidly deploy changes into production.

For example, we previously used industry and regional factors in our underwriting scorecard and have now increased the weighting of these factors to reflect the changing employment dynamics in those industries and regions. The adaptability of our scoring and decisioning platform and the speed at which we can make adjustments enabled us to reduce loan sizes by credit tier and better manage credit outcomes. We continue to make such adjustments based on new data. In anticipation of the economic impact of the pandemic and the increasing unemployment rate, we also implemented more stringent employment verification and increased recency requirements for proof of income.

Additionally, we have implemented incremental changes to our pricing, servicing, and collections capabilities. The net effect of those actions is that we continue to lend to income and employment verified customers who meet our more stringent credit criteria, and we've implemented tighter underwriting as part of our strategy to navigate this dynamic situation. Our credit tightening, along with an overall lessening in demand in applications in recent weeks has contributed to reduced originations. In terms of payments, we continue to see strong customer payment activity and customers are availing themselves of our omnichannel capabilities.

For the month ended April 30, over 68% of our customers were making payments outside of Oportun's retail locations, and over 66% of all customers were paying via ACH or debit card. Now let me talk about how we've managed credit performance during this difficult time. In addition to the verification and underwriting changes we've implemented, we have been offering our customers emergency hardship deferrals, which allow them to skip payments for 30 days to give them time to get back on their feet. We saw emergency hardship deferrals peak at 14.6% the last week of April, as the unemployment rate continues to rise.

And since that time, we have seen this rate decrease significantly to 8.6% as of May 12. We expect this trend to continue to improve as more of the economy reopens, and our customers are able to get back to work. In fact, we are starting to see the first set of customers come to the end of their 30-day emergency hardship deferral period, and over 60% of those deferrals with a payment due in April have made a payment. To track the impact of the pandemic, we also closely monitor early stage delinquencies, which we disclosed on Page 11 of the earnings deck.

As you can see from that slide, eight- to 14-day delinquencies decreased from March to April and have subsequently increased as of mid-May. However, keep in mind that we offer customers grace periods of up to 14 days before a late fee is assessed, and we know that Mother's Day leads to temporarily lower payment rates. For 15- to 29-day delinquencies, we've seen a steadily decreasing and encouraging trend. Our 30-plus day delinquency rates for the periods ending March 31, April 30 and May 12 were 3.8%, 4%, and 4.1%, respectively.

Our annualized net charge-off rate was 8.9% for the first quarter, which was better than our previously stated projection, demonstrating our strong credit performance prior to the impact of the pandemic. Our annualized net charge-off rate for April increased to 9.4%. The final near-term area of focus for us is capital and liquidity. In terms of our liquidity position, based on stress test scenarios, we continue to have more than 12 months of liquidity runway without accessing the securitization market due to our well-established and diversified funding program.

We intend to prudently manage our liquidity position over the coming months, conserving our cash position to ensure our continued service to as many of our customers as possible. As of the end of March, we had $206 million of cash, which decreased to $185 million as of April 30 due to the timing of the repayment of our warehouse line as our loan portfolio is paid down. Additionally, our business generated $52 million of cash from operations in the first quarter, which bolstered our liquidity. We have a strong balance sheet with $469 million in adjusted tangible book value and low leverage.

Given the strength of our revenue, balance sheet and liquidity position, as well as the importance of our retail locations and taking payments and originating loans, we have not laid off any employees, and it is our desire to avoid layoffs. Now that I've updated you on our three near-term focus areas, let me address how we have adapted our strategic drivers to the current environment. I would characterize our current strategy is optimizing for smart, sustainable growth. The current backdrop of the pandemic has created opportunities for us to accelerate our strategic plans in certain areas.

So let me provide a brief update. Since the start of the pandemic, the focus of our efforts has shifted from growth toward conservation of capital and liquidity. We also have seen a reduction in applications, which is impacting our loan originations. While some of this reduced application volume is a reflection of the redirection and pullback of our marketing efforts, we believe that customer demand has lessened as well given the sudden increase in unemployment and decline in consumer spending due to the stay-at-home orders.

In light of the reduction in demand, we put the expansion of our retail footprint temporarily on hold. We are optimistic that we will see demand to return as the economy begins to reopen. While our customers have the option of visiting one of our retail locations, even while stay-at-home orders are in effect around the country, our end-to-end mobile solution is an even more accessible option, and it enables customers to complete the entire lending process online via their mobile device. We believe our mobile solution is particularly valuable in helping our customers navigate the current environment.

As the crisis began to unfold, we demonstrated the ability to use our omnichannel network for servicing. We enhanced our mobile end-to-end solution to provide additional features to simplify and expedite the origination and payment processes. We also leveraged our technology infrastructure to enable our retail agents to help with customer outreach. Each of our retail locations was enhanced to become a mini contact center, able to respond to two-way SMS chats with our customers, make outbound calls, and provide service to customer inquiries.

To maintain our contact center service levels and abide by social distancing requirements, we deployed secure technology to enable our contact center agents to work remotely. Currently, we have over 800 agents working from home on a daily basis. We also are in the process of phasing in an updated version of our risk scorecard for returning customers. Similar to V10, which was designed specifically for our new customer population, the latest version of our risk model represents an improvement in our ability to manage credit risk for our returning customers, especially in our fast-growing mobile channel.

This phase-in is planned to start in the next few weeks. Now let me provide you with an update on auto and credit card. For auto, we began piloting our personal loans secured by a vehicle last week. Even before the impact of the pandemic, we saw secured personal loans as an opportunity to serve more customers and offer larger loans as an alternative to an unsecured loan to the customers that we serve today.

With our tighter underwriting posture, we believe this capability will be even more valuable today. In order to devote sufficient resources to making secured personal loans a success, we have stopped marketing our direct and auto refi offerings, but we'll revisit our strategies for these products in the future. For credit cards, we are very pleased with the initial results of the Oportun Visa Credit Card, which was launched in December. In response to market conditions, however, we are slowing down growth for the time being until we have gathered more credit performance data.

We remain optimistic that as the economy starts to open, our opportunity for growth will return. We are already seeing some initial positive trends in the first two weeks of May. To be well prepared to capitalize on this, we continue to explore ways to enter new geographic markets via state licensing or through other means, including a potential bank sponsorship to offer our personal loan products on a nationwide basis. Although there are very real challenges for us to overcome, Oportun has been lending for 14 years, and we are applying many of the valuable lessons that we learned while managing through the Great Recession.

By leaning on this past experience and leveraging all of the technology we have built since then, Oportun is again proving resilient, and I firmly believe that our company will be even stronger when this crisis finally recedes. We will continue to manage through the current environment thoughtfully by prioritizing serving and supporting our customers while protecting and delivering long-term value for shareholders. I'll now turn the call over to Jonathan, who will walk you through a more in-depth discussion of our first-quarter financial results, and then we'll open the line for your questions. Jonathan?

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Thanks, Raul, and hello, everyone. Let me start by echoing Raul's appreciation to those of you joining us today on this call, and I hope you and your loved ones are healthy and safe. As you may recall, in addition to GAAP, we also evaluate our performance based on fair value pro forma results, which we believe present a more consistent view of the underlying trends of the business. Unless I state otherwise, all the metrics that I will now share with you will be on a fair value pro forma basis for the purposes of comparison to prior-year periods.

A full list of definitions and reconciliations can be found in our earnings materials. We continue to operate in a very fluid environment. So while I'll provide you with a summary of our first-quarter results, I'll also devote some time to discussing our insights from the month of April and a few early reads for May. Through mid-March, we were on track to deliver double-digit origination growth but then shifted our focus to capital and liquidity preservation.

The ensuing steps we took to adapt to the changing environment led to reducing our credit risk exposure and making the appropriate modifications to our servicing strategy. In late March, we saw a reduction in loan applications, potentially attributable to a redirection of our marketing efforts, as well as reduced demand by our customers. This impacted our aggregate originations, which were $432.8 million for the first quarter, up 4% from the prior-year period. Despite this impact to our originations in the last two weeks of March, on a GAAP basis, total revenue for the first quarter was $163.4 million and grew 18% year over year.

Fair value pro forma total revenue, which is now the same as GAAP total revenue for the first quarter, was also $163.4 million, up 19% over the prior-year quarter, driven by strong growth in interest income and noninterest income. Our interest income increased to $150.7 million, up 20% year over year as we grew our receivables portfolio. Our managed principal balance at end of period grew 20% over the prior-year quarter to reach $2.2 billion. We also saw a slight decline in our portfolio yield from 33% in the first quarter a year ago to 32.5% for the most recent quarter.

Noninterest income, which includes cash gain on sale from our whole loan sale program, increased 10% to $12.7 million. The growth in the volume of loans sold was slightly offset by the lower gain on sale premium of 10% versus 10.7% in the prior-year period. With the reduction in our originations, we reduced the amount of our core loans that we sell from 15% to 10% of originations in order to ensure we have sufficient collateral to replenish our revolving asset-backed bonds. We continue to sell all of our access loans that we originate.

For the first quarter, net revenue, which is our total revenue after interest expense and net change in fair value, was $92.7 million, up 3% year over year. The growth in net revenue was impacted by the decrease in the value of our loans offset by a decrease in the value of our debt. Interest expense of $15.9 million was up 11% year over year. The higher interest expense was driven by an increase in our average daily debt balance of 18% year over year.

