Core Insights - Metropolis Technologies has raised $1.6 billion in funding to expand its AI-driven recognition technology beyond parking into various sectors like retail, restaurants, and gas stations [1][4][10] Funding Details - The funding consists of a $500 million Series D equity round led by LionTree, valuing the company at approximately $5 billion, and a $1.1 billion syndicated term loan from J.P. Morgan [2] Company Background - Founded in Los Angeles in 2017, Metropolis has rapidly grown to operate over 4,200 locations across 40 countries, handling an annual transaction volume of $5 billion from 50 million users [3][6] Technology and Market Opportunity - The company aims to leverage its existing camera and license-plate recognition technology to automate transactions in various environments, including drive-throughs and hotels, promoting a "Recognition Economy" [4][7][9] - Metropolis believes that the majority of the market for physical-world automation remains untapped, despite some existing checkout-free technologies [7] Future Outlook - The company plans to implement its technology in new areas, aiming to simplify transactions and enhance customer experiences by reducing wait times and streamlining processes [8][9] - Metropolis envisions becoming a leader in automating real-world transactions across multiple sectors, transforming how payments and check-ins are conducted [9][10]

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[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents SP Plus Corporation's unaudited condensed consolidated financial statements and detailed notes on key accounting areas [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates **Condensed Consolidated Balance Sheets (millions)** | (millions) | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | **Assets** | | | | Total current assets | $210.4 | $212.2 | | Total noncurrent assets | $932.0 | $939.7 | | **Total assets** | **$1,142.4** | **$1,151.9** | | **Liabilities** | | | | Total current liabilities | $325.9 | $337.4 | | Total noncurrent liabilities | $555.9 | $563.8 | | **Total liabilities** | **$881.8** | **$901.2** | | **Stockholders' equity** | | | | Total stockholders' equity | $260.6 | $250.7 | | **Total liabilities and stockholders' equity** | **$1,142.4** | **$1,151.9** | - Total assets decreased by **$9.5 million** from **$1,151.9 million** at December 31, 2023, to **$1,142.4 million** at March 31, 2024 Total liabilities decreased by **$19.4 million**, while total stockholders' equity increased by **$9.9 million**[8](index=8&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section details the company's revenues, expenses, and net income over specific periods **Condensed Consolidated Statements of Income (millions, except per share data)** | (millions, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Services revenue | $451.9 | $425.3 | | Cost of services | $389.2 | $367.0 | | General and administrative expenses | $34.8 | $30.6 | | Depreciation and amortization | $9.0 | $8.4 | | Operating income | $18.9 | $19.3 | | Interest expense | $7.4 | $6.8 | | Earnings before income taxes | $11.6 | $12.6 | | Income tax expense | $3.1 | $3.3 | | Net income | $8.5 | $9.3 | | Net income attributable to SP Plus Corporation | $7.6 | $8.4 | | Basic Net income per common share | $0.38 | $0.43 | | Diluted Net income per common share | $0.38 | $0.42 | - Total services revenue increased by **$26.6 million (6.3%)** year-over-year, from **$425.3 million** in Q1 2023 to **$451.9 million** in Q1 2024 However, operating income slightly decreased by **$0.4 million (2.1%)**, and net income attributable to SP Plus Corporation decreased by **$0.8 million (9.5%)** due to higher general and administrative expenses and interest expense[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net income and other comprehensive income items, reflecting total non-owner changes in equity **Condensed Consolidated Statements of Comprehensive Income (millions)** | (millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $8.5 | $9.3 | | Foreign currency translation (loss) gain | $(0.2) | $0.2 | | Comprehensive income | $8.3 | $9.5 | | Less: Comprehensive income attributable to noncontrolling interests | $0.9 | $0.9 | | Comprehensive income attributable to SP Plus Corporation | $7.4 | $8.6 | - Comprehensive income attributable to SP Plus Corporation decreased from **$8.6 million** in Q1 2023 to **$7.4 million** in Q1 2024, primarily due to a foreign currency translation loss in the current period compared to a gain in the prior year[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity, including net income, stock-based compensation, and distributions **Condensed Consolidated Statements of Stockholders' Equity (millions, except share data)** | (millions, except share data) | Balance at January 1, 2024 | Balance at March 31, 2024 | | :---------------------------- | :------------------------- | :------------------------ | | Total Stockholders' Equity | $250.7 | $260.6 | | Net income | $7.6 | | | Non-cash stock-based compensation | $2.3 | | | Foreign currency translation | $(0.2) | | | Distributions to noncontrolling interests | $(0.7) | | - Total stockholders' equity increased from **$250.7 million** at January 1, 2024, to **$260.6 million** at March 31, 2024, driven by net income of **$7.6 million** and non-cash stock-based compensation of **$2.3 million**, partially offset by foreign currency translation loss and distributions to noncontrolling interests[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities **Condensed Consolidated Statements of Cash Flows (millions)** | (millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $14.6 | $7.7 | | Net cash used in investing activities | $(5.6) | $(8.8) | | Net cash (used in) provided by financing activities | $(10.2) | $18.7 | | Net (decrease) increase in cash and cash equivalents | $(1.3) | $17.4 | | Cash and cash equivalents at end of period | $17.8 | $29.8 | - Net cash provided by operating activities increased by **$6.9 million** to **$14.6 million** in Q1 2024 compared to Q1 2023 Net cash used in investing activities decreased by **$3.2 million** However, net cash used in financing activities was **$10.2 million** in Q1 2024, a significant shift from **$18.7 million** provided in Q1 2023, leading to an overall decrease in cash and cash equivalents[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies and financial statement items [1. Significant Accounting Policies and Practices](index=8&type=section&id=1.%20Significant%20Accounting%20Policies%20and%20Practices) This section outlines the company's core business, merger details, consolidation principles, and accounting standards - SP Plus Corporation is a mobility solutions provider integrating technology with operations management, serving aviation, commercial, hospitality, and institutional clients in North America and Europe The company primarily operates through contractual agreements with property owners rather than owning facilities[17](index=17&type=chunk) - The company entered into a Merger Agreement on October 4, 2023, to be acquired by Metropolis Technologies, Inc. for approximately **$1.5 billion ($54.00 per share in cash)** Stockholders approved the transaction on February 9, 2024, with closing expected in 2024, subject to regulatory approvals Merger-related expenses of **$2.7 million** were incurred in Q1 2024[18](index=18&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company consolidates wholly-owned subsidiaries and Variable Interest Entities (VIEs) where it is the primary beneficiary As of March 31, 2024, assets related to consolidated VIEs were **$53.0 million**, and liabilities were **$45.3 million**[21](index=21&type=chunk) - The allowance for doubtful accounts decreased from **$2.6 million** at December 31, 2023, to **$1.4 million** at March 31, 2024[23](index=23&type=chunk) - The company has equity investments in **6 unconsolidated entities (30-50% ownership)** accounted for under the equity method, with equity earnings of **$0.5 million** in Q1 2024, down from **$0.7 million** in Q1 2023[27](index=27&type=chunk) - New accounting pronouncements, ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures), are effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively The company is currently assessing their impact[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) [2. Acquisitions](index=11&type=section&id=2.%20Acquisitions) This section details the acquisition of Roker Inc., including its financial impact and fair value allocation - On July 25, 2023, SP Plus Corporation acquired certain assets of Roker Inc., a US-based provider of integrated parking solutions, for approximately **$3.1 million** This acquisition enhances the company's frictionless technology solutions[40](index=40&type=chunk)[41](index=41&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - Roker contributed **$0.1 million** in services revenue and **$0.2 million** in losses before income taxes during the three months ended March 31, 2024, primarily due to amortization of acquired intangible assets[42](index=42&type=chunk) **Roker Acquisition Fair Values (millions):** | Asset/Liability | Amount (millions) | | :---------------------- | :---------------- | | Other intangible assets | $2.3 | | Goodwill | $1.0 | | Accounts payable | $(0.2) | | Net cash paid | $3.1 | [3. Leases](index=11&type=section&id=3.%20Leases) This section provides details on the company's lease assets, liabilities, costs, and related cash flows **Lease Assets and Liabilities (millions):** | Category | March 31, 2024 (millions) | December 31, 2023 (millions) | | :----------------------- | :------------------------ | :--------------------------- | | Total leased assets | $200.2 | $204.0 | | Total lease liabilities | $231.6 | $238.3 | **Net Lease Cost (millions):** | Component | Three Months Ended March 31, 2024 (millions) | Three Months Ended March 31, 2023 (millions) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $35.4 | $36.9 | | Finance lease cost | $2.2 | $1.9 | | Total Net lease cost | $37.6 | $38.8 | - The weighted-average remaining lease term for operating leases is **5.0 years** with a discount rate of **5.6%**, while for finance leases it is **4.0 years** with a discount rate of **6.5%**[47](index=47&type=chunk) **Cash Flow Information Related to Leases (millions):** | Item | Three Months Ended March 31, 2024 (millions) | Three Months Ended March 31, 2023 (millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Operating cash outflows related to operating leases | $20.5 | $20.8 | | Financing cash outflows related to finance leases | $1.9 | $1.9 | | Leased assets obtained for new operating lease liabilities | $5.0 | $7.8 | | Leased assets obtained for new finance lease liabilities | $5.0 | $1.7 | [4. Revenue](index=13&type=section&id=4.%20Revenue) This section explains the company's revenue recognition policies, remaining performance obligations, and contract balances - The company recognizes revenue from management type contracts (fixed/performance-based fees, e-commerce, subscription) and lease type contracts (gross receipts, e-commerce, convenience fees) Management type contracts do not include gross customer collections, which belong to property owners[51](index=51&type=chunk)[52](index=52&type=chunk) **Remaining Performance Obligations (millions):** | Year | Amount (millions) | | :---------------- | :---------------- | | 2024 | $58.6 | | 2025 | $51.1 | | 2026 | $37.6 | | 2027 | $23.1 | | 2028 | $10.1 | | 2029 and thereafter | $13.2 | | **Total** | **$193.7** | **Contract Balances (millions):** | Item | March 31, 2024 (millions) | December 31, 2023 (millions) | | :---------------- | :------------------------ | :--------------------------- | | Accounts receivable | $180.7 | $181.9 | | Contract assets | $0.3 | $1.2 | | Contract liabilities | $(9.4) | $(17.5) | - Cost of contracts expense, recorded as a reduction to Services revenue – management type contracts, was **$0.2 million** for both Q1 2024 and Q1 2023[58](index=58&type=chunk) [5. Legal and Other Commitments and Contingencies](index=17&type=section&id=5.%20Legal%20and%20Other%20Commitments%20and%20Contingencies) This section addresses the company's involvement in legal claims and litigation, assessing potential financial impacts - The company is involved in various claims and litigation in the normal course of business, including labor, contracts, and personal injury While outcomes are uncertain, the company believes these will not have a material adverse effect on its financial position, results of operations, or cash flows[61](index=61&type=chunk)[155](index=155&type=chunk) [6. Other Intangible Assets, net](index=17&type=section&id=6.%20Other%20Intangible%20Assets,%20net) This section details the company's other intangible assets, their weighted average lives, and amortization expense **Other Intangible Assets, Net (millions):** | Intangible Asset | Weighted Average Life (Years) | March 31, 2024 Net (millions) | December 31, 2023 Net (millions) | | :----------------------- | :---------------------------- | :---------------------------- | :------------------------------- | | Management contract rights | 5.4 | $21.7 | $23.0 | | Proprietary know how | 6.0 | $17.0 | $17.9 | | Customer relationships | 7.4 | $15.6 | $16.2 | | Trade names and trademarks | 12.5 | $1.7 | $1.8 | | Covenant not to compete | 3.7 | $0.7 | $0.8 | | **Total** | **6.3** | **$56.7** | **$59.7** | - Amortization expense for other intangible assets was **$2.9 million** in Q1 2024, slightly down from **$3.0 million** in Q1 2023[62](index=62&type=chunk) [7. Goodwill](index=17&type=section&id=7.%20Goodwill) This section presents the carrying amounts of goodwill by segment and explains changes due to foreign currency translation **Goodwill Carrying Amounts (millions):** | Segment | December 31, 2023 Total (millions) | March 31, 2024 Total (millions) | | :---------- | :------------------------------- | :---------------------------- | | Commercial | $388.1 | $388.0 | | Aviation | $156.5 | $156.4 | | **Total** | **$544.6** | **$544.4** | - Goodwill decreased slightly by **$0.2 million** from December 31, 2023, to March 31, 2024, primarily due to foreign currency translation adjustments[63](index=63&type=chunk) [8. Borrowing Arrangements](index=17&type=section&id=8.%20Borrowing%20Arrangements) This section outlines the company's long-term debt, credit facilities, interest rates, and compliance with covenants **Long-Term Borrowings (millions):** | Item | March 31, 2024 (millions) | December 31, 2023 (millions) | | :------------------------------------ | :------------------------ | :--------------------------- | | Senior Credit Facility, net | $323.8 | $328.6 | | Other borrowings (incl. finance leases) | $28.1 | $25.2 | | Deferred financing costs | $(1.5) | $(1.7) | | Total obligations | $350.4 | $352.1 | | Less: Current portion | $(18.5) | $(16.5) | | **Total long-term borrowings, excluding current portion** | **$331.9** | **$335.6** | - The Senior Credit Facility allows aggregate borrowings of **$600.0 million**, including a **$400.0 million** revolving credit facility and a **$200.0 million** term loan, maturing April 21, 2027 As of March 31, 2024, **$324.6 million** was borrowed against it, and the company was in compliance with debt covenants[67](index=67&type=chunk)[68](index=68&type=chunk) - The weighted average interest rate on the Senior Credit Facility increased to **6.7%** in Q1 2024 from **6.3%** in Q1 2023 The rate on all outstanding borrowings (excluding letters of credit) increased to **7.2%** from **6.7%** over the same period[69](index=69&type=chunk) - Subordinated Convertible Debentures, acquired in 2012, mature on April 1, 2028, with an approximate redemption value of **$1.1 million** as of March 31, 2024[70](index=70&type=chunk) [9. Stock Repurchase Program](index=19&type=section&id=9.%20Stock%20Repurchase%20Program) This section details the company's stock repurchase authorizations, shares repurchased, and remaining available amounts - The company has two active stock repurchase programs authorized by the Board in May 2022 and February 2023, each for up to **$60.0 million** As of March 31, 2024, **$0.2 million** remained available under the May 2022 program, and no shares have been repurchased under the February 2023 program[71](index=71&type=chunk)[72](index=72&type=chunk) - Due to the Merger Agreement, the company is restricted from repurchasing its common stock starting October 4, 2023 No shares were repurchased in Q1 2024, compared to **285,700 shares** for **$10.4 million** in Q1 2023[72](index=72&type=chunk)[73](index=73&type=chunk) **Stock Repurchase Program Summary (millions):** | Item | March 31, 2024 (millions) | | :-------------------------------- | :------------------------ | | Total authorized repurchase amount | $120.0 | | Total value of shares repurchased | $59.8 | | Total remaining authorized repurchase amount | $60.2 | [10. Stock-Based Compensation](index=20&type=section&id=10.%20Stock-Based%20Compensation) This section describes the company's RSU and PSU grants, related compensation expense, and unrecognized amounts - The company granted **158,343 Restricted Stock Units (RSUs)** in Q1 2024, up from **126,931** in Q1 2023 RSU-related compensation expense was **$1.4 million** in Q1 2024, compared to **$1.1 million** in Q1 2023[74](index=74&type=chunk) - As of March 31, 2024, there was **$12.6 million** of unrecognized RSU expense (weighted average remaining period of **2.3 years**) and **$4.2 million** of unrecognized Performance Share Unit (PSU) expense (weighted average remaining period of **1.4 years**)[74](index=74&type=chunk)[77](index=77&type=chunk) - PSU-related compensation expense was **$0.9 million** in Q1 2024, down from **$1.1 million** in Q1 2023 Additional future PSU expenses of **$4.2 million (2023 PSUs)** and **$1.9 million (2022 PSUs)** could be recognized if maximum performance targets are achieved[77](index=77&type=chunk) [11. Net Income per Common Share](index=20&type=section&id=11.%20Net%20Income%20per%20Common%20Share) This section presents basic and diluted net income per common share, reflecting net income attributable to the corporation **Net Income Per Common Share:** | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to SP Plus Corporation (millions) | $7.6 | $8.4 | | Basic weighted average common shares outstanding | 19,803,578 | 19,701,426 | | Diluted weighted average common shares outstanding | 19,992,969 | 19,867,300 | | Basic Net income per common share | $0.38 | $0.43 | | Diluted Net income per common share | $0.38 | $0.42 | - Basic and diluted net income per common share decreased from **$0.43** and **$0.42** in Q1 2023 to **$0.38** for both in Q1 2024, reflecting the decrease in net income attributable to SP Plus Corporation[79](index=79&type=chunk) [12. Comprehensive Loss](index=21&type=section&id=12.%20Comprehensive%20Loss) This section details other comprehensive income items, primarily foreign currency translation adjustments, and their impact **Other Comprehensive (Loss) Income (millions):** | Item | Three Months Ended March 31, 2024 (millions) | Three Months Ended March 31, 2023 (millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Foreign currency translation | $(0.2) | $0.2 | | Total other comprehensive (loss) income | $(0.2) | $0.2 | - Accumulated other comprehensive loss increased from **$(1.3) million** at December 31, 2023, to **$(1.5) million** at March 31, 2024, primarily due to foreign currency translation adjustments[80](index=80&type=chunk) [13. Segment Information](index=21&type=section&id=13.%20Segment%20Information) This section provides financial data for the Commercial and Aviation segments, including revenue and operating income - The company operates in two reportable segments: Commercial and Aviation The Chief Operating Decision Maker (CEO) assesses performance based on operating income[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) **Services Revenue by Segment (millions):** | Segment | Three Months Ended March 31, 2024 (millions) | Three Months Ended March 31, 2023 (millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Commercial | $147.9 | $144.4 | | Aviation | $74.2 | $71.9 | | Reimbursed management type contract revenue | $229.8 | $209.0 | | **Total services revenue** | **$451.9** | **$425.3** | **Operating Income (Loss) by Segment (millions):** | Segment | Three Months Ended March 31, 2024 (millions) | Three Months Ended March 31, 2023 (millions) | | :---------- | :--------------------------------------- | :--------------------------------------- | | Commercial | $32.4 | $31.2 | | Aviation | $11.2 | $8.6 | | Other | $(24.7) | $(20.5) | | **Total operating income** | **$18.9** | **$19.3** | - Commercial segment operating income increased by **$1.2 million (3.8%)**, and Aviation segment operating income increased by **$2.6 million (30.2%)** year-over-year The 'Other' segment, which includes operational support and shared infrastructure costs, saw its operating loss increase by **$4.2 million (20.5%)**[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2024, compared to the same period in 2023, covering the proposed merger, acquisitions, business model, trends, and detailed analysis of consolidated and segment-level results, liquidity, and cash flows [Overview](index=25&type=section&id=Overview) This section provides a high-level summary of the company's proposed merger, recent acquisitions, and core business model - The company is in the process of a proposed merger with Metropolis Technologies, Inc., an all-cash transaction valued at approximately **$1.5 billion ($54.00 per share)** Merger-related expenses of **$2.7 million** were incurred in Q1 2024[90](index=90&type=chunk)[91](index=91&type=chunk) - The acquisition of Roker Inc. in July 2023 for **$3.1 million** aims to enhance the company's frictionless technology solutions and is included in the Commercial segment[92](index=92&type=chunk)[93](index=93&type=chunk) - SP Plus Corporation delivers mobility solutions through technology integration and operations management, primarily via management type and lease type contracts with property owners in North America and Europe[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [General Business Trends](index=26&type=section&id=General%20Business%20Trends) This section discusses key market trends influencing the company's business and client relationships - The company believes clients increasingly recognize the value of technology-driven mobility solutions and outsourcing services for profit generation and customer experience differentiation[98](index=98&type=chunk) - The Commercial segment maintained a high client retention rate of approximately **94%** for the twelve months ended March 31, 2024, up from **93%** in the prior year, driven by a focus on customer service and technology solutions[98](index=98&type=chunk) [Commercial Segment Facilities](index=26&type=section&id=Commercial%20Segment%20Facilities) This section provides a breakdown of the number of facilities operated within the Commercial segment by contract type **Commercial Segment Facilities:** | Type | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :------------------------ | :------------- | :---------------- | :------------- | | Managed facilities | 2,986 | 2,979 | 2,787 | | Leased facilities | 396 | 405 | 414 | | **Total Commercial segment facilities** | **3,382** | **3,384** | **3,201** | - As of March 31, 2024, **88%** of Commercial segment locations were under management type contracts and **12%** under lease type contracts[96](index=96&type=chunk) [Aviation Segment - Airports Served](index=26&type=section&id=Aviation%20Segment%20-%20Airports%20Served) This section details the number of airports served by the Aviation segment across different regions **Aviation Segment - Airports Served:** | Region | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :------------ | :------------- | :---------------- | :------------- | | North America | 102 | 101 | 101 | | Europe | 67 | 58 | 58 | | **Total Airports** | **169** | **159** | **159** | - The Aviation segment expanded its presence, serving **169 airports** as of March 31, 2024, an increase from **159 airports** at March 31, 2023, primarily driven by growth in Europe[100](index=100&type=chunk) [Revenue](index=26&type=section&id=Revenue) This section describes the company's revenue streams and recognition policies for different contract types - Revenue is recognized from management type contracts (management fees, e-commerce, subscription, ancillary services) and lease type contracts (gross receipts, e-commerce, convenience fees) Reimbursed management type contract revenue covers direct operating expenses[101](index=101&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - Management type contract revenues do not include gross customer collections, as these belong to the property owners[101](index=101&type=chunk) [Cost of Services (Exclusive of Depreciation and Amortization)](index=28&type=section&id=Cost%20of%20Services%20(Exclusive%20of%20Depreciation%20and%20Amortization)) This section explains the nature of costs associated with the company's service contracts - Costs for management type contracts are generally the client's responsibility, except for 'reverse' management contracts and certain other aviation/ancillary services Lease type contracts include contractual rents/fees and most operating expenses[106](index=106&type=chunk)[107](index=107&type=chunk) - Reimbursed management type contract expense consists of directly reimbursed costs incurred on behalf of a client[108](index=108&type=chunk) [General and Administrative Expenses](index=28&type=section&id=General%20and%20Administrative%20Expenses) This section outlines the components of the company's general and administrative expenses - General and administrative expenses include salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel, office expenses, and acquisition-related expenses[110](index=110&type=chunk) [Depreciation and Amortization](index=28&type=section&id=Depreciation%20and%20Amortization) This section describes the company's policies for depreciating tangible assets and amortizing intangible assets - Depreciation is calculated using a straight-line method over the estimated useful lives of assets Intangible assets with finite lives are amortized over their remaining estimated useful lives[111](index=111&type=chunk) [Operating Income](index=28&type=section&id=Operating%20Income) This section defines operating income as a key performance metric for management's decision-making - Operating income is the key metric used by the Chief Operating Decision Maker (CEO) for making decisions, assessing performance, and allocating resources to the Commercial and Aviation operating segments[112](index=112&type=chunk)[113](index=113&type=chunk) [Segments](index=28&type=section&id=Segments) This section describes the services and clients served by the company's Commercial and Aviation operating segments - The Commercial segment provides services in healthcare, municipalities, government, hospitality, commercial real estate, residential, retail, colleges, and ancillary mobility solutions The Aviation segment focuses on airports, airlines, and hospitality clients with baggage and parking services, including ancillary ground transportation and check-in services[114](index=114&type=chunk)[115](index=115&type=chunk) - The 'Other' segment includes costs for operational support teams and shared infrastructure (finance, IT, HR, legal, etc.)[115](index=115&type=chunk) [Analysis of Results of Operations](index=29&type=section&id=Analysis%20of%20Results%20of%20Operations) This section provides a detailed analysis of the company's consolidated and segment-level financial performance **Consolidated Financial Highlights (millions):** | Item | March 31, 2024 (millions) | March 31, 2023 (millions) | Variance Amount (millions) | Variance % | | :------------------------------------------ | :------------------------ | :------------------------ | :----------------------- | :--------- | | Services revenue | $451.9 | $425.3 | $26.6 | 6.3% | | Cost of services (exclusive of D&A) | $389.2 | $367.0 | $22.2 | 6.0% | | General and administrative expenses | $34.8 | $30.6 | $4.2 | 13.7% | | Depreciation and amortization | $9.0 | $8.4 | $0.6 | 7.1% | | Operating income | $18.9 | $19.3 | $(0.4) | (2.1)% | | Interest expense | $7.4 | $6.8 | $0.6 | 8.8% | | Income tax expense | $3.1 | $3.3 | $(0.2) | (6.1)% | | Net income | $8.5 | $9.3 | $(0.8) | (8.6)% | - Consolidated services revenue increased by **$26.6 million (6.3%)**, driven by new management type contracts, volume-based contracts, and conversions, partially offset by a decrease in lease type contracts due to conversions and terminations[118](index=118&type=chunk)[119](index=119&type=chunk) - General and administrative expenses increased by **$4.2 million (13.7%)**, primarily due to higher acquisition-related, restructuring, and other costs (**$3.0 million** in Q1 2024 vs. **$1.3 million** in Q1 2023) and investments in growth initiatives[120](index=120&type=chunk) **Commercial Segment Performance (millions):** | Item | March 31, 2024 (millions) | March 31, 2023 (millions) | Variance Amount (millions) | Variance % | | :-------------------------- | :------------------------ | :------------------------ | :----------------------- | :--------- | | Total services revenue | $147.9 | $144.4 | $3.5 | 2.4% | | Total gross profit | $42.6 | $41.1 | $1.5 | 3.6% | | Operating income | $32.4 | $31.2 | $1.2 | 3.8% | **Key Changes:** * Management type contracts gross profit increased by **$4.7 million (15.0%)** due to increased activity and new business * Lease type contracts gross profit decreased by **$2.9 million (24.8%)** due to terminations, lower cost concessions, and conversions **Aviation Segment Performance (millions):** | Item | March 31, 2024 (millions) | March 31, 2023 (millions) | Variance Amount (millions) | Variance % | | :-------------------------- | :------------------------ | :------------------------ | :----------------------- | :--------- | | Total services revenue | $74.2 | $71.9 | $2.3 | 3.2% | | Total gross profit | $16.7 | $14.0 | $2.7 | 19.3% | | Operating income | $11.2 | $8.6 | $2.6 | 30.2% | **Key Changes:** * Management type contracts gross profit increased by **$2.5 million (17.9%)** due to new business and increased activity * Lease type contracts gross profit increased slightly by **$0.1 million (7.7%)** due to increased transient revenue, despite lower cost concessions and terminations - Operating expenses in the 'Other' segment increased by **$4.2 million (20.5%)** to **$24.7 million**, primarily due to higher acquisition-related, restructuring, and other costs (**$2.6 million** in Q1 2024 vs. **$0.7 million** in Q1 2023) and investments in business development and technology[131](index=131&type=chunk) [Analysis of Financial Condition](index=31&type=section&id=Analysis%20of%20Financial%20Condition) This section assesses the company's liquidity, capital resources, and cash flow performance - As of March 31, 2024, the company had **$17.8 million** in cash and cash equivalents and **$232.1 million** in borrowing availability under its Senior Credit Facility, which is believed to be sufficient to meet obligations and debt covenants for the next twelve months[133](index=133&type=chunk)[146](index=146&type=chunk) - Total indebtedness decreased by **$1.7 million** to **$350.4 million** as of March 31, 2024, from **$352.1 million** at December 31, 2023 This includes **$322.3 million** under the Senior Credit Facility and **$28.1 million** in other debt, primarily finance lease obligations[135](index=135&type=chunk)[140](index=140&type=chunk) - Net cash provided by operating activities increased by **$6.9 million** to **$14.6 million** in Q1 2024, mainly due to the timing of incentive compensation payments Net cash used in investing activities decreased by **$3.2 million** due to lower noncontrolling interest buyouts and property/equipment purchases[143](index=143&type=chunk)[144](index=144&type=chunk) - Net cash used in financing activities was **$10.2 million** in Q1 2024, a shift from **$18.7 million** provided in Q1 2023 This was primarily due to debt repayments and contingent consideration payments, contrasting with borrowings and stock repurchases in the prior year[145](index=145&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes in the company's primary risk exposures or