Our cost of debt decreased slightly to 4.2% in Q1 2020 relative to 4.4% in the same period a year ago. Net increase or decrease in fair value or net change in fair value includes our current-period principal net charge-offs and mark-to-market on our loans and debt. We provide a summary of the net change in fair value in our Q1 2020 earnings presentation that is available through our investor relations website. As you'll see on Page 18 of the presentation, the first quarter $54.8 million net decrease in fair value consisted of a $155.1 million mark-to-market decrease in our loans receivable, a $141.7 million mark-to-market increase related to our asset-backed notes and current-period charge-offs of $41.4 million.

Let me take you through the drivers of our fair value marks in greater detail, starting with our asset-backed notes. We set the fair value of our asset-backed notes based upon March from a third-party marketing service used by institutional investors and compared the prices to March from dealers and available trading data to validate them. As of March 31, 2020, the weighted average price of our asset-backed notes was 90.5%, down from 101.1% at December 31, 2019, reflecting the significant dislocation in illiquidity in the asset-backed market as a result of the economic impact of the pandemic. This significant reduction in the fair value of our bonds resulted in a $141.7 million increase in net change in fair value and net revenue.

As of April 30, 2020, the prices of our bonds have declined to 89.1%, reflecting continued dislocation in the asset-backed securities market. The $155.1 million decrease in fair value of our loans receivable was driven by a quarter-over-quarter decrease in the fair value price for our loans from 104.5% to 96% as of March 31, 2020. The decrease in fair value was mainly driven by two factors: first, the increase in the discount rate from 7.77% as of December 31, 2019 to 12.78% as of March 31, 2020; and second, the increase in our remaining life of loan charge-offs from 9.51% at December 31, 2019 to 14.56% at March 31, 2020. I will now provide more details on those two main drivers.

First, I'll start with the discount rate. We adjust the discount rate we used to fair value our loans based upon changes in the yields of our asset-backed notes. The 501-basis point increase quarter over quarter is consistent with the weighted average increase in yield on our bonds. The second driver of reduction in the fair value of our loans is the 505-basis point increase in our remaining life of loan charge-off assumptions.

Our charge-off assumptions are based upon our experience in the last recession, where we had a statistically significant pool of loans outstanding, as well as our experience providing hardship deferrals to our customers in Houston impacted by Hurricane Harvey in 2017, adjusted for projected unemployment of 15%, which is higher than the previous recession. However, our assumptions did not include any benefit connected to government stimulus efforts because we chose to wait to see the actual impact on borrower repayment behavior. We've provided some supplemental disclosures regarding our fair value assumptions on Page 42 of the earnings deck. As of April 30, 2020, the fair value of our loans declined to 95.1% due to an increase in the discount rate, offset by a decrease in remaining life of loan charge-offs.

The discount rate increased to 14.09%, consistent with the increase in yields on our asset backlogs. Remaining life of loan charge-offs decreased to 13.85% due to plateauing of deferrals and previously deferred loans returning to repayment. We believe that the delivery of stimulus checks and increased unemployment benefits are helping our borrowers. Our operating expenses for the first quarter were $98.6 million, up 25% over the prior year.

Operating costs associated with our auto and credit card products are included in our overall opex. And Page 19 of the earnings deck provides some additional detail regarding these costs. For Q1 2020, we recognized $4.2 million of operating expense related to these investments. These investments contributed to our year-over-year opex increase.

As a result, adjusted operating efficiency was 57.8%, 200 basis points higher than the comparable quarter last year and consistent with our adjusted operating efficiency in the fourth quarter of 2019. While actively identifying and reducing discretionary spend across the company, we have increased spending to protect the health and safety of our customers and employees. And we continue to invest in those areas that will enhance our company over the long term, such as completing the development of our secured personal loan product. Our customer acquisition cost for the first quarter of 2020 was $170, up from $141 in the prior-year quarter.

The increase in CAC was driven by the decline in number of loans originated we started to see in the second half of March. Our overall market investments have also been reduced by approximately 35% to 40% for the second quarter as we look to redirect our efforts to manage credit risk. In April, we saw a CAC of $574 due to reduced customer demand and tighter credit approval criteria. While we have reduced our marketing budget, we continue to employ all of our sales team in retail locations and contact centers, which has also contributed to elevated CAC.

We believe it is important for us to maintain current staffing levels in order to ensure we can meet customer demand as the economy reopens. Our effective tax rate was 26% for Q1 2020 as compared to 27% in Q1 2019. The reduction in our effective tax rate reflects our net loss from operations, which on a GAAP basis, was $13.3 million versus net income of $14.6 million in the prior-year quarter. This equated to a net loss per share of $0.49 versus diluted earnings per share of $0.51 in the prior-year quarter.

Our adjusted net loss per share was $0.04 based on adjusted net loss of $1.2 million versus adjusted EPS of $0.43 and adjusted net income of $9.6 million in the prior-year quarter. Adjusted net income or loss is the numerator of our adjusted return on equity, which was minus 1% for Q1 2020 versus 10.6% in the prior-year quarter. Over time, we believe this metric should improve, and post crisis, our longer-term goal remains to achieve high-teens ROEs on a consolidated basis. Given the impact of the fair value marks on our bottom line, we believe it continues to be very valuable to use adjusted EBITDA as a proxy for our pre-tax cash profitability.

In addition to adding back taxes, depreciation, amortization, stock-based compensation, and onetime events, adjusted EBITDA also excludes the noncash impact of fair value accounting. For the first quarter, our adjusted EBITDA was $17.9 million, compared to $18.9 million in the prior-year quarter. Raul already shared with you the highlights of our credit performance, but I'd like to share more with you regarding the deferrals and repayment options we are providing to our customers who have told us they've been economically impacted by the pandemic. An emergency hardship deferral allows a customer to skip payments for 30 days.

Interest continues to accrue on along during the deferral period and the skip payments are added on to the end of the customer's loan repayment schedule, extending the term of the loan. We begin reaching out to customers in deferral a week prior to their next scheduled payment to ask if they are capable of making a payment or whether they remain economically impacted by the pandemic and need another emergency hardship deferral. We have seen the rate of new emergency hardship deferral significantly diminish, our own curve flattening, if you will, and we believe we have already reached our peak in late April. As of April 30, 2020, 14.6% of owned receivables principal balance was in emergency hardship deferral.

As of May 12, emergency hardship deferrals have declined to 8.6% of owned receivables principal balance. These trends are encouraging, and we hope to see them accelerate as the economy reopens. It's also important to note that over 92% of balances that are in deferral were seven days delinquent or less prior to March 16. In addition, over 79% of balances that are in deferral are returning borrowers who are our best customers, with 58% of balances belonging to customers who've had two or more prior loans with us.

Turning now to capital and liquidity. We continue to manage our funding program to maintain a liquidity runway of at least 12 months, meaning that we do not need to access incremental funding or capital during this time period. As of March 31, 2020, total cash was $206.1 million comprised of cash and cash equivalents of $144.8 million and restricted cash of $61.3 million. To evaluate our liquidity is also valuable to look at our cash flow statement.

Adjusted EBITDA includes the impact of charge-offs, but charge-offs are noncash events. For the first quarter of 2020, our cash flow from operations was $52.1 million as compared to $47.2 million for the prior-year period. With respect to funding, we have $1.3 billion in term securitization bonds outstanding that allow us to fund new loan originations for the remainder of each securitization's revolving period which range from September 2020 to July 2022. As of March 31, 2020, we had $120 million of undrawn capacity on our $400 million warehouse line that is committed through October 2021.

Because of the decline in loan originations, as of April 30, 2020, we had $188 million of undrawn capacity on our warehouse line as we have transferred certain loans from our warehouse line to pledge to our securitizations. Until we see a return to receivables growth, we will not need to increase our warehouse line capacity or issue a new securitization. I also want to reiterate the point Raul touched on about our strong capital base. As of March 31, 2020, we had adjusted tangible book value of $468.8 million or $17.27 per share.

In addition to having a strong equity capital base, we run our business at low leverage. Our debt-to-equity ratio was 3.0 times, a reduction from 3.6 times the prior year, as the $60.5 million net proceeds we raised in our IPO in September reduced our need to issue debt to fund the strong growth of our portfolio in Q4 2019. Turning to our outlook for the second quarter and remainder of 2020. Given the ongoing uncertainty surrounding the duration, severity of the pandemic, we anticipate that our future financial performance will continue to be impacted, but the timing of this impact is too dependent on external factors to reliably set guidance parameters at this time.

We do expect our 2Q operating expenses to be in line with 1Q. For the full-year 2020, we expect our originations and revenue will reflect the overall economic environment. As we discussed, we remain committed to working with our customers during this uncertain time. And just as our technology enabled our rapid response to the impact of COVID-19, it is just as capable of rapidly implementing incremental changes to pricing, servicing, and collections as we emerge from this period.

Based on what we know today, we will continue to monitor and adjust as conditions unfold. That concludes my remarks, and I will now turn the call back over to Raul.

Raul Vazquez -- President and Chief Executive Officer

Thank you, Jonathan. In closing, I want to reiterate that we have built a strong business characterized by low leverage, strong liquidity, and a diversified funding program. Our significant investment in technology is allowing us to rapidly evolve our underwriting and collections approach in order to continue to serve our customers during these unprecedented times. As Jonathan and I have both mentioned, we are cautiously optimistic at this time given recent trends we've shared with you in customer payments and credit, as well as indications that loan applications are beginning to increase.