management of market risks since the disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes in primary risk exposures or market risk management have occurred since the December 31, 2023, Annual Report on Form 10-K[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting Management concluded that disclosure controls and procedures were effective as of March 31, 2024, and reported no significant changes in internal control over financial reporting during the quarter - Management, including the CEO, CFO, and Corporate Controller, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[148](index=148&type=chunk)[150](index=150&type=chunk) - There were no significant changes in internal control over financial reporting during the quarter ended March 31, 2024, that materially affected or are reasonably likely to materially affect the company's internal controls[151](index=151&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various claims and litigation in the normal course of business, including labor, contracts, and personal injury While the outcomes are uncertain, the company believes these will not have a material adverse effect on its financial position, results of operations, or cash flows Accruals are made for probable and reasonably estimable losses - The company faces claims and litigation in the normal course of business, but believes the final outcomes will not materially adversely affect its financial position, results of operations, or cash flows[155](index=155&type=chunk) - Accruals are recorded when a loss is probable and reasonably estimable; otherwise, reasonably possible losses are disclosed if material and estimable[156](index=156&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section advises investors to consider the risk factors discussed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and subsequent SEC filings It states that no material changes to these risk factors have occurred - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, have occurred[157](index=157&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable, indicating no unregistered equity sales or use of proceeds to report for the period [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable, indicating no defaults upon senior securities to report for the period [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable, indicating no mine safety disclosures to report for the period [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This item is not applicable, indicating no other information to report for the period [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certificates of amendment, bylaws, Section 302 and 906 certifications, and Inline XBRL documents - The exhibits include Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation, Amendment to Fourth Amended and Restated Bylaws, Section 302 Certifications for CEO, CFO, and Corporate Controller, Section 906 Certification, and Inline XBRL documents[164](index=164&type=chunk) [Signatures](index=40&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, including those of G Marc Baumann (Chairman and CEO), Kristopher H. Roy (Chief Financial Officer), and Gary T. Roberts (Senior Vice President, Corporate Controller and Assistant Treasurer), all dated May 2, 2024 - The report is signed by G Marc Baumann (Chairman and CEO), Kristopher H. Roy (CFO), and Gary T. Roberts (SVP, Corporate Controller and Assistant Treasurer) on May 2, 2024[167](index=167&type=chunk)

```markdown [Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Q1 2024 Performance Highlights](index=1&type=section&id=Q1%202024%20Performance%20Highlights) SP Plus Corporation achieved record first-quarter performance across several key measures, including an 8% year-over-year increase in gross profit and adjusted EBITDA. The company also reported 6% year-over-year location growth, maintained a 94% location retention rate, and saw record highs in technology transactions and their contribution to gross profit - **Record First Quarter Performance Across Multiple Key Measures**.[1](index=1&type=chunk) - Gross profit increased **8% year-over-year** on both a reported and adjusted basis, setting first quarter records.[2](index=2&type=chunk) - Adjusted EBITDA increased **8%**, setting first quarter records.[2](index=2&type=chunk) - Year-over-Year Location Growth of **6%**; Maintains Robust **94% Location Retention Rate**.[1](index=1&type=chunk) - Technology Transactions and Contribution to Gross Profit at **Record Highs**, both **nearly doubling year-over-year**.[1](index=1&type=chunk)[4](index=4&type=chunk) [Management Outlook & Strategic Focus](index=1&type=section&id=Management%20Outlook%20%26%20Strategic%20Focus) Management highlighted strong momentum and the successful execution of its strategy, focusing on delivering innovative technology solutions, superior operations, expanding market reach through acquisitions, and monetizing technology investments. The company is on track to achieve its goal of generating 10% of gross profit through technology solutions by 2025 - Strategy remains firmly on track as the company continues to deliver innovative technology solutions and superior operations, expand its addressable market through acquisitions, and monetize technology investments.[2](index=2&type=chunk) - The company remains on track to achieve its goal of generating **10% of its gross profit through technology solutions by 2025**.[4](index=4&type=chunk) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Key Financial Metrics (GAAP & Adjusted)](index=1&type=section&id=Key%20Financial%20Metrics%20(GAAP%20%26%20Adjusted)) The company reported a mixed financial performance for Q1 2024 compared to Q1 2023. While GAAP net income and EPS saw a slight decrease, adjusted gross profit, adjusted operating income, adjusted net income, adjusted EPS, adjusted EBITDA, and free cash flow all showed positive year-over-year growth, indicating strong underlying operational performance | Metric | Q1 2024 (GAAP) | Q1 2024 (Adjusted) | Q1 2023 (GAAP) | Q1 2023 (Adjusted) | | :--------------------------------- | :------------- | :--------------- | :------------- | :--------------- | | Total services revenue (before reimbursed management type contract revenue) | $222.1 | NA | $216.3 | NA | | Gross profit | $59.3 | $63.0 | $55.1 | $58.4 | | General and administrative expenses | $34.8 | $31.8 | $30.6 | $29.3 | | Operating income | $18.9 | $25.1 | $19.3 | $23.7 | | Net income attributable to SP Plus | $7.6 | $12.2 | $8.4 | $11.6 | | Net income per diluted common share (EPS) | $0.38 | $0.61 | $0.42 | $0.58 | | EBITDA | NA | $30.4 | NA | $28.2 | | Net cash provided by operating activities | $14.6 | NA | $7.7 | NA | | Free cash flow | NA | $8.4 | NA | $0.3 | [First Quarter Operating Results (Narrative)](index=2&type=section&id=First%20Quarter%20Operating%20Results%20(Narrative)) Reported gross profit increased 8% year-over-year to $59.3 million, driven by technology-related fees, underlying growth in same locations, increased travel activity, new contract wins, and high location retention. Adjusted G&A expenses rose due to investments in business development and technology. GAAP net income and EPS decreased, while adjusted EPS increased. Cash flow from operations and free cash flow saw significant improvements - Reported gross profit in Q1 2024 increased **8% year-over-year** to $59.3 million, with adjusted gross profit also increasing **8%** to $63.0 million.[10](index=10&type=chunk) - Adjusted G&A expenses for Q1 2024 were $31.8 million, up from $29.3 million in Q1 2023, reflecting investments in business development and technology deployment.[11](index=11&type=chunk) - GAAP net income attributable to SP Plus was $7.6 million ($0.38 per diluted common share) in Q1 2024, compared to $8.4 million ($0.42 per diluted common share) in Q1 2023.[12](index=12&type=chunk) - Adjusted earnings per common share was $0.61 in Q1 2024, up from $0.58 for Q1 2023.[12](index=12&type=chunk) - Cash flow from operations and free cash flow totaled $14.6 million and $8.4 million respectively in Q1 2024, significantly up from $7.7 million and $0.3 million in Q1 2023.[13](index=13&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) [Commercial Segment](index=1&type=section&id=Commercial%20Segment) The Commercial division demonstrated solid growth in Q1 2024, with reported gross profit increasing 4% and adjusted gross profit increasing 5%. This growth was primarily fueled by strong demand across healthcare, commerce, and residential verticals, which posted double-digit same-location year-over-year growth. The segment expanded its commercial locations by 6% year-over-year, reaching 3,382, while maintaining a high 94% retention rate - Commercial division reported **4% gross profit growth** and **5% adjusted gross profit growth**.[3](index=3&type=chunk) - Growth was led by increased demand in healthcare, commerce, and residential, each posting **double-digit same location year-over-year growth**.[3](index=3&type=chunk) - Ended Q1 with 3,382 commercial locations, representing **6% year-over-year growth**, maintaining a **94% retention rate**.[3](index=3&type=chunk) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | YoY Change | | :-------------------- | :----------------- | :----------------- | :--------- | | Adjusted Gross Profit | $45.1 | $43.1 | +$2.0 (+4.6%) | [Aviation Segment](index=1&type=section&id=Aviation%20Segment) The Aviation division delivered another strong quarter, achieving double-digit gross profit growth. Reported gross profit increased 19% and adjusted gross profit increased 17%, benefiting from recent airport contract wins, high travel volumes, and successful cross-selling of additional services at airport locations - Aviation division achieved **double-digit gross profit growth**, with **reported gross profit up 19%** and **adjusted gross profit up 17%**.[3](index=3&type=chunk) - Growth reflects the benefit from recent airport contract wins, high travel volumes, and cross-selling of additional services.[3](index=3&type=chunk) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | YoY Change | | :-------------------- | :----------------- | :----------------- | :--------- | | Adjusted Gross Profit | $17.9 | $15.3 | +$2.6 (+17.0%) | [Strategic Initiatives & Recent Developments](index=1&type=section&id=Strategic%20Initiatives%20%26%20Recent%20Developments) [Technology & Innovation](index=1&type=section&id=Technology%20%26%20Innovation) SP+ continues to advance its technology offerings, adding 16 standalone Sphere locations in Q1 2024, bringing the total to 86 over the past year. This expansion, coupled with record-high technology transactions and their contribution to adjusted gross profit (nearly doubling year-over-year), underscores the company's commitment to digital transformation and its goal of generating 10% of gross profit from technology solutions by 2025 - Added **16 standalone Sphere locations** during Q1 2024 for a total of **86 over the last twelve months**.[4](index=4&type=chunk) - Total technology transactions and their contribution to adjusted gross profit each set a quarterly record, both **nearly doubling year-over-year**.[4](index=4&type=chunk) - The company remains on track to achieve its goal of generating **10% of its gross profit through technology solutions by 2025**.[4](index=4&type=chunk) [Merger with Metropolis Technologies](index=2&type=section&id=Merger%20with%20Metropolis%20Technologies) SP+ stockholders approved the merger with Metropolis Technologies on February 9, 2024. The merger is still subject to regulatory approvals, including the expiration or termination of the HSR Act waiting period, which has been extended due to a 'Second Request' from the Department of Justice. The company continues to expect the merger to close in 2024 and will not host an earnings conference call for Q1 2024 results due to the pending acquisition - SP+ stockholders voted to approve the Agreement and Plan of Merger with Metropolis Technologies, Inc. on February 9, 2024.[14](index=14&type=chunk) - The Merger remains subject to the satisfaction or waiver of certain other closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.[14](index=14&type=chunk) - SP+ and Metropolis each received a 'Second Request' from the DOJ, extending the HSR Act waiting period.[14](index=14&type=chunk) - The Company continues to expect the Merger to close in 2024 and will not host an earnings conference call for its first quarter 2024 results due to the pending acquisition.[14](index=14&type=chunk)[15](index=15&type=chunk) [Company Information](index=2&type=section&id=Company%20Information) [About SP+](index=2&type=section&id=About%20SP%2B) SP Plus Corporation is a leading technology and operations management provider of mobility services, serving aviation, commercial, hospitality, and institutional clients across North America and Europe. With over 20,000 team members, SP+ integrates industry-leading technology with best-in-class operations to deliver efficient and time-sensitive mobility solutions - SP Plus Corporation is a best-in-class technology and operations management provider of mobility services for aviation, commercial, hospitality, and institutional clients throughout North America and Europe.[1](index=1&type=chunk) - Develops and integrates industry-leading technology with best-in-class operations management and support to deliver mobility solutions.[17](index=17&type=chunk) - Employs over 20,000 team members located throughout North America and Europe.[17](index=17&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers that the release contains forward-looking statements based on management's expectations, which are subject to various uncertainties and factors. These risks include the company's ability to execute its strategic growth plan, intense competition, client relationships, insurance, acquisitions, IT disruption, economic conditions, labor disputes, catastrophic events, and regulatory impacts. Additionally, specific risks related to the pending acquisition by Metropolis Technologies, such as completion terms, financing, potential litigation, business disruptions, and regulatory approvals, are highlighted - The release contains forward-looking statements based on management's expectations and beliefs concerning future events, subject to uncertainties and factors relating to operations and the business environment.[18](index=18&type=chunk) - Risks include the Company's ability to successfully effect its strategic growth plan, intense competition, changing consumer preferences, difficulty obtaining insurance, risks relating to acquisition strategy, information technology disruption, deterioration in general economic conditions, and regulatory environment.[18](index=18&type=chunk) - Important risk factors relating to the pending acquisition by Metropolis Technologies include completion terms and timing, obtaining necessary financing, potential litigation, business disruptions, regulatory approvals (e.g., HSR Act Second Request), and significant transaction costs.[19](index=19&type=chunk)[20](index=20&type=chunk) [Use of Non-GAAP Financial Measures](index=4&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) SP+ utilizes non-GAAP financial measures, such as adjusted gross profit, adjusted G&A, adjusted operating income, adjusted net income, adjusted EPS, adjusted EBITDA, and free cash flow, to complement its U.S. GAAP financial statements. These measures exclude items not indicative of core performance, including acquisition-related costs, restructuring costs, amortization of acquired intangible assets, and non-routine items. The company believes these non-GAAP measures provide useful insights into operating performance, profitability, and business trends, facilitating comparisons with historical periods and competitors - The Company considers certain financial measures that are not prepared in accordance with U.S. GAAP, such as adjusted gross profit, adjusted G&A, adjusted operating income, adjusted net income, adjusted EPS, and adjusted EBITDA.[22](index=22&type=chunk) - These non-GAAP measures exclude items management does not consider indicative of its core performance, including acquisition-related, restructuring and other costs, amortization of acquired intangible assets, and non-routine items.