I began my remarks by expressing thanks to our teams who are working hard during these very difficult circumstances to help our customers. I have never been more proud of our employees than I am now, and I'm confident that Oportun will come out of this crisis even stronger than it was at the start of the year. Thank you all for your time, and now we welcome your questions and comments. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] The first question is from the line of John Hecht with Jefferies. Please proceed with your question.

Raul Vazquez -- President and Chief Executive Officer

John?

Operator

John, your line is live.

John Hecht -- Jefferies -- Analyst

Sorry, guys. Can you hear me?

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Yes, we can.

Raul Vazquez -- President and Chief Executive Officer

Hi, John.

John Hecht -- Jefferies -- Analyst

OK. Thanks very much. Good to hear your voice. I appreciate all the color from the quarter, and then the update through April is very helpful as well.

First question, Jonathan, just thinking about, if the trends you're seeing in delinquencies and deferrals and so forth, kind of -- and I'm not asking for guidance. It's more just kind of conceptual. If those kind of persisted through the quarter like you've seen, how do we think about what the fair value -- like what the effects on fair value this quarter in terms of any assumptions you might change?

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Sure. That's a great question, John. So first of all, what I'd guide you to is what you've already seen in the transition from our March mark to our April mark, right? So you talked about credit performance in terms of delinquencies. As we said in our remarks, based upon some favorable trends, such as the deferral percentage coming down from a peak of 14.6% to 8.6%, also the percentage of customers in deferral, 60% making payments, that is one of the factors we considered in lowering our remaining cumulative life charge-off assumption from 14.6% to 13.9%.

If we continue to see favorable trends, then it could be that we would take that loss assumption down further. The other part of fair value, as you know, is the discount rate, as well as the marks on the bonds. We saw the yields on our bonds increase, right? So the price traded down during April. That's a function of markets, and that will be sort of an independent variable.

We are seeing the asset-backed market, in general, continue to have increased firmness. Companies are coming to market with deals. So we haven't seen it yet, but it may be that, over time, our spreads, along with the rest of the market, improve. And that would actually be beneficial on the asset side, but then it would be not beneficial on the debt side, right? If the price of our debt were to increase, then that moves against fair value because it's an increase in the value of a liability.

But overall, we expect to see the credit trends based on what we're seeing today improve.

John Hecht -- Jefferies -- Analyst

OK. That's very helpful. And then maybe an unrelated follow-up questions, and we've always appreciated the value of the omnichannel platform and the technology. I'm wondering, over the course of the past several weeks, can you talk about your applications online versus in stores and how that mix is changing and how that impacts the business as well?

Raul Vazquez -- President and Chief Executive Officer

Sure. John, this is Raul. To your point, given the fact that a lot of the country put in place shelter-in-place kind of measures and consumers in general, stop moving around as much, we did start to see diminished traffic to our retail locations. Thankfully, for years, we believed in adding an end-to-end mobile capability, and that has served us very, very well during this time.

And from a road map perspective, we've asked our engineers to prioritize mobile enhancements even higher. It's really our second priority now, second only to managing credit outcomes. So we're really pleased with the performance we're seeing from mobile, and we've decided to continue to enhance the capability even faster given the environment that we're in.

John Hecht -- Jefferies -- Analyst

Great, appreciate it. And good to hear that everybody's healthy.

Raul Vazquez -- President and Chief Executive Officer

Likewise.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Thank you, John.

Operator

Our next question comes from the line of Sanjay Sakhrani with KBW. Please proceed with your question.

Sanjay Sakhrani -- KBW -- Analyst

Thanks. Nice to hear that you guys are well. I wanted to dig in a little bit more on the credit quality discussion. I guess, do you guys have a whole lot of insight into your customers' employment situation? For example, how many have been laid off versus furloughed? Maybe how many are essential workers? Because I guess what I'm trying to get at is as we look forward, and let's just assume the stimulus sort of wears off, what is the sort of structural impact to the loss rate going forward.

Thanks.

Raul Vazquez -- President and Chief Executive Officer

Yeah. So that level of detail, we don't really have in terms of the population of customers that we have, Sanjay. What I would tell you is that our belief was that our customers were among the first ones that lost their jobs. So as shelter-in-place took effect as different businesses started to cut back on labor, we believe that our customers were among the first that felt that impact.

As a consequence, you know already that there were a lot of tightening measures that we put in place. We strengthened our verification practices, including verifying that our applicants that were coming in now had a job, and we asked them for even more recent proof of income. So we took a lot of measures because, again, we felt like our customers were among that first wave. I saw some data in just the last day and a half or so that looked at unemployment or job losses -- I'm sorry, with the job losses by income ban.

So there were three lines, that were people that earned less than $50,000, $50,000 to $100,000 and $100,000-plus. And for people that earned less than $50,000, the amount of job losses basically plateaued. So our view right now is that our customers have felt the pain. And that as the economy starts to open back up, our customers will be able to go back to work.

And until then that they are benefiting from the stimulus and unemployment benefits. And that's what we think, by the way, is helping our delinquency numbers.

Sanjay Sakhrani -- KBW -- Analyst

Right. And I guess when we look at the loss assumption you guys have made inside of that fair value mark, are you guys assuming some kind of recovery? I know you mentioned, Jonathan, that you're assuming that deferrals will help like a natural disaster sort of situation. But how have things historically progressed for a given loss rate in your book? And how different is this cycle? And then just one quick other follow-up to David's last question. How many of your customers are actually making payments electronically versus at the branch? Thanks.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

OK. So let me just...

Raul Vazquez -- President and Chief Executive Officer

We'll take the payments first.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Yes, let me start with the first part. So let me tell you, I think, the easiest way to address your question, Sanjay, is to tell you what things we looked at in order to come up with our loss assumption. And it's a triangulation between a couple of three things. One, we've been lending for 14 years, so we have statistically significant experience from the 2008, 2009 Great Recession, where our loss experience actually was relatively quite good in comparison.

And obviously, in the current environment, we're seeing higher levels of unemployment than we did back then, so we've clearly extrapolated for that. The other thing that we looked at very closely is that we have experience with deferrals and helping customers get back on track. Even though this is bigger than a natural disaster, I think it's a very helpful comparison. So in 2017, we had 12% of our portfolio in Houston when Hurricane Harvey hit, and we were able to help customers there.

And so we have a wealth of data from that experience of what happens when you defer customers, give them time to get back on their feet and then work with them potentially to get reduced repayment plans for those who aren't able to get back to a full income but can make some payment. So we've seen that experience, and then we've magnified the fact that we're seeing much higher levels of unemployment than in either of those scenarios in the past. What we didn't factor in, as we discussed in our remarks, was the $4 trillion of government stimulus, and that's because we like to take a data-driven approach, and we haven't seen data on that before. So we decided to wait and see.

How that would impact customer behavior before we factor that in. And as we've talked about before, I think the fact that we are seeing so many customers pay the fact that we're seeing the deferrals go down, the fact that we're seeing good delinquency numbers, potentially, that is an impact from the stimulus that's factored in.

Raul Vazquez -- President and Chief Executive Officer

So just to add one thought to that, and then I'll answer your payment question, Sanjay, the way that we're thinking about that number going forward and updating it is we update it based on actuals. So we look at what percentage of the cohorts of deferrals are actually coming off deferrals, what percentage are making payments, do they continue making payments, do they go into delinquencies. And then obviously, as you can imagine, we manage all the delinquencies carefully. So we would tell you that the change that you saw from Q1 to April is based on actuals.

And then obviously, as we continue to see May season, we'll update that again. And when we tell you Q2, that will, again, be based on actuals. So we're not foolish enough to try to project when things are going to fully recover or what it's going to look like region by region. What we're trying to do is just manage the actuals of the business very carefully.

Let me pause there and see if you have any follow-up questions before we move to payment numbers you asked for.

Sanjay Sakhrani -- KBW -- Analyst

No, that was great. Thanks.

Raul Vazquez -- President and Chief Executive Officer

OK. So on the payment side for the month that ended in April, what we saw was over 68% of customers were making payments outside of our locations. So going back to the question that John asked, we have seen people start to use either payment mechanisms or certainly our mobile solution more. And over two-thirds of all customers, Sanjay, are paying either via ACH or debit card.

Sanjay Sakhrani -- KBW -- Analyst

Right. Thank you.

Operator

Our next question comes from the line of Mark DeVries with Barclays. Please proceed with your question.

Mark DeVries -- Barclays -- Analyst

Thanks and good afternoon. I was hoping you could provide some color on what you think is driving that drop. I believe you said on the deferrals from 14.6%. I thought it was the end of April to 8.6%.

And just a couple of weeks, I mean, it seems like a very big drop. Do you kind of a feel for what caused that to move so quickly?

Raul Vazquez -- President and Chief Executive Officer

Yes. This is Raul, Mark. It's a couple of things. If you think about this number, one of the ways we manage is we think about what are new deferrals coming in and then what are the number of people that are coming off of deferrals.

So in terms of new deferrals, we've seen that number decline significantly, and that goes back to the comment I made earlier that our view is that our customers got hit with the first wave of layoffs. So at the kind of end of March, beginning of April, that was really when we think our customers started to be impacted. And as a consequence, when we started to make these Emergency Hardship Deferrals available, we saw quite a few of them at the beginning, but we're seeing very few being added now. The number of people coming off is what's driving that percentage down.

And you did have those numbers correct. It was 14.6% at the end of April. And as of May 12, it was 8.6%. And that's a combination of people making payments and coming off deferral or the people for whom the deferrals have expired.

And those are really the things that are driving it: the people coming in and then the two reasons I described for people coming out.

Mark DeVries -- Barclays -- Analyst

OK. That's helpful. One of the things I think you've talked about in the past about the resiliency of your customers under stress is the ability to substitute in final term sources of income if they lose their job. Do you have a sense for how many people who are returning to repayment are returning to their old jobs versus maybe being able to find new jobs as some of the needs in the economic shift?

Raul Vazquez -- President and Chief Executive Officer

Yes. We don't know, Mark. That's not something that we ask for our customers. If they're going to make a payment, we don't ask them if it's from a new job or their current job.

So I'm afraid I don't have any insight to provide there.

Mark DeVries -- Barclays -- Analyst

OK. Got it. And then just one last thing. I mean, I think you also cited some positive signs as people return to work.

Do you have a feel yet on the ground? Any difference in like originations, credit performance in some of the states that have opened up earlier, like Texas and Florida versus states that have been slower to open, like California?

Raul Vazquez -- President and Chief Executive Officer

So I won't go into the geographic piece right now because, historically, we haven't disclosed originations that way, Mark. But I'll tell you, though, we recognize that things are very dynamic. We are cautiously optimistic based on the improvements we've seen in originations the last few weeks. So one of the ways that we've chosen to look at it now, just given how different the times are, is not necessarily on a year-over-year basis alone but instead on a week-over-week basis to try to get a sense of have we hit bottom and are we starting to climb out of the bottom.

And we have seen improvements now week over week over the last couple of weeks. So that does make us cautiously optimistic right now.

Mark DeVries -- Barclays -- Analyst

OK. Got it. Thank you.

Raul Vazquez -- President and Chief Executive Officer

Sure. Thank you.

Operator

Our next question comes from the line of David Scharf with JMP Securities. Please proceed with your question.

David Scharf -- JMP Securities -- Analyst

Hey, good afternoon and thanks for taking the questions. And I'll echo previous comments and thanks for all of the April and May data. Everyone's trying to obviously get a handle on what kind of trajectory we're on, and that's very helpful. Raul, you may have addressed this in one of your answers, but I'm curious, is there any color you can provide on who is applying in these last few weeks and, specifically, whether these are new applicants or if they're all repeat borrowers? I mean, it's clearly a positive trend that some other lenders aren't necessarily seeing.

Raul Vazquez -- President and Chief Executive Officer

So I would tell you, David, we are getting both new applicants and repeat applicants. This is clearly a time where there are people that still need capital, either people who don't have a job and are trying to find someone who can help them out or people that do have a job and, maybe because their loved one has lost their job, they want to help out or they've got some unforeseen expense. So we're seeing applications from both new and repeat customers. What I can tell you is the profile of a successful borrower today after the tightening actions that we've taken in both March and April is someone who has proof of income, someone who is more likely to work in an industry that has not been as impacted by the current situation.

In some cases, the risk engines suggest that we verify employment. And in that case, we've been able to get a hold of their employer and verify that the applicant has a job right now. And to your point, because I think this is one of the things that's behind your question, David, the person is much more likely to have been a prior customer. In this environment, we are absolutely skewing toward people who have proven success with our product and payment structure.

David Scharf -- JMP Securities -- Analyst

Got it. No, that's helpful. And maybe just following up on that discussion. When you talked about tightening the underwriting criteria and specifically maybe beefing up income verification.

I think you just gave one example, which maybe calling employers. But can you talk a little bit about in the past and what's changed in terms of the nuts and bolts of income verification and whether you believe that these will be sort of permanent changes to the business going forward?

Raul Vazquez -- President and Chief Executive Officer

So I think as Jonathan described earlier, one of the things that has really helped us is we've been through this situation before in terms of the Great Recession, so we have a playbook that works well for us then. And frankly, we also have the benefit of having the same chain for risk officers. So we not only have the playbook, but we have the person that wrote it still with us, and we've been able to add to that playbook based on the hurricanes, wildfires, other things like that. So just to summarize very quickly, I'm going to answer more broadly first, David.

We've tightened our lending criteria. We adjusted loan amounts overnight. We enhanced outreach efforts to customers. We skewed more to repeat customers.

And then getting back to your specific question, the things that we have done on income verification are we have asked for much more recent proof of income. So if in the past, we would have allowed you to say, give us a pay stamp from three or four weeks ago, now we're going to ask you for your most recent pay stamp just to verify that you are still employed and that you're not necessarily showing us something that is not reflecting your current employment. Whether or not these are going to continue to be permanent changes, I'm not going to speculate on that right now. I think we, like everyone else, are waiting to see how does the economy recover, how quickly do people get back to work and then, once the recovery takes place, is it going to be a stable recovery.

But right now, we think this is the best practice for us to have.

David Scharf -- JMP Securities -- Analyst

Got it. No, no, makes sense. And then I think lastly, Jonathan, just to make sure I wrote this down correctly. As we think about near-term marketing spend, variable costs in the context of reduced demand, did you say that total opex in the second quarter would likely be sequentially flat? Or should we be thinking about it being down?

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

No, I did say that. You heard that correctly. I did say that we would expect Q2 total opex to be sequentially flat around there.

David Scharf -- JMP Securities -- Analyst

Got it. OK. Thank you very much.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Thank you, David.

Operator

[Operator instructions] Our next question comes from the line of Rick Shane with J.P. Morgan. Please proceed with your question.

Rick Shane -- J.P. Morgan -- Analyst

Hey, guys. Thanks for taking my questions and glad to hear everybody is doing well. I do appreciate all the detail on the fair value marks and the underlying analytics behind that. It's really helpful.

A couple of detailed questions and then sort of a conceptual question. What were the actual repayments on the portfolio this quarter? And what was the gain on sale margin?

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

I'm sorry, you asked what were the actual repayments on the portfolio?

Rick Shane -- J.P. Morgan -- Analyst

Yes.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Yes. So you can actually see that in the slide that we included in the deck. We had some view on the portfolio. Let me get to the right page here because I think this will be helpful.

It's Page 17 of the earnings deck, where we illustrate our operating cash flow and you can see cash flow from investments of minus $39 million. Now there are a few other things in there, but that's the main driver. And then also, you can find more detail in the supplemental earnings spreadsheet that's posted on our investor website that will have the portfolio roll forward. Then in terms of your second question, the gain on sale margin was 10% for Q1.

Rick Shane -- J.P. Morgan -- Analyst

Great. Sorry for the dog in the background. The new reality, I apologize.

Raul Vazquez -- President and Chief Executive Officer

That's quite all right.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

No worries.

Rick Shane -- J.P. Morgan -- Analyst

And then the last question is, look, stock is trading at a substantial discount to tangible book. Your secured notes are trading at significant discounts to par. I realize, in particular, on the fair value notes that may not be attractive to repurchase those because they do offer an attractive hedge against fair value marks, but you also have some notes that are held at amortized cost. I'm wondering, when you're thinking about opportunities and investments, and I realize maintaining liquidity is critical right now, but the opportunities either to buy back some stock or to extinguish some of the debt.

Raul Vazquez -- President and Chief Executive Officer

So, Rick, this is Raul. First, as I mentioned in my remarks, I'm really proud of how our team is executing right now. These are challenging times. There's a lot of dynamic elements in the business.

We didn't spend a lot of time talking about this, but I think, as you know, one of the metrics that we provide is adjusted EBITDA. So that way, our investors can see the underlying strength of the business since it excludes the impact of the fair value, and that number for Q1 was $17.9 million. It exceeded the guidance that we had provided, so we continue to believe that the company is performing well even during these difficult times. On your question of, say, buybacks, that's certainly something we've talked to the board about is thinking about how do we want to use our capital and what is the highest return for our shareholders.

As you pointed out right now, we think that the preservation of capital makes the most sense given how dynamic the environment is, but that is kind of an ongoing conversation with our board.

Rick Shane -- J.P. Morgan -- Analyst

Great. Look, I realize that it's an easy question from my perspective and that if everything gets better from here, buying back stock or redeeming debt is a great call. But if things deteriorate, you're going to certainly wish you had the liquidity. But as a growth company as the market start to normalize, I am curious just how -- and again, how you think about that because there is a trade-off in terms of the growth opportunity.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

How we think about growth in general or how we think about the buyback, just to be clear?

Rick Shane -- J.P. Morgan -- Analyst

How you would -- if you sort of reach the point of feeling all clear about the world, which, again, I think we're all a ways away from that point. But how important is growth versus the opportunity to generate really substantial returns by either redeeming notes or buying back stock at such a huge discount?

Raul Vazquez -- President and Chief Executive Officer

Yes. So the last time we spoke to you, it was a very forward-looking comment on your part. You mentioned that there are times when a team has to understand the need to slow down or even hit the brakes a bit and being very thoughtful about that. And we certainly believe that in this environment, it made sense for us to shift from a growth mentality to one of managing capital carefully and making sure that we are producing great credit outcomes.

That's our No. 1 priority. But I'll tell you, as a team, we remain optimistic that our opportunity for growth will return as the economy starts to reopen. So there was a question earlier David made about opex.

And one of the reasons that we're keeping opex flat sequentially is we believe, and we are working on things that are going to make us stronger on the other side of this event that we're all living through than we were a few months ago. We mentioned in the comments we have introduced now secured personal loan. It is in 20 locations. So we're testing our way into it, and we're excited about the ability to have a secured loan product as the economy starts to reopen.