[22](index=22&type=chunk) - Adjusted EBITDA is defined as U.S. GAAP net income attributable to the Company before interest expense, income taxes, depreciation and amortization, and other non-core items.[23](index=23&type=chunk) - Free cash flow is defined as net cash provided by operating activities, less cash used for investing activities (exclusive of acquisitions/intangibles), less distributions to non-controlling interests, plus exchange rate changes.[24](index=24&type=chunk) - These non-GAAP measures are used to evaluate operating and financial performance, compare to prior periods and competitors, and aid in operational and financial decisions and budgeting.[25](index=25&type=chunk) [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Statements of Income](index=5&type=section&id=Statements%20of%20Income) The condensed consolidated statements of income show total services revenue increased by 6.3% year-over-year to $451.9 million in Q1 2024. Despite this revenue growth, operating income and net income attributable to SP Plus Corporation slightly decreased compared to Q1 2023, primarily due to higher general and administrative expenses and other expenses | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | YoY Change | | :-------------------------------- | :----------------- | :----------------- | :--------- | | Total services revenue | $451.9 | $425.3 | +$26.6 (+6.3%) | | Total cost of services (exclusive of depreciation and amortization) | 389.2 | 367.0 | +$22.2 (+6.0%) | | General and administrative expenses | 34.8 | 30.6 | +$4.2 (+13.7%) | | Depreciation and amortization | 9.0 | 8.4 | +$0.6 (+7.1%) | | Operating income | 18.9 | 19.3 | -$0.4 (-2.1%) | | Earnings before income taxes | 11.6 | 12.6 | -$1.0 (-7.9%) | | Net income attributable to SP Plus Corporation | $7.6 | $8.4 | -$0.8 (-9.5%) | | Diluted EPS | $0.38 | $0.42 | -$0.04 (-9.5%) | [Balance Sheets](index=8&type=section&id=Balance%20Sheets) The condensed consolidated balance sheets as of March 31, 2024, show a slight decrease in total assets and total liabilities compared to December 31, 2023. Cash and cash equivalents decreased, while total stockholders' equity increased by 3.9% quarter-over-quarter | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | QoQ Change | | :-------------------------------- | :------------------------ | :------------------------- | :----------- | | Total assets | $1,142.4 | $1,151.9 | -$9.5 (-0.8%) | | Total current assets | 210.4 | 212.2 | -$1.8 (-0.8%) | | Cash and cash equivalents | 17.8 | 19.1 | -$1.3 (-6.8%) | | Total liabilities | 881.8 | 901.2 | -$19.4 (-2.1%) | | Total stockholders' equity | 260.6 | 250.7 | +$9.9 (+3.9%) | [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows indicate a significant increase in net cash provided by operating activities, rising from $7.7 million in Q1 2023 to $14.6 million in Q1 2024. Net cash used in investing activities decreased, while net cash used in financing activities shifted from a net inflow in Q1 2023 to a net outflow in Q1 2024, resulting in an overall decrease in cash and cash equivalents | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | YoY Change | | :-------------------------------- | :----------------- | :----------------- | :--------- | | Net cash provided by operating activities | $14.6 | $7.7 | +$6.9 (+89.6%) | | Net cash used in investing activities | (5.6) | (8.8) | +$3.2 (+36.4%) | | Net cash used in financing activities | (10.2) | 18.7 | -$28.9 (-154.5%) | | (Decrease) increase in cash and cash equivalents | (1.3) | 17.4 | -$18.7 (-107.5%) | | Cash and cash equivalents at end of period | $17.8 | $29.8 | -$12.0 (-40.3%) | [Non-GAAP Reconciliations](index=6&type=section&id=Non-GAAP%20Reconciliations) [Gross Profit Reconciliation](index=6&type=section&id=Gross%20Profit%20Reconciliation) The reconciliation shows that GAAP gross profit of $59.3 million in Q1 2024 was adjusted to $63.0 million by adding back depreciation and amortization ($3.4 million) and acquisition-related, restructuring, and other costs ($0.3 million). This represents an **8% increase** in adjusted gross profit year-over-year | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Gross profit, GAAP | $59.3 | $55.1 | | Add: Depreciation and amortization | 3.4 | 3.2 | | Add: Acquisition-related, restructuring and other costs | 0.3 | 0.1 | | **Adjusted gross profit** | **$63.0** | **$58.4** | [General and Administrative Expenses Reconciliation](index=6&type=section&id=General%20and%20Administrative%20Expenses%20Reconciliation) GAAP general and administrative expenses of $34.8 million in Q1 2024 were adjusted to $31.8 million by subtracting $3.0 million in acquisition-related, restructuring, and other costs. This adjusted figure reflects an **8.5% increase** from Q1 2023, primarily due to investments in business development and technology | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | General and administrative expenses, GAAP | $34.8 | $30.6 | | Subtract: Acquisition-related, restructuring and other costs | (3.0) | (1.3) | | **Adjusted G&A** | **$31.8** | **$29.3** | [Operating Income Reconciliation](index=6&type=section&id=Operating%20Income%20Reconciliation) GAAP operating income of $18.9 million in Q1 2024 was adjusted to $25.1 million. This adjustment includes adding back $3.3 million for acquisition-related, restructuring, and other costs, and $2.9 million for amortization of acquired intangibles, resulting in a **5.9% year-over-year increase** in adjusted operating income | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Operating income, GAAP | $18.9 | $19.3 | | Add: Acquisition-related, restructuring and other costs | 3.3 | 1.4 | | Add: Amortization of acquired intangibles | 2.9 | 3.0 | | **Adjusted operating income** | **$25.1** | **$23.7** | [Net Income Attributable to SP Plus Reconciliation](index=6&type=section&id=Net%20Income%20Attributable%20to%20SP%20Plus%20Reconciliation) GAAP net income attributable to SP Plus of $7.6 million in Q1 2024 was adjusted to $12.2 million. This adjustment includes adding back acquisition-related, restructuring, and other costs ($3.3 million), amortization of acquired intangibles ($2.9 million), and a net tax effect of adjustments ($-1.7 million), leading to a **5.2% year-over-year increase** in adjusted net income | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Net income attributable to SP Plus, GAAP | $7.6 | $8.4 | | Add: Acquisition-related, restructuring and other costs | 3.3 | 1.4 | | Add: Amortization of acquired intangibles | 2.9 | 3.0 | | Net tax effect of adjustments | (1.7) | (1.2) | | **Adjusted net income attributable to SP Plus** | **$12.2** | **$11.6** | [Adjusted EBITDA Reconciliation](index=7&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q1 2024 was $30.4 million, an **7.8% increase** from $28.2 million in Q1 2023. This figure is reconciled from GAAP net income attributable to SP Plus by adding back income tax expense, interest expense, total depreciation and amortization expense, and acquisition-related, restructuring, and other costs | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Net income attributable to SP Plus, GAAP | $7.6 | $8.4 | | Add: Income tax expense | 3.1 | 3.3 | | Add: Interest expense, net | 7.3 | 6.7 | | Add: Total depreciation and amortization expense | 9.0 | 8.4 | | Add: Acquisition-related, restructuring and other costs | 3.3 | 1.4 | | **Adjusted EBITDA** | **$30.4** | **$28.2** | [Free Cash Flow Reconciliation](index=9&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free cash flow significantly increased to $8.4 million in Q1 2024 from $0.3 million in Q1 2023. This reconciliation starts with net cash provided by operating activities and adjusts for net cash used in investing activities, noncontrolling interest buyout, distributions to noncontrolling interests, and the effect of exchange rate changes | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Net cash provided by operating activities | $14.6 | $7.7 | | Net cash used in investing activities | (5.6) | (8.8) | | plus: Noncontrolling interest buyout | 0.1 | 2.1 | | Distributions to noncontrolling interests | (0.7) | (0.5) | | Effect of exchange rate changes on cash and cash equivalents | (0.1) | (0.2) | | **Free cash flow** | **$8.4** | **$0.3** | [Operational Metrics](index=9&type=section&id=Operational%20Metrics) [Commercial Segment Facilities](index=9&type=section&id=Commercial%20Segment%20Facilities) The Commercial Segment reported a total of 3,382 facilities as of March 31, 2024, showing a 6% increase year-over-year from 3,201 facilities in Q1 2023, despite a slight quarter-over-quarter decrease from 3,384 facilities in Q4 2023 | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :-------------------------- | :------------- | :---------------- | :------------- | | Managed facilities | 2,986 | 2,979 | 2,787 | | Leased facilities | 396 | 405 | 414 | | **Total Commercial Segment facilities** | **3,382** | **3,384** | **3,201** | - Total Commercial Segment facilities increased **6% year-over-year** (3,382 in Q1 2024 vs. 3,201 in Q1 2023).[3](index=3&type=chunk) [Aviation Segment Airports Served](index=10&type=section&id=Aviation%20Segment%20Airports%20Served) The Aviation Segment expanded its reach, serving a total of 169 airports as of March 31, 2024, up from 159 in Q1 2023. This increase was primarily driven by growth in Europe, where the number of airports served rose from 58 to 67 | Region | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :------------- | :------------- | :---------------- | :------------- | | North America | 102 | 101 | 101 | | Europe | 67 | 58 | 58 | | **Total Airports** | **169** | **159** | **159** | ```

For the transition period from to Commission file number: 000-50796 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SP PLUS CORPORATION (Exact Name of Registrant as Specified in Its Charter) Incorporation or Organization) 200 E. Randolph Street, Suite 7 ...

[Executive Summary & Business Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Highlights) [Key Financial and Operational Achievements](index=1&type=section&id=Key%20Financial%20and%20Operational%20Achievements) SP Plus Corporation achieved a record year in 2023, marked by significant growth in gross profit and adjusted EBITDA, driven by strong performance across both Commercial and Aviation segments, while maintaining a high location retention rate and consistent net location growth - Full-year reported gross profit increased **15%**, adjusted gross profit increased **13%**, and adjusted EBITDA increased **10%** in 2023[3](index=3&type=chunk) - Both Commercial and Aviation segments experienced **double-digit gross profit growth** in 2023[4](index=4&type=chunk) - Achieved **11 consecutive quarters of net location growth**, ending 2023 with **3,384 commercial locations**, an **8% year-on-year increase**, and maintained a **94% location retention rate**[4](index=4&type=chunk) [Strategic Growth Drivers](index=1&type=section&id=Strategic%20Growth%20Drivers) The company's growth was fueled by excellent execution of its growth strategy, including new business wins, increased activity at existing locations, and the successful penetration and deployment of its Sphere technology offerings - Growth strategy execution involved bringing innovative technology solutions and superior operations to existing and new clients[3](index=3&type=chunk) - Sphere technology offerings gained further traction with existing clients and enabled **120 new standalone deployments** at locations not currently utilizing SP+ services[4](index=4&type=chunk) - Aviation segment benefited from recent airport contract wins, high travel volumes, and strategic technology acquisitions[4](index=4&type=chunk) [Corporate Recognitions](index=1&type=section&id=Corporate%20Recognitions) SP+ received notable recognitions in early 2024, being named one of America's Greatest Workplaces for Diversity and included in Forbes' list of America's most successful Small-Cap companies for the second consecutive year - Named one of America's Greatest Workplaces for Diversity for 2024 by Newsweek and Plant-A Insights Group[5](index=5&type=chunk) - Included in the Forbes list of America's most successful Small-Cap companies for the **second year in a row**[5](index=5&type=chunk) [Consolidated Financial Performance](index=1&type=section&id=Consolidated%20Financial%20Performance) [Financial Summary (GAAP & Non-GAAP)](index=1&type=section&id=Financial%20Summary%20%28GAAP%20%26%20Non-GAAP%29) The company reported its fourth quarter and full-year 2023 financial results, providing both GAAP and adjusted (non-GAAP) figures to offer a comprehensive view of its performance, highlighting growth in revenue, gross profit, and EBITDA | Metric (in millions except per share) | Q4 2023 GAAP | Q4 2023 Adjusted | Q4 2022 GAAP | Q4 2022 Adjusted | | :------------------------------------ | :----------- | :--------------- | :----------- | :--------------- | | Total services revenue | $217.2 | NA | $206.4 | NA | | Gross profit | $58.1 | $62.6 | $48.6 | $57.0 | | General and administrative expenses | $40.4 | $30.2 | $30.7 | $28.7 | | Operating income | $11.9 | $25.5 | $13.4 | $22.0 | | Net income attributable to SP Plus | $1.2 | $11.9 | $4.8 | $11.5 | | Net income per share (EPS) | $0.06 | $0.60 | $0.24 | $0.56 | | EBITDA | NA | $31.5 | NA | $27.6 | | Net cash provided by operating activities | $2.3 | NA | $17.7 | NA | | Free cash flow | NA | ($2.3) | NA | $12.0 | | Metric (in millions except per share) | FY 2023 GAAP | FY 2023 Adjusted | FY 2022 GAAP | FY 2022 Adjusted | | :------------------------------------ | :----------- | :--------------- | :----------- | :--------------- | | Total services revenue | $883.2 | NA | $794.4 | NA | | Gross profit | $239.6 | $254.7 | $208.0 | $225.5 | | General and administrative expenses | $140.4 | $122.1 | $109.1 | $105.4 | | Operating income | $77.5 | $108.5 | $82.9 | $100.3 | | Net income attributable to SP Plus | $31.1 | $54.6 | $45.2 | $58.4 | | Net income per share (EPS) | $1.57 | $2.76 | $2.15 | $2.78 | | EBITDA | NA | $129.0 | NA | $117.2 | | Net cash provided by operating activities | $55.8 | NA | $93.3 | NA | | Free cash flow | NA | $31.2 | NA | $68.6 | [Fourth Quarter 2023 Operating Results](index=2&type=section&id=Fourth%20Quarter%202023%20Operating%20Results) In Q4 2023, SP+ reported a 20% year-over-year increase in GAAP gross profit and a 10% increase in adjusted gross profit, driven by increased parking activity, new contracts, and high location retention, while GAAP net income and EPS decreased, and adjusted EPS saw a slight increase - Reported gross profit increased **20% year-over-year** to **$58.1 million** in Q4 2023[10](index=10&type=chunk) - Adjusted gross profit rose **10%** to **$62.6 million** in Q4 2023, attributed to increased parking activity, new contract wins, and high location retention[10](index=10&type=chunk) | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | Change (YoY) | | :------------------------------------ | :-------------------- | :-------------------- | :----------- | | Reported G&A expenses | $40.4 | $30.7 | +31.6% | | Adjusted G&A expenses | $30.2 | $28.7 | +5.2% | | Reported Net income attributable to SP Plus | $1.2 | $4.8 | -75.0% | | Reported Diluted EPS | $0.06 | $0.24 | -75.0% | | Adjusted EPS | $0.60 | $0.56 | +7.1% | [Full Year 2023 Operating Results](index=2&type=section&id=Full%20Year%202023%20Operating%20Results) For the full year 2023, SP+ achieved a 15% increase in reported gross profit and a 13% increase in adjusted gross profit, driven by underlying growth, increased travel, new business, and technology implementations, while GAAP net income and EPS decreased, and adjusted EPS remained stable - Full-year 2023 reported gross profit was **$239.6 million**, a **15% increase** from 2022[13](index=13&type=chunk) - Adjusted gross profit increased **13%** to **$254.7 million**, reflecting underlying growth in same-store locations, increased travel activity, new business wins, and Sphere technology-only location implementation[14](index=14&type=chunk) | Metric | FY 2023 (in millions) | FY 2022 (in millions) | Change (YoY) | | :------------------------------------ | :-------------------- | :-------------------- | :----------- | | Reported G&A expenses | $140.4 | $109.1 | +28.7% | | Adjusted G&A expenses | $122.1 | $105.4 | +15.8% | | Reported Net income attributable to SP Plus | $31.1 | $45.2 | -31.2% | | Reported Diluted EPS | $1.57 | $2.15 | -26.9% | | Adjusted EPS | $2.76 | $2.78 | -0.7% | - Full-year 2023 cash flow from operations totaled **$55.8 million** and free cash flow was **$31.2 million**, down from **$93.3 million** and **$68.6 million** in 2022, primarily due to **$21.7 million** in acquisition and restructuring costs and a one-time **$20.5 million** federal income tax refund received in 2022[16](index=16&type=chunk) [Revenue and Gross Profit by Contract Type](index=6&type=section&id=Revenue%20and%20Gross%20Profit%20by%20Contract%20Type) SP+ categorizes its revenue and gross profit by contract type: Management type, Lease type, and Reimbursed management type, with both management and lease type contracts showing growth in service revenue and gross profit for the full year 2023 | Contract Type | Q4 2023 Service Revenue (in millions) | Q4 2023 Gross Profit (in millions) | FY 2023 Service Revenue (in millions) | FY 2023 Gross Profit (in millions) | | :-------------------------- | :---------------------- | :------------------- | :---------------------- | :------------------- | | Management type | $143.4 | $50.6 | $590.0 | $201.4 | | Lease type | $73.8 | $11.6 | $293.2 | $52.6 | | Reimbursed management type | $236.9 | $0.0 | $899.1 | $0.0 | - Management type service revenue increased from **$518.7 million** in FY 2022 to **$590.0 million** in FY 2023, with gross profit increasing from **$175.5 million** to **$201.4 million**[32](index=32&type=chunk) - Lease type service revenue increased from **$275.7 million** in FY 2022 to **$293.2 million** in FY 2023, with gross profit increasing from **$49.9 million** to **$52.6 million**[32](index=32&type=chunk) [Segment Performance](index=8&type=section&id=Segment%20Performance) [Commercial Segment](index=8&type=section&id=Commercial%20Segment) The Commercial Segment demonstrated strong growth in 2023, with increases in both GAAP and adjusted gross profit and operating income for both the fourth quarter and full year, reflecting robust location growth and increased activity | Metric | Q4 2023 GAAP (in millions) | Q4 2023 Adjusted (in millions) | FY 2023 GAAP (in millions) | FY 2023 Adjusted (in millions) | | :------------------- | :----------- | :--------------- | :----------- | :--------------- | | Gross Profit | $43.0 | $45.6 | $178.4 | $187.4 | | G&A expenses | $9.3 | $7.6 | $36.6 | $32.9 | | Operating income | $32.0 | $35.6 | $135.0 | $145.6 | - Full-year 2023 GAAP gross profit for the Commercial Segment increased to **$178.4 million** from **$156.5 million** in 2022, and adjusted gross profit increased to **$187.4 million** from **$168.2 million**[34](index=34&type=chunk) - The Commercial Segment ended 2023 with **3,384 total facilities**, up from **3,130** in 2022, including **2,979 managed facilities** and **405 leased facilities**[38](index=38&type=chunk) [Aviation Segment](index=9&type=section&id=Aviation%20Segment) The Aviation Segment also showed strong performance in 2023, with significant increases in GAAP and adjusted gross profit and operating income, benefiting from new airport contracts and high travel volumes | Metric | Q4 2023 GAAP (in millions) | Q4 2023 Adjusted (in millions) | FY 2023 GAAP (in millions) | FY 2023 Adjusted (in millions) | | :------------------- | :----------- | :--------------- | :----------- | :--------------- | | Gross Profit | $15.1 | $17.0 | $61.2 | $67.3 | | G&A expenses | $4.5 | $3.7 | $17.2 | $15.2 | | Operating income | $9.1 | $11.3 | $37.9 | $45.7 | - Full-year 2023 GAAP gross profit for the Aviation Segment increased to **$61.2 million** from **$51.5 million** in 2022, and adjusted gross profit increased to **$67.3 million** from **$57.3 million**[35](index=35&type=chunk) - The Aviation Segment served **159 airports globally** as of December 31, 2023, an increase from **158** in 2022, with **101 in North America** and **58 in Europe**[38](index=38&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Summary Condensed Consolidated Statements of Income](index=5&type=section&id=Summary%20Condensed%20Consolidated%20Statements%20of%20Income) The consolidated statements of income show an increase in total services revenue for both the fourth quarter and full year 2023, but a decrease in net income attributable to SP Plus Corporation, primarily due to higher general and administrative expenses and interest expense | Metric (in millions except EPS) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :------------------- | :------ | :------ | :------ | :------ | | Total services revenue | $454.1 | $418.3 | $1,782.3 | $1,553.5 | | Operating income | $11.9 | $13.4 | $77.5 | $82.9 | | Net income | $2.0 | $5.4 | $34.7 | $48.1 | | Net income attributable to SP Plus Corporation | $1.2 | $4.8 | $31.1 | $45.2 | | Diluted EPS | $0.06 | $0.24 | $1.57 | $2.15 | - Total services revenue for the full year 2023 increased by **14.7%** to **$1,782.3 million** from **$1,553.5 million** in 2022[31](index=31&type=chunk) - General and administrative expenses increased significantly to **$140.4 million** in FY 2023 from **$109.1 million** in FY 2022[31](index=31&type=chunk) [Summary Condensed Consolidated Balance Sheets](index=9&type=section&id=Summary%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of December 31, 2023, shows an increase in total assets, primarily driven by higher cash and cash equivalents and accounts receivable, with total liabilities also increasing slightly, while stockholders' equity grew | Metric | Dec 31, 2023 (in millions) | Dec 31, 2022 (in millions) | | :------------------- | :----------- | :----------- | | Total assets | $1,151.9 | $1,121.4 | | Total current assets | $212.2 | $196.8 | | Total liabilities | $901.2 | $895.7 | | Total stockholders' equity | $250.7 | $225.7 | - Cash and cash equivalents increased to **$19.1 million** at year-end 2023 from **$12.4 million** in 2022[35](index=35&type=chunk) - Goodwill remained substantial at **$544.6 million**, slightly up from **$543.2 million** in 2022[35](index=35&type=chunk) [Summary Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Summary%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operating activities decreased significantly in 2023 compared to 2022, while cash used in investing activities also decreased, with the company ending the year with an increase in cash and cash equivalents | Metric | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | | Net cash provided by operating activities | $55.8 | $93.3 | | Net cash used in investing activities | ($26.6) | ($54.0) | | Net cash used in financing activities | ($22.3) | ($42.4) | | Increase (decrease) in cash and cash equivalents | $6.7 | ($3.3) | | Cash and cash equivalents at end of period | $19.1 | $12.4 | - Cash paid for income taxes, net, was **$10.0 million** in 2023, compared to a net receipt of **$7.1 million** in 2022[36](index=36&type=chunk) [Free Cash Flow](index=10&type=section&id=Free%20Cash%20Flow) Free cash flow for the full year 2023 decreased to $31.2 million from $68.6 million in 2022, primarily impacted by cash used for acquisition and restructuring costs and the absence of a one-time tax refund received in the prior year | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net cash provided by operating activities | $2.3 | $17.7 | $55.8 | $93.3 | | Net cash used in investing activities | ($4.2) | ($35.9) | ($26.6) | ($54.0) | | Free cash flow | ($2.3) | $12.0 | $31.2 | $68.6 | - In 2023, growth in the business was offset by a cash use of **$21.7 million** related to acquisition and restructuring costs, contributing to the year-over-year decrease in free cash flow[16](index=16&type=chunk) - The receipt of a one-time **$20.5 million** federal income tax refund in 2022 also contributed to the year-over-year decrease in free cash flow for 2023[16](index=16&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) [Gross Profit Reconciliation](index=7&type=section&id=Gross%20Profit%20Reconciliation) The reconciliation of GAAP gross profit to adjusted gross profit primarily accounts for depreciation and amortization, acquisition-related, restructuring and other costs, and non-cash impairment charges | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | :------ | :------ | | Gross profit, GAAP | $58.1 | $48.6 | $239.6 | $208.0 | | Add: D&A | $4.1 | $4.7 | $14.4 | $13.7 | | Add: Acquisition-related, restructuring and other costs | $0.3 | - | $0.6 | $0.1 | | Add: Non-cash impairment charges | - | $3.7 | - | $3.7 | | Adjusted gross profit | $62.6 | $57.0 | $254.7 | $225.5 | [General and Administrative Expenses Reconciliation](index=7&type=section&id=General%20and%20Administrative%20Expenses%20Reconciliation) Adjusted G&A expenses exclude acquisition-related, restructuring, and other costs to provide a clearer view of core operational administrative expenses | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | :------ | :------ | | G&A expenses, GAAP | $40.4 | $30.7 | $140.4 | $109.1 | | Subtract: Acquisition-related, restructuring and other costs | ($10.2) | ($1.9) | ($18.3) | ($3.7) | | Adjusted G&A | $30.2 | $28.7 | $122.1 | $105.4 | [Operating Income Reconciliation](index=7&type=section&id=Operating%20Income%20Reconciliation) Adjusted operating income is derived by adding back acquisition-related, restructuring and other costs, non-cash impairment charges, and amortization of acquired intangibles to GAAP operating income | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | :------ | :------ | | Operating income, GAAP | $11.9 | $13.4 | $77.5 | $82.9 | | Add: Acquisition-related, restructuring and other costs | $10.5 | $1.9 | $18.9 | $3.8 | | Add: Non-cash impairment charges | - | $3.7 | - | $3.7 | | Add: Amortization of acquired intangibles | $3.0 | $2.9 | $12.0 | $9.9 | | Adjusted operating income | $25.5 | $22.0 | $108.5 | $100.3 | [Net Income Attributable to SP Plus Reconciliation](index=7&type=section&id=Net%20Income%20Attributable%20to%20SP%20Plus%20Reconciliation) Adjusted net income attributable to SP Plus and adjusted EPS are calculated by adjusting GAAP figures for acquisition-related, restructuring and other costs, non-cash impairment charges, amortization of acquired intangibles, and their net tax effects, including non-routine tax items | Metric (in millions except EPS) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net income attributable to SP Plus, GAAP | $1.2 | $4.8 | $31.1 | $45.2 | | Add: Acquisition-related, restructuring and other costs | $10.7 | $1.9 | $19.1 | $3.8 | | Add: Non-cash impairment charges | - | $3.7 | - | $3.7 | | Add: Amortization of acquired intangibles | $3.0 | $2.9 | $12.0 | $9.9 | | Net tax effect of adjustments | ($3.7) | ($2.3) | ($8.4) | ($4.7) | | Non-routine tax | $0.7 | $0.4 | $0.7 | $0.4 | | Adjusted net income attributable to SP Plus | $11.9 | $11.5 | $54.6 | $58.4 | | Adjusted diluted EPS | $0.60 | $0.56 | $2.76 | $2.78 | [Adjusted EBITDA Reconciliation](index=8&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA is reconciled from GAAP net income by adding back income tax expense, interest expense, total depreciation and amortization expense, acquisition-related, restructuring and other costs, and non-cash impairment charges | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net income attributable to SP Plus, GAAP | $1.2 | $4.8 | $31.1 | $45.2 | | Add: Income tax expense | $2.4 | $2.5 | $14.0 | $17.5 | | Add: Interest expense, net | $7.5 | $5.5 | $28.8 | $17.3 | | Add: Total depreciation and amortization expense | $9.9 | $9.2 | $36.1 | $29.7 | | Add: Acquisition-related, restructuring and other costs | $10.5 | $1.9 | $18.9 | $3.8 | | Add: Non-cash impairment charges | - | $3.7 | - | $3.7 | | Adjusted EBITDA | $31.5 | $27.6 | $129.0 | $117.2 | [Recent Corporate Developments](index=3&type=section&id=Recent%20Corporate%20Developments) [Merger with Metropolis Technologies, Inc.](index=3&type=section&id=Merger%20with%20Metropolis%20Technologies%2C%20Inc.) SP+ stockholders approved the merger with Metropolis Technologies, Inc. on February 9, 2024, which is pending regulatory approval, specifically the expiration or termination of the waiting period under the HSR Act, following a Second Request from the DOJ, with the company anticipating closing the merger in 2024 - SP+ stockholders approved the Agreement and Plan of Merger with Metropolis Technologies, Inc. on **February 9, 2024**[17](index=17&type=chunk) - The merger is subject to closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act)[17](index=17&type=chunk) - Both SP+ and Metropolis received a 'Second Request' from the Antitrust Division of the Department of Justice (DOJ) on **February 5, 2024**, extending the waiting period[17](index=17&type=chunk) - Due to the pending acquisition, SP+ will not host an earnings conference call for its fourth quarter 2023 results[18](index=18&type=chunk) [Company Information and Disclosures](index=3&type=section&id=Company%20Information%20and%20Disclosures) [About SP+](index=3&type=section&id=About%20SP%2B) SP+ is a leading technology and operations management provider of mobility services, integrating industry-leading technology with best-in-class operations to deliver solutions for efficient movement of people, vehicles, and belongings across North America and Europe - SP+ develops and integrates industry-leading technology with best-in-class operations management and support[19](index=19&type=chunk) - Provides mobility services for aviation, commercial, hospitality, and institutional clients throughout North America and Europe[2](index=2&type=chunk) - Employs over **20,000 team members**[19](index=19&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the release contains forward-looking statements subject to various risks and uncertainties, including those related to the strategic growth plan, intense competition, economic conditions, and specifically, risks associated with the pending acquisition by Metropolis Technologies, Inc. - Forward-looking statements are identified by words such as 'expect', 'anticipate', 'believe', 'intend', 'may', 'will', and similar terms[21](index=21&type=chunk) - Risks include the ability to successfully effect its strategic growth plan, intense competition, changing consumer preferences, difficulty obtaining insurance, and information technology disruption[22](index=22&type=chunk) - Important risk factors related to the Metropolis acquisition include completion terms and timing, financing, potential litigation, business disruptions, retention of key personnel, and the outcome of the HSR Act Second Request[23](index=23&type=chunk) [Use of Non-GAAP Financial Measures Explanation](index=4&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures%20Explanation) SP+ uses non-GAAP financial measures like adjusted gross profit, adjusted G&A, adjusted operating income, adjusted net income, adjusted EPS, and adjusted EBITDA to supplement GAAP statements, excluding items not indicative of core performance to provide a clearer view for evaluating operating performance and trends - Non-GAAP measures exclude items like acquisition-related, restructuring and other costs; impairment charges; non-routine settlements; amortization of acquired intangible assets; and depreciation and amortization expense (for adjusted gross profit)[25](index=25&type=chunk) - Adjusted EBITDA is defined as GAAP net income attributable to the Company before interest expense, income taxes, depreciation and amortization, and other items not indicative of core performance[26](index=26&type=chunk) - Free cash flow is defined as net cash provided by (used in) operating activities, less cash used for investing activities (excluding acquisitions/intangible asset purchases and net after-tax proceeds from sales), less distributions to non-controlling interests, plus exchange rate changes[27](index=27&type=chunk) - These non-GAAP measures are used by management to evaluate operating and financial performance, compare to prior periods and competitors, and in budgeting and planning, but should not be considered in isolation of GAAP measures[28](index=28&type=chunk) [Contact Information](index=11&type=section&id=Contact%20Information) Contact information for investor relations is provided through ADVISIRY PARTNERS - Contact for investor inquiries: David Gold, ADVISIRY PARTNERS, (212) 661-2220, david.gold@advisiry.com[38](index=38&type=chunk)