Credit cards is something we were very pleased with at the beginning, and we just put it on hold out of an abundance of caution. But that's something that we think could continue to be a growth driver, and we continue to look at things like bank sponsorships so that we can offer our product in more states. And the investments we're making mobile and other parts of the business. So you're right.

What we have done is we've made sure that we've taken the right actions from our view today to make sure that we are well-positioned to start to grow then as the economy starts to reopen.

Rick Shane -- J.P. Morgan -- Analyst

Got it. That's very helpful. And it feels like a lot longer than three months ago since we've had those conversations. So thank you, and I appreciate all the hard work that's gone into getting where you guys are today.

Raul Vazquez -- President and Chief Executive Officer

Thank you, Rick.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Thank you, Rick.

Operator

There are no further questions in the queue. I'd like to hand the call back to Raul Vazquez for closing remarks.

Raul Vazquez -- President and Chief Executive Officer

Thank you very much. Well, again, I do want to thank everyone for joining us on today's call, and we absolutely look forward to speaking with you again soon. Take care, everyone.

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

Stay well.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Nils Erdmann -- Vice President of Investor Relations

Raul Vazquez -- President and Chief Executive Officer

Jonathan Coblentz -- Chief Financial Officer and Chief Administrative Officer

John Hecht -- Jefferies -- Analyst

Sanjay Sakhrani -- KBW -- Analyst

Mark DeVries -- Barclays -- Analyst

David Scharf -- JMP Securities -- Analyst

Rick Shane -- J.P. Morgan -- Analyst

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OTC Markets Group Inc. (OTC:OTCM)
Q1 2020 Earnings Call
May 14, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks

• Questions and Answers

• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the OTC Markets Group first quarter 2020 earnings conference call. [Operator instructions] As a reminder this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Dan Zinn, general counsel.

Sir, you may begin.

Dan Zinn -- General Counsel

Thank you, operator. Good morning. Welcome to the OTC Markets Group first-quarter 2020 earnings conference call. Joining me today are Cromwell Coulson, our president and chief executive officer; and Bea Ordonez, our chief financial officer.

Today's call will be accompanied by a slide presentation. Our earnings press release and the presentation are each available on our website. Certain statements during this call and in our presentation may relate to future events or expectations and as such, may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements.

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Information concerning risks and uncertainties that may impact our actual results is contained in the risk factors section of our 2019 annual report and our quarterly report for the first quarter of 2020, which is also available on our website. For more information, please refer to the safe harbor statement on Slide 3 of the earnings presentation. With that, I'd like to turn the call over to Cromwell Coulson.

Cromwell Coulson -- President and Chief Executive Officer

Thank you, Dan. And good morning, everyone. Thank you for joining us today. Wherever you're calling in from, I hope you and your loved ones are safe.

I want to begin our call by expressing our gratitude to the first responders, to healthcare workers and so many important people who are working today to support us, those in grocery stores, delivering our packages, collecting our sanitation, helping our neighbors and each and every person we all rely upon. They have shown up to work, demonstrating extraordinary courage and resilience, maintaining essential services for our communities. They are all our heroes. I also want to acknowledge the team here at OTC Markets for rising to the challenge of these unprecedented times and keeping our stock markets open.

We are living through a unique period of human history, a 100-year viral storm. While the world is reeling in many ways, we are fortunate that our business continues to operate. We find meaning in the fact that we are able to play a small role in helping the capital markets keep functioning by continuing to serve our subscribers, colleagues and larger community. While we cannot predict how long these challenges will last, in times of crisis, the stock market provides liquidity for those who need capital and will be a light to the clouds as we find our course forward.

As we noted in our quarterly report, our framework for managing through this challenging environment is grounded in four key principles: Supporting our colleagues and prioritizing their safety and well-being, continuing to serve our subscribers and our customers, ensuring that we take the measures necessary in the short term to protect our current operations and safeguard our financial stability while remaining focused on the critical long-term strategic initiatives that position our business for future growth. I want to note our quarterly report and earnings release present the first-quarter results in the context of broader global events, the current economic conditions and this framework as our compass. We will do the same throughout this call and in response to your questions. Our first-quarter results were strong, with all three of our business lines delivering revenue growth, which overall drove an 8% increase in top line revenue and an 11% increase in operating income.

Bea will cover our financial results in greater detail in a few moments. But I want to take a moment to highlight the performance of our OTC Link business line. OTC Link revenue grew 17%, due in large part to the extremely active market environment that we saw toward the end of the first quarter. OTC Link ATS interdealer quotation system, which is an SCI entity, continued to support our broker-dealer subscribers and facilitate their trading needs, while our OTC Link ECN handled record trade volumes.

With unprecedented volatility this quarter, including four separate marketwide halts, it took the collective effort of the entire industry to keep stock markets open and meeting investors' liquidity needs. We met this challenge with the majority of our employees working remotely beginning in early March. I want to take a moment to personally thank three team members. Mike Modeski, Bart Krezalek and Steve Hock, who continued to come to the office and even slept there some night.

They ensured that we could safely have skilled hands in the office to respond immediately to any issue that may arise as we sheltered the rest of the team. I would be remiss if I did not also thank the remainder of our spectacular team. In particular, those that have spent countless hours monitoring, planning and implementing the technology solutions that allow us to run our markets in times of stress. They tirelessly work to serve our clients and support our entire company, so we could all continue to perform our roles from a remote environment.

It is a testament to their hard work and the resilience of the infrastructure that we have built that we are fully operating today and are able to mark another quarter of 100% uptime of core OTC Link ATS systems during market hours. Our business continuity planning is such that we do not need to have a physical presence in order to operate. Robust BCP preparations allowed us to move quickly to protect our people and have most of them work remotely. It will also permit us to be careful and conservative in our approach when we start reopening our offices.

Systems reliability remains paramount. And while we focus our attention on ensuring our operational capacity during this time, we have not taken our eye off of the longer-term goals. Our management, product design and engineering teams continue to work on initiatives that will improve our technology platform going forward. Our marketing team place significant focus on growing our digital communication capabilities last year and that has proven vital thus far in 2020.

The increased usage of our virtual investor conferences solution during the quarter highlights those capabilities. We are connecting companies to their investors and to each other, even when we can't gather in person. Now more than ever, we embrace our strategic vision for the future that is online, data driven and social. Thus far, our corporate services business line has felt the most acute effects of the COVID-19 pandemic, with new sales declining quarter over quarter.

Specifically, the small and venture stage companies on the OTCQB market are among those most at risk of being impacted by the recent deterioration in economic conditions. We are also likely to see a continued decrease in demand for our corporate services products as companies focus on preserving their day-to-day operations during the crisis. Against the backdrop of unprecedented market turmoil and an extraordinarily challenging economic environment, and in line with similar measures taken by NASDAQ and NYSE, we are providing issuers on our OTCQX and OTCQB markets with temporary relief from certain of our market standards, related to bid price, market capitalization, market value and public float through June 2020. Similarly, we have followed the SEC's lead in extending the deadline for certain disclosure filings by up to 45 days.

We remain committed to our disclosure based philosophy and data-driven market standards. And we recognize that temporary relief from certain requirements is an appropriate response to the current environment. It should be noted that there are hundreds of NASDAQ and NYSE listed companies that will fall out of compliance with share price or financial listing standards. We believe that our OTCQB market, which is a disclosure-based market, can play an important role in giving public companies a way to continue providing disclosure to investors as they address their current financial or economic challenges in a cost-effective and time-efficient manner.

Our market data licensing business delivered strong quarter-over-quarter revenue growth from pricing increases in product sales. We also added hot sector data and risk flags to our small-cap listed compliance product, covering more than 2,300 NASDAQ and NYSE listed securities. We enhanced the U.S. bank holding company corporate structure data on our website to provide historical data trends and charting functionality on all call report data points.

For more than 550 U.S. community banks trading on the OTCQX, OTCQB, and pink markets to achieve our mission of creating better informed and more efficient financial markets. We must keep adding useful data streams and driving enhanced market transparency. During the first quarter, we continued to work closely with the SEC on significant regulatory proposals impacting our markets.

Most notably, on April 8, we filed our third comment letter on the SEC's proposed amendments to exchange Act Rule 15C to 11. This rule governs the publication of quotes on our OTC Link ATS interdealer quotation system. The SEC's proposal includes a number of positive aspects such as recognizing our OTCQX, OTCQB and current information disclosure standards, and allowing brokers and others to rely on our designations to determine whether companies meet the rules eligibility requirements. The proposal also includes several debatable elements, including its limitations on start-ups, early stage companies and others that can be unintentionally harmed by Shell company definitions.

It overly restricts trading transparency and market efficiency for shares of outside investors in companies that cease providing current public information. As a result, the proposal has been met with the different perspectives from individual and institutional investors, broker-dealers, companies, advisors and other regulators. We have proposed a number of practical solutions that would modernize and streamline the rule in a more effective manner. We appreciate the SEC's willingness to engage with market participants as they consider how to structure a final rule.

If adopted is currently proposed, a final rule is luckily to have some positive impact on our ability to develop future revenue streams but would also introduce complexity and limit the number of securities eligible for quoting on our markets, which is likely to have a negative impact on revenue. We look forward to continuing to work closely with the SEC on this important rule making. Finally, I'm pleased to announce that on May 5, our board of directors declared a quarterly dividend of $0.15 per share payable in June. This dividend reflects our ongoing commitment to provide superior shareholder returns.

Unlike a storm in the ocean, there is no satellite map that will tell us when the squalls will pass. So we must concentrate our efforts on safely sailing through whatever trials may appear on the horizon. We are focused on safety of our colleagues, serving our clients, remain operationally and financially strong and prudently navigating these unprecedented times while position ourselves for growth. I'm confident that we have the crew to do just that.

As I turn the call over to Bea, I want to recognize the work that Bea and the finance team as well as our legal team has done to publish our quarterly reports on time. It has taken a big effort to stay on schedule. Thank you, Bea and your teams and our legal team. And with that, it's all yours Bea.

Bea Ordonez -- Chief Financial Officer

Thank you, Cromwell, and thank you all for joining the call today. I hope that everyone is staying healthy and safe. I want to start by commending the efforts of the whole team here at OTC markets who have pulled together and continue to work every day to support our clients and subscribers through these difficult times. I will now spend a few minutes reviewing our results for the first quarter of 2020.

Any reference made to prior period comparatives refers to the first quarter of 2019. As part of our review of our financial results, we will endeavor to provide additional information and disclosure related to how the unfolding COVID-19 pandemic has affected our first quarter results and how it could affect our future performance. For the first quarter of 2020, we generated $16.6 million in gross revenues, up 8%, with all three of our business lines delivering quarter-over-quarter revenue growth. In the aggregate, the COVID-19 pandemic and the challenging business environment that has resulted from it, did not have a material adverse effect on our first quarter revenues, with strong growth in transaction-based trading revenues, and the impact of price increases and user growth in our market data business, offsetting weak growth in our corporate services business.

We operate three distinct business lines that generate diversified revenue streams and serve a broad range of market participants and a wide spectrum of U.S. and global issuers. We benefit from a subscription-based revenue model, with approximately 85% of our revenues coming from subscription-based contracts that are recurring in nature. We ended the quarter with a strong balance sheet, $23 million in cash on hand, and no debt -- are well positioned to continue to invest in our business and to prudently deploy capital.

We have continued to operate our businesses, provide support for our subscribers and customers and devote resources to enhancing our product suite and to adding subscribers and growing the number of issuers on our markets. We are confident that we are well positioned to navigate the difficult economic conditions ahead. With that said, it is clear that while considerable uncertainty exists, our operations and financial results in the coming quarters are likely to be impacted by the current macroeconomic environment. Turning now to look in more detail at individual business lines.

As we've noted, OTC Link revenues were up 17%. We saw significant volatility in the U.S. equity market throughout the month of March, and this drove a substantial increase in the number of transactions executed on our OTC Link ECN as well as a marked increase in the number of quotes and trade messages on our OTC Link ATS. To illustrate, for the month of March, we executed some 213,000 transactions on our ECN, more than double the number of transactions executed during the month of February.

This, coupled with the impact of additional subscribers on boarded over the past several months, drove an increase in our ECN revenues for the quarter of 127%. We've continued to see a relatively active market environment during the month of April. And in the short term, it is likely that our OTC Link business will benefit from the increased volatility and increased trading volumes we are seeing in global equity markets more generally. However, over the longer term, as broker-dealers and others continue to navigate the difficult environment, it is possible that potential subscribers could delay purchasing or implementation decisions.

Further, a prolonged downturn in economic activity could depress trading activity and adversely affect our subscriber base and in turn, our trading revenues. Revenues from our market data licensing business were up 11%. Effective on January 1, we raised the monthly subscription price for Level 1 and Level 2 professional users of our data, the first such raise since 2014. This, coupled with a 3% quarter-over-quarter increase in the number of reported users drove a 14% increase in revenues.

We also raised the monthly subscription cost of certain of our broker-dealer enterprise licenses. Again, the first such increase since 2014. This drove a 25% quarter-over-quarter increase in related revenues. Finally, sales of our data file products and sales or -- and upgrades to premium versions of our compliance offerings drove a 20% increase in related revenues.

As of May 1, 2020, 44 subscribers use our products to streamline and automate their compliance processes, including almost every institution that is active in the OTC space. We have devoted significant resources to growing our subscriber base and believe that we have captured much of that addressable market for our existing suite of products. Further, consolidation among the larger financial firms is likely to continue and could impact the addressable market, both for our compliance products and for our enterprise level market data products more generally. With that said, we are devoting internal resources to developing additional products that better serve the complex compliance needs of participants in the OTC and broader U.S.

equity markets. While revenues from our market data business have not thus far been materially impacted by the economic slowdown, it is possible that we could see potential subscribers delaying purchasing decisions, while existing subscribers might look to curtail their spending or cancel services. Revenues from our corporate services business were up 2%. Revenues from our OTCQX market were up 6%, in line with the higher number of companies on the market over the course of the quarter.

We benefited from a higher starting point with 442 companies on the market on January 1, versus 409 companies at the beginning of 2019. We saw a small decline in our annual renewal rate from 94% for the 2019 annual subscription period to 92% for 2020. Further, we saw a significant slowdown in sales in the current quarter, with 9 companies added versus the 30 companies that joined the market during the first quarter of 2019. Thus, at the end of the current quarter, we have 414 companies on the QX market, flat versus the prior year quarter end.

On a quarter-over-quarter basis, the ending number of companies on our OTCQB market has contracted by roughly 5%, driving a 4% decline in revenues. In 2019, we raised market standards on our QB market, which has had the effect of reducing the available pool of domestic companies. Further, relative to 2018, we saw a much less active cannabis market in 2019. As a result, for the year ended December 31, 2019, we saw a roughly 17% decline in sales, driving a contraction in the number of companies on the OTCQB market at the beginning of 2020.

In addition, we saw a significant drop in new sales during the first quarter, with 28 companies joining the QB market versus the 68 companies added to the market during the prior year quarter. As Cromwell noted during his remarks, OTCQB companies have likely been among those most impacted by the rapid deterioration in macroeconomic conditions that occurred in the first quarter. In respect of both our QX and QB markets, we have seen issuers, including global issuers, deferring buying decisions while they adjust to the challenges of the current business climate. Our sales efforts have also had to adapt to the challenges of operating in a remote working environment.

We remain cognizant of the very difficult business conditions that exist for some of our issuers and our extending relief, including where appropriate by extending payment terms and as Cromwell noted, by providing temporary relief from certain market standards. To the extent that the current economic downturn becomes more severe or is prolonged, we are likely to see a continued dampening of demand for our corporate services products. Further, we are likely to see an increase in the number of customers, particularly OTCQB customers who choose not to renew their services at the end of their service term. On the other hand, as noted by Cromwell, a prolonged downturn would, over the longer term, will likely result in an uptick in company's delisting from national exchanges.

And could expand the pool of qualified companies for our markets. Turning now to expenses. On a quarter-over-quarter basis, operating expenses increased by 4%. The primary driver was a 7% increase in our compensation costs, reflecting increased headcount, the impact of annual salary raises as well as increases in share-based compensation expense and in the cost of providing healthcare coverage for our employees.

This, together with less significant increases in our other areas, was partially offset by a decline in our occupancy cost, a result of onetime costs incurred in the prior year quarter. With revenues growing at 8% and expense growth contained at 4%, we delivered 11% quarter-over-quarter growth in income from operations while net income for the quarter increased by 9%. The company's effective tax rate increased from 13% to 14%, largely as a result of quarter-over-quarter declines in excess tax benefits recognized in respect of stock-based compensation. Cash flows from operating activities for the first quarter amounted to $200,000, a small decrease versus the prior year period, with increases in net income and in the amount of noncash items, offset by changes in our assets and liabilities.

During the first quarter, we used operating cash flows generated as well as cash on hand to fund technology infrastructure investments and to return cash to investors in the form of dividends and through our stock buyback program. We returned a total of $5.3 million in the current quarter, up versus the $3.1 million returns in the prior year period, a result of the increase in the number of shares we purchased. In closing, during the first quarter, like so many businesses here in the U.S. and globally, we work diligently to adapt to our new working environment and to continue to support our colleagues and the thousands of subscribers and issuers we serve.

We delivered strong earnings growth while remaining focused on the critical long-term initiatives that position our business for future growth. While we continue to evaluate the evolving challenges of the current environment, we remain focused on delivering for all of our stakeholders and on continuing to grow to support the needs of our diverse community of clients. With that, I would like to thank everyone for their time and pass it back to the operator to open up the line for questions.Question and Answer

Questions & Answers:

Operator

[Operator instructions] I am showing there are no questions at this time.

Cromwell Coulson -- President and Chief Executive Officer

Thank you, operator. Ladies and gentlemen, I want to thank you all for joining us today and encourage you to read our quarterly report for additional perspective. As always, we remain committed to supporting our colleagues, our clients and our company in these challenging times. On behalf of the entire team, I would like to wish you and your families continued health and safety.

We look forward to connecting with you next quarter. Thank you. Operator, there are questions now.

Operator

Yes. I see. Your first question comes from Chris McGinnis from Sidoti & Company.

Chris McGinnis -- Sidoti and Company, LLC -- Analyst

Good morning. Thanks for taking my questions. Nice quarter, and I hope you're all healthy and safe. Maybe can you just maybe talk a little bit about trends maybe in April and maybe how states start to open up and maybe economies start to unfreeze here.

If that had any changes with the business? And just how maybe trends are tracking in April and early May? Thanks.