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of SP Plus Corporation, including the balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes on significant accounting policies, acquisitions, leases, revenue recognition, and segment information for the periods ended September 30, 2023 and 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | September 30, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :------- | | Cash and cash equivalents | $38.5 | $12.4 | $26.1 | 210.5% | | Total current assets | $236.0 | $196.8 | $39.2 | 19.9% | | Total assets | $1,168.3 | $1,121.4 | $46.9 | 4.2% | | Total current liabilities | $342.7 | $343.6 | $(0.9) | (0.3%) | | Total liabilities | $916.2 | $895.7 | $20.5 | 2.3% | | Total stockholders' equity | $252.1 | $225.7 | $26.4 | 11.7% | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | Metric (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total services revenue | $460.7 | $404.4 | $1,328.2 | $1,135.2 | | Total cost of services | $393.1 | $346.2 | $1,136.4 | $966.8 | | General and administrative expenses | $37.6 | $27.2 | $100.0 | $78.4 | | Depreciation and amortization | $9.0 | $7.2 | $26.2 | $20.5 | | Operating income | $21.0 | $23.8 | $65.6 | $69.5 | | Interest expense | $7.4 | $3.9 | $21.5 | $12.2 | | Net income attributable to SP Plus Corporation | $9.2 | $14.3 | $29.9 | $40.4 | | Basic EPS | $0.47 | $0.69 | $1.52 | $1.92 | | Diluted EPS | $0.46 | $0.68 | $1.50 | $1.90 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $10.1 | $15.1 | $32.7 | $42.7 | | Foreign currency translation loss | $(0.9) | $(0.6) | $(0.2) | $(0.7) | | Comprehensive income attributable to SP Plus Corporation | $8.3 | $13.7 | $29.7 | $40.2 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric (millions) | Balance at Jan 1, 2023 | Net Income | Foreign Currency Translation | Issuance of Restricted Stock Units | Non-cash Stock-based Compensation | Noncontrolling Interests Buyout | Repurchases of Common Stock | Distributions to Noncontrolling Interests | Balance at Sep 30, 2023 | | :-------------------------------- | :--------------------- | :--------- | :--------------------------- | :--------------------------------- | :-------------------------------- | :------------------------------ | :-------------------------- | :---------------------------------------- | :------------------------ | | Additional Paid-In Capital | $274.2 | — | — | $(0.4) | $5.5 | $(0.7) | — | — | $281.1 | | Retained Earnings | $73.6 | $29.9 | — | — | — | — | — | — | $103.5 | | Treasury Stock | $(120.0) | — | — | — | — | — | $(10.5) | — | $(130.5) | | Total Stockholders' Equity | $225.7 | $29.9 | $(0.2) | $(0.4) | $5.5 | $(0.7) | $(10.5) | $(2.5) | $252.1 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Activity (millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $53.5 | $75.6 | | Investing activities | $(22.4) | $(18.1) | | Financing activities | $(4.5) | $(54.1) | | Effect of exchange rate changes | $(0.5) | $(0.7) | | Increase in cash and cash equivalents | $26.1 | $2.7 | | Cash and cash equivalents at end of period | $38.5 | $18.4 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Significant Accounting Policies and Practices](index=9&type=section&id=1.%20Significant%20Accounting%20Policies%20and%20Practices) This section outlines the company's core business, basis of financial statement presentation, principles of consolidation, and accounting policies for key balance sheet items like cash, accounts receivable, property and equipment, equity investments, and intangible assets. It also details the treatment of noncontrolling interests and foreign operations - The Company provides mobility solutions integrating technology with operations management, serving aviation, commercial, hospitality, and institutional clients in North America and Europe, primarily operating through contractual agreements with property owners rather than owning facilities[19](index=19&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - Consolidated Variable Interest Entities (VIEs) assets were **$58.1 million** as of September 30, 2023, and liabilities were **$45.9 million**, primarily related to ROU assets and lease liabilities[22](index=22&type=chunk) - The allowance for doubtful accounts was **$4.6 million** as of September 30, 2023, an increase from **$4.0 million** at December 31, 2022[24](index=24&type=chunk) - Equity earnings from unconsolidated entities (6 partnerships/joint ventures) decreased significantly, from **$2.5 million to $0.7 million** for the three months ended September 30, 2023, and from **$4.0 million to $2.0 million** for the nine months ended September 30, 2023[29](index=29&type=chunk) [2. Acquisitions](index=11&type=section&id=2.%20Acquisitions) This note details the company's acquisition activities, including the 2023 acquisition of Roker Inc. and the 2022 acquisitions of K M P Associates Limited and DIVRT, Inc., outlining their strategic rationale, financial impact, and purchase price allocations - On July 25, 2023, the Company acquired Roker Inc., a US-based provider of integrated parking solutions, for approximately **$3.1 million**, enhancing frictionless technology solutions and contributing **$0.1 million** in service revenue and **$0.1 million** in losses before income taxes for the three and nine months ended September 30, 2023[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - The 2022 acquisitions of KMP and DIVRT contributed **$1.5 million** and **$4.7 million** in services revenue and losses before income taxes of **$0.9 million** and **$2.6 million** for the three and nine months ended September 30, 2023, respectively, primarily due to amortization of acquired intangible assets[49](index=49&type=chunk) | Acquired Intangible Assets (millions) | Estimated Life | Fair Value (2023 Roker) | Fair Value (2022 KMP/DIVRT) | | :------------------------------------ | :------------- | :---------------------- | :-------------------------- | | Proprietary know how | 8.0 Years | $2.1 | $17.3 | | Customer relationships | 5.4 Years | $0.2 | $3.2 | | Trade names | N/A | N/A | $1.8 | | Covenant not to compete | N/A | N/A | $1.2 | | Total Identified Intangible Assets | | $2.3 | $23.5 | [3. Leases](index=13&type=section&id=3.%20Leases) This section details the company's lease arrangements for parking facilities, office space, and equipment, distinguishing between operating and finance leases, and provides a breakdown of lease assets, liabilities, costs, and maturities | Lease Metric (millions) | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :---------------- | | Operating ROU assets | $173.7 | $166.9 | | Finance leased assets | $24.1 | $24.4 | | Total leased assets | $197.8 | $191.3 | | Short-term lease liabilities | $56.4 | $60.2 | | Long-term lease liabilities | $154.9 | $158.5 | | Total lease liabilities | $234.3 | $241.9 | | Lease Cost (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | $42.6 | $39.1 | $122.8 | $112.5 | | Finance lease cost | $2.0 | $1.7 | $5.9 | $4.9 | | Net lease cost | $44.6 | $40.8 | $128.7 | $117.4 | - The weighted-average remaining lease term for operating leases is **5.1 years**, and for finance leases is **4.1 years**, both with a weighted-average discount rate of **5.4%** as of September 30, 2023[57](index=57&type=chunk) [4. Revenue](index=14&type=section&id=4.%20Revenue) This section details the company's revenue recognition policies, categorizing revenue into management type and lease type contracts, and provides information on service concession arrangements, disaggregation of revenue, remaining performance obligations, and contract balances - The Company recognizes revenue when control of promised goods or services is transferred to customers, primarily from management type and lease type contracts[59](index=59&type=chunk)[60](index=60&type=chunk) - As of September 30, 2023, the Company had **$198.3 million** in remaining performance obligations expected to be recognized as revenue in future periods, with **$21.1 million** in 2023 and **$64.2 million** in 2024[66](index=66&type=chunk)[68](index=68&type=chunk) | Contract Balances (millions) | September 30, 2023 | December 31, 2022 | | :--------------------------- | :----------------- | :---------------- | | Accounts receivable | $189.0 | $169.9 | | Contract asset | $0.0 | $1.8 | | Contract liabilities | $(15.3) | $(17.4) | [5. Legal and Other Commitments and Contingencies](index=17&type=section&id=5.%20Legal%20and%20Other%20Commitments%20and%20Contingencies) This section states that the company is involved in various legal claims and litigation in the normal course of business, but believes the outcomes will not have a material adverse effect on its financial position, results of operations, or cash flows - The Company is subject to claims and litigation, including labor, employment, contracts, and personal injury, but believes the final outcome will not materially adversely affect its financial position, results of operations, or cash flows[72](index=72&type=chunk) [6. Other Intangible Assets, net](index=17&type=section&id=6.%20Other%20Intangible%20Assets,%20net) This note provides a breakdown of the company's other intangible assets, net, including their weighted average lives, gross amounts, accumulated amortization, and net carrying values, as well as related amortization expense | Intangible Asset (millions) | Weighted Average Life (Years) | Net (Sep 30, 2023) | Net (Dec 31, 2022) | | :-------------------------- | :---------------------------- | :----------------- | :----------------- | | Management contract rights | 5.8 | $24.3 | $28.1 | | Proprietary know how | 6.5 | $18.6 | $19.0 | | Customer relationships | 7.8 | $16.7 | $18.2 | | Trade names and trademarks | 12.3 | $1.8 | $2.1 | | Covenant not to compete | 3.5 | $0.9 | $1.5 | | Total other intangible assets, net | 6.7 | $62.3 | $68.9 | | Amortization Expense (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Amortization expense | $3.0 | $2.1 | $9.0 | $7.0 | [7. Goodwill](index=17&type=section&id=7.%20Goodwill) This note details the changes in the carrying amount of goodwill, segmented by Commercial and Aviation, for the nine months ended September 30, 2023, including additions from acquisitions and foreign currency translation adjustments | Goodwill (millions) | Commercial | Aviation | Total | | :------------------ | :--------- | :------- | :---- | | Net book value as of Dec 31, 2022 | $387.0 | $156.2 | $543.2 | | Acquisition | $0.9 | — | $0.9 | | Foreign currency translation | — | $0.1 | $0.1 | | Net book value as of Sep 30, 2023 | $387.9 | $156.3 | $544.2 | [8. Borrowing Arrangements](index=17&type=section&id=8.%20Borrowing%20Arrangements) This note outlines the company's long-term borrowing arrangements, primarily its Senior Credit Facility, and provides details on outstanding amounts, interest rates, and compliance with debt covenants | Borrowing (millions) | September 30, 2023 | December 31, 2022 | | :------------------- | :----------------- | :---------------- | | Senior Credit Facility, net | $337.7 | $322.3 | | Other borrowings | $24.1 | $24.3 | | Deferred financing costs | $(2.0) | $(2.4) | | Total obligations | $359.8 | $344.2 | | Less: Current portion | $(14.7) | $(12.4) | | Total long-term borrowings, excluding current portion | $345.1 | $331.8 | - The Senior Credit Facility permits aggregate borrowings of **$600.0 million**, with a revolving credit facility of up to **$400.0 million** and a term loan facility of **$200.0 million**, maturing on April 21, 2027[76](index=76&type=chunk) - The weighted average interest rate on the Senior Credit Facility increased to **6.7%** for the nine months ended September 30, 2023, from **4.6%** in the prior year, reflecting rising interest rates[78](index=78&type=chunk) [9. Stock Repurchase Program](index=18&type=section&id=9.%20Stock%20Repurchase%20Program) This note details the company's stock repurchase programs, including authorizations by the Board of Directors in February 2023 and May 2022, and the actual repurchase activity for common stock - The Board authorized a **$60.0 million** stock repurchase program on February 14, 2023, under which no shares have been repurchased[80](index=80&type=chunk) - Under the May 2022 program, **285,700 shares** were repurchased for **$10.4 million** during the nine months ended September 30, 2023, at an average price of **$36.53 per share**, with **$0.2 million** remaining available as of September 30, 2023[81](index=81&type=chunk)[82](index=82&type=chunk) - The Company is restricted from repurchasing common stock starting October 4, 2023, as a condition of the Merger Agreement[82](index=82&type=chunk) [10. Stock-Based Compensation](index=19&type=section&id=10.%20Stock-Based%20Compensation) This note describes the company's stock-based compensation plans, including stock grants, restricted stock units (RSUs), and performance share units (PSUs, detailing the number of shares granted, vesting schedules, and recognized compensation expenses - The Company granted **18,660 shares** of common stock to the Board during the nine months ended September 30, 2023, recognizing **$0.6 million** in compensation expense[85](index=85&type=chunk) - **126,931 restricted stock units** were granted to executives during the nine months ended September 30, 2023, vesting over three years, with unrecognized RSU compensation expense of **$6.9 million** as of September 30, 2023, to be recognized over approximately **1.8 years**[86](index=86&type=chunk)[87](index=87&type=chunk) - **126,921 Performance Share Units (PSUs)** were granted to executives during the nine months ended September 30, 2023, with performance targets based on operating income over a three-year period, and unrecognized PSU compensation expense of **$6.7 million** as of September 30, 2023, with potential additional expense of **$4.1 million** for 2023 PSUs if maximum targets are met[88](index=88&type=chunk)[90](index=90&type=chunk) [11. Net Income per Common Share](index=20&type=section&id=11.%20Net%20Income%20per%20Common%20Share) This note provides the computation of basic and diluted net income per common share, along with a reconciliation of weighted average common shares outstanding, for the three and nine months ended September 30, 2023 and 2022 | EPS Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to SP Plus Corporation (millions) | $9.2 | $14.3 | $29.9 | $40.4 | | Basic weighted average common shares outstanding | 19,649,611 | 20,744,813 | 19,660,930 | 21,054,095 | | Diluted weighted average common shares outstanding | 19,910,308 | 20,977,667 | 19,874,165 | 21,223,982 | | Basic EPS | $0.47 | $0.69 | $1.52 | $1.92 | | Diluted EPS | $0.46 | $0.68 | $1.50 | $1.90 | [12. Comprehensive Loss](index=20&type=section&id=12.%20Comprehensive%20Loss) This note details the components of other comprehensive loss, primarily foreign currency translation adjustments, and their impact on accumulated other comprehensive loss for the nine months ended September 30, 2023 and 2022 | Component (millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------- | :----------------------------- | :----------------------------- | | Translation adjustments | $(0.2) | $(0.7) | | De-designation of interest rate collars | — | $0.5 | | Total other comprehensive loss, net of tax | $(0.2) | $(0.2) | - Accumulated other comprehensive loss increased from **$(1.8) million** at December 31, 2022, to **$(2.0) million** at September 30, 2023, primarily due to foreign currency translation adjustments[94](index=94&type=chunk) [13. Segment Information](index=21&type=section&id=13.