Bea Ordonez -- Chief Financial Officer

Thank you, Chris, and thanks for your question. I hope you're staying well. Yes, certainly look at we've closed out April now, obviously. As I noted, I think during the remarks and as we noted in our quarterly, we continued to see a fairly active environment during the month of May to give some context on our OTC Link ECN.

But May, we averaged about 8,000 transactions per day. So down in the month of March, we executed an average of 10,000, so down a little bit, but still up considerably from our average in January and February and on a period-over-period basis, also up considerably. And again, as I noted, that's in part, obviously, a factor of the very active market environment, but also the significant success we've had in onboarding subscribers over the last several months. If you look at May 1, 2020 versus May 1 last year, we have 61 subscribers connected versus 43 last year.

So yes, as I noted, I think in the short term, our OTC Link business, have some transactional exposure through the ECN business primarily. And we're likely to see a little bit of an uptick there and some tailwinds from the active environment. In our market data business, again, active environments and more eyeballs on data and so on. We're likely to continue to sort of stay steady state, at least for a little bit, but again, as conditions prolong over a longer period of time, if indeed they do, that's where we might expect to see headwinds sort of through the end of that cycle.

Corporate services, again, as we noted through our remarks, is really the area where we saw the fastest impact and where we might see a more prolonged impact, again, there's significant uncertainty here, but it also depends on the length and severity of any downturn. But in terms of April, what we saw in the first quarter, as I noted, was certainly a decline in sales for a whole bunch of reasons. By the middle of the first quarter, we had limited business travel, we have canceled in person events at our offices. Both of those represent a significant form of outreach for us.

By early May, we had transitioned everybody, including our sales team to a fully remote working environment. And without a doubt, that had an impact on sales processes and onboarding. And in addition, obviously, the market declines, the steep decline in stock prices that we saw in March had an outsized impact on small-cap companies. And so we saw some not insignificant number of companies in our pipeline, fall out of compliance with market standards, who would otherwise have qualified.

So all of that had a drag on sales in the first quarter, which you see in the numbers. In April, we see a little bit of an uptick in QB sales, which is nice. We added 13 companies to the market in April, which is just a shade down from the 16 that we added for April of last year. We added three companies to our QX market, again, down from the eight we added last year.

But signs of life, we have a strong pipeline. And as we see, again, we noted during our remarks that exchanges are also extending temporary relief around certain market standards. As we sort of work our way through that cycle and potentially see more delis, we could see sort of more signs of life in that pipeline as well. So really, in terms of longer term in our corporate services, again, a prolonged downturn could dampen demand for our products.

But at the same time, companies will need to access the benefits of being a public market. And if the current climate does become somewhat of a new normal for at least some period of time, companies who have perhaps deferred some of their decisions may start to operate more normally within what is the new framework. So we remain pretty bullish around that and are going to continue to do what we've done throughout the quarter, which is to devote resources to outbound sales efforts, to move as much communication online and leverage products like our virtual investor conferences business and to continue to support our issuers with relief where appropriate and just with the support we've always provided them. I hope that answers your question.

Operator

[Operator instructions] Your next question comes from Andrew Mitchell from Edison.

Andrew Mitchell -- Edison Investment Research -- Analyst

I was wondering if you could comment on the number of broker-dealer participants in ATS. In the OTC Link ATS has shown a further decline in the quarter you're reporting on. I was wondering if there's any sort of specific background to that. Have any of them, I assume not, have any of them simply transferred to using the ECN and not the ATS.

Can you sort of shed some more light on that?

Dan Zinn -- General Counsel

Sure, Andrew. Thanks for the question and hope that you're well. So it's the continuation of a trend that we've seen for quite some time where there's just increased consolidation in the space. I think the numbers there out that we've seen an increase in usage of the ECN.

And so some of that is crossover. It's firms using both services and they provide a different experience from a trading perspective. So it's not so much that firms are leaving one to join the other. I think the expansion that you see is due to firms taking advantage of both types of services.

And then the general trend in terms of the number of broker-dealer subscribers is really just in keeping with what we've seen over time. So outside of a few that I think have moved from OTC Link ATS to OTC Link ECN, the general trend is just the overall long term.

Andrew Mitchell -- Edison Investment Research -- Analyst

And on the ECN, obviously, I assume the main driver, I think you say in the statement, of the increase in transaction-based expenses is obviously the increase in volume. But have there been any significant changes in the terms or participants the make or take fees?

Dan Zinn -- General Counsel

No. And Bea can address this as well from just the pure results perspective. But you're right, the increase that you see is really based on the increased volume in the market. So that impacts quote and message activity on OTC Link ATS as well as obviously executions and transactions on OTC Link ECN.

So it's not a change in pricing or in the model. It really is all flowing from that impact of increased activity.

Andrew Mitchell -- Edison Investment Research -- Analyst

OK. And then I think a final one was on the -- you flagged up that there clearly these things have protracted in terms of the macro effect. A key risk is to the corporate business line. And I was wondering, the OTCQX, I think, is a calendar year primarily a calendar year renewal cycle.

I was just wondering if in OTCQB, there's any lumpiness in terms of when contracts renewals come up that may affect if there is this sort of adverse development, when we might expect to see that becoming more evident.

Bea Ordonez -- Chief Financial Officer

Right. Sure. No. As you know, QX customers renew annually based on a calendar year subscription period.

And as we noted in our remarks for 2020, we achieved a 92% renewal rate, which, again, we're very pleased with, a shade down from 94% last year. But we've stayed historically right in that band of 92%, 93%, 94% and so on. QB customers, as you noted, that they renew annually or semiannually on a rolling renewal calendar based on the anniversary when they joined. We see a little bit of lumpiness, something we did in the earlier years based on how we rolled out that market and onboarded customers.

But in a typical month now, we might see somewhere between 75 to 100 QB customers up for renewal in any given monthly period. And to provide a little bit of context, in 2019, our average renewal rate across every renewal cycle that hit through that year was about 93%, up a bit, down a bit in a given month, but again, a fairly sticky product with a low rate of voluntary churn off of it. It's early, as we've noted, look at the real effect kicks in March in terms of some of the governmental measures that locked down the economy. So we're going to have to see how this plays out and continue to evaluate it.

In looking at April, as an example, April renewal date, and our terms require payments 30 days prior to the beginning of the next service date, we would ordinarily have closed out that period. We've so far hit a renewal rate of 84% for April, and we've extended payment relief to 14% within that pool of companies. So we're certainly lagging where we would expect to be in renewal, but not markedly so. And we sort of feel like we can navigate through this.

To give a little more context in terms of May, we've seen 70% of companies renewed. So again, we're certainly lagging where we were in 2019, but it's early days. We've extended payment relief, which we think is appropriate, obviously, given the unprecedented economic conditions. And we'll just continue to evaluate that and do what we think better to the interest of obviously, the company and our market standards and so on, but also of our issuers in supporting them through these times.

So I think it's somewhat hard. Obviously, there's significant uncertainty for everybody to really model out what the likely impact is going to be. We're beginning to see some trends, but a lot can change in the next three months, just as a lot changed in the three months leading up to this point.

Cromwell Coulson -- President and Chief Executive Officer

As I said, we don't have a radar map that's going to tell us when the storm is over. And I do believe, in these times, managing quarter to quarter is just completely foolish is because we know there is the current situation. If we're staying financially strong, serving our clients, protecting our people and preserving our financial strength. But we also know eventually you sail through these things.

And nobody can tell you whether there's going to be you or a we when it comes out, but it will. And whether it is six months or two years or three years, our goal is to make it through. Now where I'd say there's a challenge now because business all focused on hanging on and dealing with immediate needs and everyone was on it in a different situation in our corporate client world while traders were going full speed. But as we look at going forward, one of the unique thing about venture markets is people think about them as just for new companies coming on.

But venture markets because they are very light on the financial standards, they're disclosure driven. They also give a place for companies to hang on and keep providing information to investors. And we've seen that in having Fannie Mae and Freddie Mac are QB companies. We see that in other companies.

And in some ways, moving to a market that's disclosure based while a management team is addressing their challenges is much more efficient for them. We see companies on NASDAQ focusing on doing reverse splits to try and keep their stock price up permanently rather than putting the management time to addressing the challenges and building a sustainable business. And in our cycle, QB was a much younger experience in the 2008 crisis. But as we look to Canada, we see often that there's a lot of companies that want to hold on to stay on a venture market, even when things are not doing well.

And that for us is helping people understand why it's useful. And why it may be a better place than being on a national exchange where the financial standards, you're focusing on short-term financial standards versus long-term sustainability.

Andrew Mitchell -- Edison Investment Research -- Analyst

Thank you.

Operator

Your next question comes from Dave Alias from Alias Asset Management.

Unknown speaker

Thank you everybody. Thank you especially for everybody at the company for hosting the conference call. Congratulations on a very good quarter. I can't even imagine the back end work that goes on back there to support your work.

I have three questions. Before a question, I want to say something. The business part, I don't question, you have a strong balance sheet. Your revenues are very good.

My question is, have you done or plan on doing to increase the liquidity in your stock? I ask this because in the opening statement, you commented on liquidity being a central facet of the stock market, especially during these difficult times. However, your stock has minimal to no liquidity so that's the first out of three questions.

Cromwell Coulson -- President and Chief Executive Officer

OK. So I think every stock would like to have more liquidity. And for us, is there enough liquidity? For existing shareholders as they roll through as they go along. One of the parts I always found interesting was when we were a private company, our conversations with our outside investors were "when are you selling the company?" and in our annual meetings with them.

And "when are you selling?" And I expected we'd have more investors who wanted to sell. And we don't have a ton of investors who want to sell is -- and that's a good thing because I look at liquidity as a turnover, it would be really -- there's liquidity is that if you have a ton of liquidity just for liquidity's sake, what you're doing is you're shortening your shareholder duration. So we talk to community banks, which often look a lot like our type of shareholder base, where only 5% of their shares turnover in a year. And for the community banks, they like I'd like to have five times liquidity, but then they would have -- they would be shortening their investor duration.

And so you would ask, would we like to think about other ways to increase liquidity as areas go forward? The second part is, We see blocks appear in the market, and they trade. And there's this idea it makes people happy that I should be able to show up in a smaller company stock, whether exchange listed or OTC, and be able to sell large block really quickly. And it's a bug in markets that there's not liquidity for size in stocks. And what we see is it's actually a feature because smaller companies have information asymmetries.

If someone shows up wanting immediate liquidity for a large amount of stock, in small companies, you're either going to get speed or price, you don't get both. And what we've seen is when blocks have come along, they've either had to sell over time into the market or a block shows up and it hangs out there for two weeks, a month at the market and the market realizes the seller isn't discounting their shares, doesn't have an informational asymmetry. And often, it trades around the market level. So that's our part is there's a lot of people outside the industry who will loudly say that we can make this market structure change.

And it's one of the reasons why we've been also not as a traditional value investor buying back as aggressively stock in the public market. Because that creates a liquidity trap. We preferred dividends in general, because employees have smaller windows. But that's our general philosophy.

We would love more liquidity, but we think we have an appropriate amount of liquidity. And if someone wants to be able to buy a stock, that they can buy a huge amount and trade out of in the next 30 seconds. They should concentrate on trading much bigger companies.

Unknown speaker

Thank you. OK. My second of three questions. While I do see an appreciated dividend, and I do believe a dividend is better than a stock buyback.

But that's an opinion. It's not a fact. I trying to calculate my upside as an investor in the company that has a $325 million market cap concerning that significant revenue growth. When I say significant, I want to be fair because that's a subjective term [inaudible].

Significant revenue growth being, let's say, year over year, double digits, 20%. How this company is going to grow 20-plus percent per year unless you make an acquisition? So my concern is there's only so much upside in the $325 million market cap company, unless a major event occurs. I'm trying to look at it from my perspective, and I'm having difficulty finding it because like I said, I believe what you do is great. I believe the service and everything you do is to provide to small caps is wonderful.

I believe your business is good. I believe that your business is not going to go away, and it's probably going to grow. And if I had to make an internal guess, and I am saying you don't give guidance or pro forma nor should you but I don't see the significant growth. And as an investor in a $325 million market cap, I'm having trouble with that.

Can you help me better understand that or how I could look at it? And then I have one very quick question after this.

Bea Ordonez -- Chief Financial Officer

Sure. Let me try and answer that. Look, it's difficult, as I sit here for me to answer how you should view this as an investor given your particular requirements and your particular characteristics as an investor, and what your risk-adjusted return might be on this kind of stock and so on and so forth. I think to your point in the question, we have delivered growth over the long-term for a very long time.

We have a long operating history of delivering earnings growth and of raising the dividends that we pay and the amount of cash we return to investors over the long term, while also delivering stock value appreciation. So look, as every caveat will tell you, past performance doesn't guarantee future performance, but we have continued, even over the last several years, to expand within our sector of the equities market to put out more products, to find more niches, to serve more clients and subscribers to really look at the global opportunity. We have proven over the last several years that we can, and we'll do that to deliver lasting growth and value over the longer term. And in terms of our capital allocation policy, as you know, we have paid consistent quarterly debt dividend.

I think it's now our 45th or 46th consistent dividend. And we have always raised it or we have raised it or look to raise it in line with that earnings growth. And again, we will prudently evaluate the current condition, but our long-term goal is to continue to raise the amount of cash we return to investors through dividends and through other programs in line with that earnings growth that, look, we remain confident that we can deliver over the longer term. In terms of your note on acquisitions.

Yes. Look, we've noted through a couple of earnings calls that we view that as an avenue to really drive more incremental growth through the business. We've certainly been looking at it with some limited success to date. And given the current economic climate, look, it's difficult time certainly, but they can create opportunities for us and for others.

We've certainly seen and are likely to continue to see valuation multiples contract when you compare it to the meteoric highs that we've seen over the past several years. So we may see an opportunity as a result, and we remain willing and able now or in the future to deploy capital as we come across the right opportunity.

Unknown speaker

And my last point. My last question, this is my last question. So sorry for taking so much time. My philosophy, and again, it's more of an opinion as compared to a fact, but my philosophy has pretty much been proven.

For any public company to see stock appreciation, they require institutional investors coming in. And so what are you doing to bring in institutions since you don't have any? And secondly, again, this becomes a little bit of a quandary, and I don't want to beat a dead horse with a stick, but the liquidity issue, the liquidity issue, institutional investors. Our firm, for example, we want to take a position in the company unless we could buy at least $250,000 worth of stock. So with that being said, I can't, right now.

I'm having difficulty getting into the stock to get the $250,000, but you don't have institutions. So forgetting my fear and my firm, but without institutional investors, there's only so much a stock will go up. So with that being said, I don't want to talk about the liquidity as much, but I do want to talk about what, if anything, are you doing or can you do? What do you intend to do to bring in institutional because with retail investors only, that creates almost like a ceiling to what the company stock can do. And congratulations on a great quarter.

Cromwell Coulson -- President and Chief Executive Officer

So this is Cromwell. We do have institutions. They're quieter institutions. A lot of the institutions we see come in are either value or growth with value and small company specialists.

A lot of those ones are very happy buying over the long term. They don't want to pay the liquidity to minimum. They hang around on the bid. They learn these questions.

They come visit us for years. We are a company with a lot of shareholders who have done well over time. And they don't want us trying to bang home runs. And what they want us to do is consistently building out our platform to serve our clients in a sustainable manner.

And I would say one of the big lies about liquidity in small companies is driven by pipes players. And it's the intermediaries that come in and tell small companies, I want to invest in your company. I'm a long-term investor. I'm an institution and then they go but you need more liquidity.

So you need to put out aggressive press releases, you need to do things that are on the edge. And then those firms just buy shares at a discount and are selling them into the market because they're talking about liquidity, is really about how big a door can I arbitrage. Other longer-term investors, if we are doing a capital raise, there'd be a group of institutions that we could go to, and we could expand. And we look at that of align it.

But running a public company, to be long term is, if you want to be super aggressive, short term, shoot them up guys, there's other markets for that. We want to provide a sustainable, a market for public companies where management can focus on long-term and giving their investors the information and the transparency and the tradability, but without all the burdensomeness. So we eat our own cooking. I don't think every company needs to be able to trade one million shares a day to be a public company.

And that's the problem we're solving in the U.S. So if you want us to be something differently, we're probably the wrong stock for you.

Operator

But we've got questions from one more person. We have a follow-up question from Chris McGinnis from Sidoti & Company.

Chris McGinnis -- Sidoti and Company, LLC -- Analyst

Just a quick question. I appreciate taking the time again. Bea, just on the cost structure, kind of from Q1 kind of going forward for the rest of the year, any changes that you might want to mention or you think it will probably stay at the same levels on the operating side?

Bea Ordonez -- Chief Financial Officer

Thank you, Chris, for your question. Yes, as I noticed through the remarks, there's not big movements in our cost structure quarter over quarter. I think we did a good job in containing expense growth, and that was our plan for 2020. We saw a lot of investment.

You've tuned into many calls now, but 2019 was really marked by investment in a bunch of areas. We added headcount, we added infrastructure capabilities. And those capabilities have served us very well now, as we noted during our remarks. So that was really an investment year, and we saw the impact to our expense base accordingly for 2020, and we have flagged this last year.

We largely wanted to contain that expense growth and see some leverage and see some margin expansion. We saw that in Q1. Obviously, as we look forward, life is not quite what we expected it to be. I don't expect significant changes to our operating expenses over the rest of the year.

A large percentage of our expense base is fixed in nature, roughly 80% is compensation and IT expenses. So that we don't plan on adding headcount in the short term, all things being equal, we'll continue to invest prudently in infrastructure initiatives as we need to and as planned, but we don't plan on significantly upping those costs either. We're a relatively small company, and we run pretty lean. So a long way of saying we don't expect significant movement there.

We're focused on not only weathering the storm, but obviously positioning ourselves for the longer term and being able to emerge from this stronger and able to drive future growth. So certainly, at this point, and I know other companies have said similar things. We don't plan on reducing headcount in any way or anything like that in the short term. We'll continue to evaluate market conditions and emerge stronger on the other side, that is the plan.

Operator

There are no further questions in queue.

Cromwell Coulson -- President and Chief Executive Officer

Thank you, operator. And since I've already read my closing remarks, I'd just like to repeat. On behalf of the entire team at OTC markets, we would like to wish you and your family's continued health and safety. We look forward to connecting with you again.

Thank you.

Operator

[Operator signoff]

Duration: 60 minutes

Call participants:

Dan Zinn -- General Counsel

Cromwell Coulson -- President and Chief Executive Officer

Bea Ordonez -- Chief Financial Officer

Chris McGinnis -- Sidoti and Company, LLC -- Analyst

Andrew Mitchell -- Edison Investment Research -- Analyst

Unknown speaker

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