%20Segment%20Information) This note provides financial information disaggregated by the company's operating segments: Commercial and Aviation, along with an 'Other' segment for corporate support costs, detailing revenue, operating income, and general and administrative expenses for each segment - The Company's operating segments are Commercial (healthcare, municipalities, hotels, etc.) and Aviation (airports, airlines, baggage services), with the 'Other' segment including operational support and shared infrastructure costs[98](index=98&type=chunk)[99](index=99&type=chunk) | Segment Revenue (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Commercial | $146.5 | $136.8 | $438.5 | $400.9 | | Aviation | $81.9 | $70.3 | $227.5 | $187.1 | | Reimbursed management type contract revenue | $232.3 | $197.3 | $662.2 | $547.2 | | Total services revenue | $460.7 | $404.4 | $1,328.2 | $1,135.2 | | Segment Operating Income (millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Commercial | $35.7 | $32.4 | $103.0 | $95.7 | | Aviation | $10.6 | $9.7 | $28.8 | $26.3 | | Other | $(25.3) | $(18.3) | $(66.2) | $(52.5) | | Total operating income | $21.0 | $23.8 | $65.6 | $69.5 | [14. Subsequent Event](index=22&type=section&id=14.%20Subsequent%20Event) This note discloses a significant subsequent event: the company entered into a definitive merger agreement to be acquired by Metropolis Technologies, Inc. for approximately $1.5 billion in an all-cash transaction - On October 4, 2023, SP Plus Corporation entered into a Merger Agreement to be acquired by Metropolis Technologies, Inc. for approximately **$1.5 billion** in an all-cash transaction[101](index=101&type=chunk) - Under the agreement, Metropolis will acquire all outstanding shares of SP Plus common stock for **$54.00 per share**, with the transaction expected to close in 2024, subject to stockholder and regulatory approvals[101](index=101&type=chunk) - The Company incurred **$3.5 million** in merger-related expenses as of September 30, 2023, and is restricted from certain activities, including common stock repurchases, starting October 4, 2023[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of recent acquisitions, business model, general business trends, and a detailed analysis of revenue, costs, and operating income by segment for the three and nine months ended September 30, 2023, compared to the prior year [Overview](index=23&type=section&id=Overview) - The Company entered into a Merger Agreement on October 4, 2023, to be acquired by Metropolis Technologies, Inc. for **$54.00 per share**, with the transaction expected to close in 2024[106](index=106&type=chunk)[101](index=101&type=chunk) - As of September 30, 2023, **$3.5 million** in expenses related to the proposed merger have been incurred, with additional expenses anticipated[107](index=107&type=chunk) [Acquisitions](index=23&type=section&id=Acquisitions) - Recent acquisitions include Roker Inc. (July 2023 for **$3.1 million**), DIVRT, Inc. (November 2022 for **$17.6 million**), and K M P Associates Limited (October 2022 for **$13.8 million**)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - These acquisitions strategically enhance the Company's position as a global provider of frictionless technology solutions, independent of its legacy parking management and transportation operations[111](index=111&type=chunk) [Our Business](index=23&type=section&id=Our%20Business) - The Company develops and integrates technology with operations management to deliver mobility solutions for efficient movement of people, vehicles, and travel belongings, serving aviation, commercial, hospitality, and institutional clients[112](index=112&type=chunk) - Operations are primarily under management type contracts (**88%** in Commercial segment) and lease type contracts, with **159 airports** served across North America and Europe[113](index=113&type=chunk)[115](index=115&type=chunk) [General Business Trends](index=24&type=section&id=General%20Business%20Trends) - The Company observes a trend where sophisticated clients recognize technology-driven mobility solutions as profit generators or service differentiators, leading to outsourcing of these services[117](index=117&type=chunk) - Commercial segment facilities increased to **3,364** as of September 30, 2023, from **3,130** at December 31, 2022, including **22 facilities** from the Roker acquisition[118](index=118&type=chunk) - Airports served increased to **159** as of September 30, 2023, from **158** at December 31, 2022, with a significant increase in 2022 due to the KMP acquisition (**65 airports**)[119](index=119&type=chunk) [Revenue](index=24&type=section&id=Revenue) - Management type contracts generate revenue from fixed/variable monthly fees, performance-based incentives, e-commerce technology fees, and ancillary services, excluding gross customer collections[120](index=120&type=chunk)[121](index=121&type=chunk) - Lease type contracts include all gross receipts (net of local taxes), consulting fees, and e-commerce technology fees, with the Company paying fixed or percentage-based rent to property owners[120](index=120&type=chunk)[122](index=122&type=chunk) - Reimbursed management type contract revenue consists of direct reimbursements from clients for operating expenses incurred under management type contracts[123](index=123&type=chunk) [Cost of Services (Exclusive of Depreciation and Amortization)](index=25&type=section&id=Cost%20of%20Services%20(Exclusive%20of%20Depreciation%20and%20Amortization)) - Costs for management type contracts are generally the client's responsibility, except for 'reverse' management contracts and certain other aviation/ancillary services[124](index=124&type=chunk) - Lease type contract costs include contractual rents/fees paid to clients and all operating expenses for the leased facility, excluding major capital expenditures or real estate taxes[125](index=125&type=chunk) - Reimbursed management type contract expense represents directly reimbursed costs incurred on behalf of clients[126](index=126&type=chunk) [General and Administrative Expenses](index=25&type=section&id=General%20and%20Administrative%20Expenses) - General and administrative expenses encompass salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel, office expenses, and acquisition-related costs[128](index=128&type=chunk) [Depreciation and Amortization](index=25&type=section&id=Depreciation%20and%20Amortization) - Depreciation is calculated using a straight-line method over estimated useful lives, while finite-life intangible assets (typically from acquisitions) are amortized over their remaining estimated useful lives[129](index=129&type=chunk) [Operating Income](index=25&type=section&id=Operating%20Income) - Operating income is the key metric used by the Chief Operating Decision Maker (CODM) to assess performance and allocate resources to the Commercial and Aviation segments[130](index=130&type=chunk) [Segments](index=25&type=section&id=Segments) - The Company's operating segments are Commercial (healthcare, municipalities, hotels, etc.) and Aviation (airports, airlines, baggage services), with the 'Other' segment including operational support and shared infrastructure costs[132](index=132&type=chunk)[133](index=133&type=chunk)[137](index=137&type=chunk) [Analysis of Results of Operations](index=26&type=section&id=Analysis%20of%20Results%20of%20Operations) [Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022](index=26&type=section&id=Three%20Months%20Ended%20September%2030,%202023%20Compared%20to%20Three%20Months%20Ended%20September%2030,%202022) This section analyzes the consolidated and segment-specific financial performance for the three months ended September 30, 2023, compared to the same period in 2022, highlighting changes in revenue, costs, and operating income [Consolidated Results](index=26&type=section&id=Consolidated%20Results) | Metric (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Services revenue | $460.7 | $404.4 | $56.3 | 13.9% | | Cost of services (exclusive of D&A) | $393.1 | $346.2 | $46.9 | 13.5% | | General and administrative expenses | $37.6 | $27.2 | $10.4 | 38.2% | | Depreciation and amortization | $9.0 | $7.2 | $1.8 | 25.0% | | Operating income | $21.0 | $23.8 | $(2.8) | (11.8%) | | Interest expense | $7.4 | $3.9 | $3.5 | 89.7% | | Net income | $10.1 | $15.1 | $(5.0) | (33.1%) | - Services revenue increased by **$56.3 million (13.9%)**, driven by increased volume in baggage delivery and other management type contracts due to travel recovery, new business, and acquisitions[136](index=136&type=chunk)[138](index=138&type=chunk) - Net income decreased by **$5.0 million (33.1%)**, primarily due to higher interest expense from rising variable interest rates and increased general and administrative expenses, partially offset by lower income tax expense[141](index=141&type=chunk) [Commercial Segment](index=27&type=section&id=Commercial%20Segment) | Commercial Segment (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :---------------------------- | :----------- | :----------- | :------- | :------- | | Total services revenue | $146.5 | $136.8 | $9.7 | 7.1% | | Total gross profit | $47.3 | $40.9 | $6.4 | 15.6% | | General and administrative expenses | $9.8 | $7.2 | $2.6 | 36.1% | | Operating income | $35.7 | $32.4 | $3.3 | 10.2% | - Commercial segment operating income increased by **$3.3 million (10.2%)**, driven by higher gross profit from increased activity in volume-based management and lease type contracts due to travel recovery and new business, partially offset by higher G&A expenses and amortization from acquisitions[146](index=146&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) [Aviation Segment](index=28&type=section&id=Aviation%20Segment) | Aviation Segment (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Total services revenue | $81.9 | $70.3 | $11.6 | 16.5% | | Total gross profit | $16.9 | $13.9 | $3.0 | 21.6% | | General and administrative expenses | $4.8 | $3.1 | $1.7 | 54.8% | | Operating income | $10.6 | $9.7 | $0.9 | 9.3% | - Aviation segment operating income increased by **$0.9 million (9.3%)**, primarily due to increased activity in management type contracts and other aviation services from travel recovery and new business, partially offset by higher G&A expenses and amortization from the KMP acquisition[149](index=149&type=chunk)[150](index=150&type=chunk) [Other Segment](index=29&type=section&id=Other%20Segment) - Operating expenses in the Other segment increased by **$7.0 million (38.3%)** to **$25.3 million**, mainly due to higher acquisition-related, restructuring, and other costs, as well as increased compensation and investments in growth initiatives[151](index=151&type=chunk) [Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022](index=29&type=section&id=Nine%20Months%20Ended%20September%2030,%202023%20Compared%20to%20Nine%20Months%20Ended%20September%2030,%202022) This section analyzes the consolidated and segment-specific financial performance for the nine months ended September 30, 2023, compared to the same period in 2022, detailing the drivers of changes in revenue, costs, and operating income [Consolidated Results](index=29&type=section&id=Consolidated%20Results) | Metric (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Services revenue | $1,328.2 | $1,135.2 | $193.0 | 17.0% | | Cost of services (exclusive of D&A) | $1,136.4 | $966.8 | $169.6 | 17.5% | | General and administrative expenses | $100.0 | $78.4 | $21.6 | 27.6% | | Depreciation and amortization | $26.2 | $20.5 | $5.7 | 27.8% | | Operating income | $65.6 | $69.5 | $(3.9) | (5.6%) | | Interest expense | $21.5 | $12.2 | $9.3 | 76.2% | | Net income | $32.7 | $42.7 | $(10.0) | (23.4%) | - Services revenue increased by **$193.0 million (17.0%)**, primarily due to continued recovery in travel, new business, and acquisitions across both management and lease type contracts[152](index=152&type=chunk)[153](index=153&type=chunk) - Net income decreased by **$10.0 million (23.4%)**, mainly due to a significant increase in interest expense (**76.2%**) and higher general and administrative expenses, partially offset by lower income tax expense[155](index=155&type=chunk) [Commercial Segment](index=30&type=section&id=Commercial%20Segment) | Commercial Segment (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :---------------------------- | :----------- | :----------- | :------- | :------- | | Total services revenue | $438.5 | $400.9 | $37.6 | 9.4% | | Total gross profit | $135.4 | $120.5 | $14.9 | 12.4% | | General and administrative expenses | $27.3 | $21.1 | $6.2 | 29.4% | | Operating income | $103.0 | $95.7 | $7.3 | 7.6% | - Commercial segment operating income increased by **$7.3 million (7.6%)**, driven by higher gross profit from increased activity in management and lease type contracts, partially offset by increased G&A expenses and amortization from acquisitions[160](index=160&type=chunk)[159](index=159&type=chunk) [Aviation Segment](index=31&type=section&id=Aviation%20Segment) | Aviation Segment (millions) | Sep 30, 2023 | Sep 30, 2022 | Variance | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Total services revenue | $227.5 | $187.1 | $40.4 | 21.6% | | Total gross profit | $46.1 | $38.9 | $7.2 | 18.5% | | General and administrative expenses | $12.7 | $8.7 | $4.0 | 46.0% | | Operating income | $28.8 | $26.3 | $2.5 | 9.5% | - Aviation segment operating income increased by **$2.5 million (9.5%)**, primarily due to higher gross profit from increased activity in management type contracts and other aviation services, partially offset by higher G&A expenses and amortization from the KMP acquisition[163](index=163&type=chunk)[162](index=162&type=chunk) [Other Segment](index=31&type=section&id=Other%20Segment) - Operating expenses in the Other segment increased by **$13.7 million (26.1%)** to **$66.2 million**, driven by higher compensation, stock-based compensation, and increased acquisition-related, restructuring, and other costs[164](index=164&type=chunk) [Analysis of Financial Condition](index=31&type=section&id=Analysis%20of%20Financial%20Condition) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, the Company had **$38.5 million** in cash and cash equivalents and **$237.7 million** in borrowing availability under its Senior Credit Facility[167](index=167&type=chunk) - Management believes the Company will generate sufficient liquidity to meet obligations and comply with debt covenants for the next twelve months, despite macroeconomic conditions like higher inflation and rising interest rates[167](index=167&type=chunk) [Outstanding Indebtedness](index=32&type=section&id=Outstanding%20Indebtedness) - Total indebtedness increased by **$15.6 million** to **$359.8 million** as of September 30, 2023, from December 31, 2022, primarily comprising **$335.7 million** under the Senior Credit Facility and **$24.1 million** in other debt[169](index=169&type=chunk)[175](index=175&type=chunk) - The weighted average interest rate on the Senior Credit Facility increased to **6.7%** for the nine months ended September 30, 2023, from **4.6%** in the prior year[171](index=171&type=chunk) [Stock Repurchases](index=32&type=section&id=Stock%20Repurchases) - The Board authorized a **$60.0 million** stock repurchase program in February 2023, with no shares repurchased under it, while a May 2022 program had **$0.2 million** remaining as of September 30, 2023[172](index=172&type=chunk)[173](index=173&type=chunk) - The Company repurchased **285,700 shares** for **$10.4 million** at an average price of **$36.53 per share** during the nine months ended September 30, 2023[174](index=174&type=chunk) - Stock repurchases are restricted starting October 4, 2023, due to the Merger Agreement[174](index=174&type=chunk) [Daily Cash Collections](index=32&type=section&id=Daily%20Cash%20Collections) - The Company collects significant daily cash from parking locations, with lease type contract revenue deposited locally and a portion remitted to clients, while management type contract receipts may be deposited into company or client accounts[175](index=175&type=chunk)[176](index=176&type=chunk) - Working capital and liquidity can fluctuate intra-month and intra-year based on contract mix and timing of cash payments, necessitating a significant cash balance and utilization of the Senior Credit Facility[177](index=177&type=chunk) [Summary of Cash Flows](index=33&type=section&id=Summary%20of%20Cash%20Flows) | Cash Flow Activity (millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $53.5 | $75.6 | | Net cash used in investing activities | $(22.4) | $(18.1) | | Net cash used in financing activities | $(4.5) | $(54.1) | | Net increase in cash and cash equivalents | $26.1 | $2.7 | [Operating Activities](index=33&type=section&id=Operating%20Activities) - Net cash provided by operating activities decreased to **$53.5 million** for the nine months ended September 30, 2023, from **$75.6 million** in the prior year, primarily due to a **$20.5 million** U.S. Federal income tax refund in 2022 and higher interest payments in 2023[179](index=179&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) - Net cash used in investing activities increased to **$22.4 million** for the nine months ended September 30, 2023, from **$18.1 million** in the prior year, mainly due to the Roker acquisition (**$3.1 million**), a noncontrolling interest buyout (**$2.3 million**), and increased property and equipment purchases[180](index=180&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) - Net cash used in financing activities decreased significantly to **$4.5 million** for the nine months ended September 30, 2023, from **$54.1 million** in the prior year, driven by increased borrowings on the Senior Credit Facility and lower common stock repurchases[181](index=181&type=chunk) [Cash and Cash Equivalents](index=33&type=section&id=Cash%20and%20Cash%20Equivalents) - Cash and cash equivalents increased to **$38.5 million** as of September 30, 2023, from **$12.4 million** at December 31, 2022, reflecting the Company's ability to utilize deposited funds[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes in the company's primary risk exposures or management of market risks since the last annual report - No material changes in primary risk exposures or market risk management have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[183](index=183&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of September 30, 2023, with an exclusion for the recently acquired Roker Inc., and confirms no significant changes in internal control over financial reporting - The Chief Executive Officer, Chief Financial Officer, and Corporate Controller concluded that disclosure controls and procedures were effective as of September 30, 2023[186](index=186&type=chunk) - The assessment of disclosure controls and procedures excludes Roker Inc. (acquired July 25, 2023), which constituted less than **1%** of total assets and revenues[186](index=186&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[187](index=187&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is involved in routine legal claims and litigation, including labor, contract, and personal injury matters, but anticipates no material adverse effect on its financial position, results of operations, or cash flows - The Company is subject to claims and litigation in the normal course of business, including labor, employment, contracts, and personal injury, but believes the final outcome will not have a material adverse effect on its financial position, results of operations, or cash flows[190](index=190&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section refers investors to the risk factors discussed in the company's Annual Report on Form 10-K, stating that there have been no material changes to these risks - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[192](index=192&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section indicates that there is no applicable information regarding unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no applicable defaults upon senior securities [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there are no applicable mine safety disclosures [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of exhibits filed with the quarterly report, including amendments to corporate documents, office leases, and Section 302 and 906 certifications - The exhibits include corporate governance documents (Certificate of Amendment, Bylaws Amendment), office leases, and certifications from the Chairman/CEO, CFO, and Corporate Controller (Section 302 and 906)[198](index=198&type=chunk) [Signatures](index=38&type=section&id=Signatures) This section contains the required signatures of the company's principal executive officer, principal financial officer, and principal accounting officer, certifying the filing of the report - The report is signed by G Marc Baumann (Chairman and Chief Executive Officer), Kristopher H. Roy (Chief Financial Officer), and Gary T. Roberts (Senior Vice President, Corporate Controller and Assistant Treasurer) on November 2, 2023[201](index=201&type=chunk)

PART I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance, condition, and related disclosures for the reporting period [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including the balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, recent acquisitions, lease obligations, revenue recognition, legal contingencies, intangible assets, goodwill, borrowing arrangements, stock repurchase programs, stock-based compensation, earnings per share, comprehensive income components, and segment information [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (millions): | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | **$1,146.3** | **$1,121.4** | | Total Liabilities | **$904.9** | **$895.7** | | Total Stockholders' Equity | **$241.4** | **$225.7** | | Cash and cash equivalents | **$24.6** | **$12.4** | | Accounts receivable, net | **$179.0** | **$167.7** | [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section outlines the company's revenues, expenses, and net income over specific periods, reflecting operational profitability Condensed Consolidated Statements of Income (millions, except per share data): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total services revenue | **$442.2** | **$381.0** | **$867.5** | **$730.8** | | Operating income | **$25.3** | **$25.6** | **$44.6** | **$45.7** | | Interest expense | **$7.3** | **$3.5** | **$14.1** | **$8.3** | | Net income attributable to SP Plus Corporation | **$12.3** | **$15.4** | **$20.7** | **$26.1** | | Diluted Net income per common share | **$0.62** | **$0.72** | **$1.04** | **$1.22** | - Net income attributable to SP Plus Corporation decreased by **20.1%** for the three months ended June 30, 2023, and by **20.7%** for the six months ended June 30, 2023, compared to the prior year periods[9](index=9&type=chunk) - Interest expense significantly increased by **108.6%** for the three months and **69.9%** for the six months ended June 30, 2023, compared to the prior year periods[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section reports net income and other comprehensive income items, providing a complete view of changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (millions): | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | **$13.3** | **$16.3** | **$22.6** | **$27.6** | | Foreign currency translation gain (loss) | **$0.5** | **$(0.2)** | **$0.7** | **$(0.1)** | | Comprehensive income attributable to SP Plus Corporation | **$12.8** | **$15.3** | **$21.4** | **$26.5** | - Comprehensive income attributable to SP Plus Corporation decreased by **16.4%** for the three months and **19.2%** for the six months ended June 30, 2023, compared to the prior year periods[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including net income, stock repurchases, and stock-based compensation Changes in Stockholders' Equity (millions, except share data): | Item | Balance at January 1, 2023 | Net Income (6 months) | Repurchases of Common Stock (6 months) | Non-cash Stock-Based Compensation (6 months) | Balance at June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | **$225.7** | **$20.7** | **$(10.5)** | **$4.8** | **$241.4** | - Total stockholders' equity increased by **$15.7 million** from January 1, 2023, to June 30, 2023, primarily driven by net income and non-cash stock-based compensation, partially offset by common stock repurchases[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (millions): | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | **$21.0** | **$35.7** | | Net cash used in investing activities | **$(13.5)** | **$(10.7)** | | Net cash provided by (used in) financing activities | **$4.7** | **$(26.0)** | | Net increase (decrease) in cash and cash equivalents | **$12.2** | **$(1.1)** | | Cash and cash equivalents at end of period | **$24.6** | **$14.6** | - Net cash provided by operating activities decreased by **41.2%** for the six months ended June 30, 2023, compared to the prior year[14](index=14&type=chunk) - Financing activities shifted from a net cash outflow of **$26.0 million** in 2022 to a net inflow of **$4.7 million** in 2023[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Significant Accounting Policies and Practices](index=8&type=section&id=1.%20Significant%20Accounting%20Policies%20and%20Practices) This section describes the key accounting principles and methods used in preparing the financial statements - The Company develops and integrates technology with operations management to deliver mobility solutions, primarily through contractual agreements with property owners/managers rather than owning facilities[16](index=16&type=chunk)[103](index=103&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP for interim financial information, consolidating wholly-owned subsidiaries and Variable Interest Entities (VIEs) where the Company is the primary beneficiary[17](index=17&type=chunk)[19](index=19&type=chunk) - Goodwill is evaluated for impairment annually on October 1 or more often if circumstances change, at the reporting unit level (Commercial and Aviation segments)[32](index=32&type=chunk) [2. Acquisitions](index=10&type=section&id=2.%20Acquisitions) This section details recent business acquisitions, including their financial impact and strategic rationale - In October 2022, the Company acquired K M P Associates Limited (KMP), a UK-based software and technology provider, for approximately **$13.8 million**, included in the Aviation segment[38](index=38&type=chunk)[100](index=100&type=chunk) - In November 2022, the Company acquired certain assets of DIVRT, Inc., a developer of frictionless parking technology, for approximately **$17.6 million**, with potential contingent consideration up to **$7.0 million**, included in the Commercial segment[39](index=39&type=chunk)[101](index=101&type=chunk) Acquisitions Contribution (Six Months Ended June 30, 2023, millions): | Item | Amount | | :--- | :--- | | Services revenue | **$3.2** | | Losses before income taxes | **$1.7** | | (primarily due to amortization of acquired other intangible assets) | | [3. Leases](index=12&type=section&id=3.%20Leases) This section provides information on the company's lease arrangements, including leased assets, liabilities, and associated costs Lease Components (millions): | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total leased assets | **$194.4** | **$191.3** | | Total lease liabilities | **$236.4** | **$241.9** | Net Lease Cost (millions): | Period | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Three Months Ended | **$45.3** | **$40.4** | | Six Months Ended | **$84.1** | **$76.6** | - Weighted-average remaining lease term for operating leases is **5.2 years** with a weighted-average discount rate of **5.4%** as of June 30, 2023[50](index=50&type=chunk) [4. Revenue](index=13&type=section&id=4.%20Revenue) This section explains the company's revenue recognition policies and provides a breakdown of remaining performance obligations - Revenue is recognized when control of promised goods or services is transferred to customers[52](index=52&type=chunk)[53](index=53&type=chunk) - Lease-type contracts include gross receipts and fees, with the Company paying fixed/percentage rent[54](index=54&type=chunk) - Management-type contracts consist of management fees, with gross customer collections belonging to property owners[55](index=55&type=chunk) Remaining Performance Obligations (millions) as of June 30, 2023: | Year | Amount | | :--- | :--- | | 2023 | **$40.5** | | 2024 | **$58.8** | | 2025 | **$37.2** | | 2026 | **$28.6** | | 2027 | **$17.1** | | 2028 and thereafter | **$17.0** | | Total | **$199.2** | [5. Legal and Other Commitments and Contingencies](index=15&type=section&id=5.%20Legal%20and%20Other%20Commitments%20and%20Contingencies) This section discloses ongoing legal matters, claims, and other potential liabilities that could affect the company's financial position - The Company is subject to claims and litigation in the normal course of business, including labor, contracts, and personal injury matters[64](index=64&type=chunk)[182](index=182&type=chunk) - Management believes the final outcome of current claims and legal proceedings will not have a material adverse effect on its financial position, results of operations, or cash flows[64](index=64&type=chunk)[182](index=182&type=chunk) - Accruals are recorded when a loss is probable and reasonably estimable, based on the lowest amount in the estimated range of loss if no point is more likely[183](index=183&type=chunk) [6. Other Intangible Assets, net](index=15&type=section&id=6.%20Other%20Intangible%20Assets,%20net) This section details the company's intangible assets, such as contract rights and customer relationships, and their amortization Other Intangible Assets, Net (millions): | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Other intangible assets, net | **$63.5** | **$68.9** | | - Management contract rights | **$25.6** | **$28.1** | | - Proprietary know how | **$17.6** | **$19.0** | | - Customer relationships | **$17.1** | **$18.2** | Amortization Expense (millions): | Period | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Three Months Ended | **$3.0** | **$2.1** | | Six Months Ended | **$6.0** | **$4.9** | [7. Goodwill](index=16&type=section&id=7.%20Goodwill) This section provides information on the company's goodwill, including its carrying amount and any impairment considerations Goodwill Carrying Amount (millions): | Segment | December 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Commercial | **$387.0** | **$387.1** | | Aviation | **$156.2** | **$156.5** | | Total | **$543.2** | **$543.6** | - Goodwill increased slightly by **$0.4 million** from December 31, 2022, to June 30, 2023, primarily due to foreign currency translation[66](index=66&type=chunk) - The Aviation segment's goodwill includes **$59.5 million** in accumulated impairment losses[66](index=66&type=chunk) [8. Borrowing Arrangements](index=16&type=section&id=8.%20Borrowing%20Arrangements) This section outlines the company's debt structure, including senior credit facilities, other borrowings, and associated interest rates Long-Term Borrowings (millions): | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Senior Credit Facility, net | **$343.9** | **$322.3** | | Other borrowings | **$23.9** | **$24.3** | | Total obligations | **$365.7** | **$344.2** | | Total long-term borrowings, excluding current portion | **$352.2** | **$331.8** | - The Senior Credit Facility permits aggregate borrowings of **$600.0 million**, with **$345.0 million** outstanding and **$39.1 million** in letters of credit as of June 30, 2023[69](index=69&type=chunk)[70](index=70&type=chunk) - The weighted average interest rate on the Senior Credit Facility increased to **6.5%** for the six months ended June 30, 2023, from **3.3%** in the prior year[71](index=71&type=chunk) [9. Stock Repurchase Program](index=17&type=section&id=9.%20Stock%20Repurchase%20Program) This section describes the company's stock repurchase activities and the remaining authorization under its programs - The Board authorized a new **$60.0 million** stock repurchase program on February 14, 2023, under which no shares have been repurchased as of June 30, 2023[74](index=74&type=chunk) Stock Repurchase Activity (May 2022 Program, Six Months Ended June 30): | Item | 2023 | 2022 | | :--- | :--- | :--- | | Total number of shares repurchased | **285,700** | **176,500** | | Average price paid per share | **$36.53** | **$31.51** | | Total value of common stock repurchased | **$10.4 million** | **$5.6 million** | - As of June 30, 2023, **$60.2 million** remained authorized for repurchase under the combined May 2022 and February 2023 programs[77](index=77&type=chunk) [10. Stock-Based Compensation](index=17&type=section&id=10.%20Stock-Based%20Compensation) This section details the company's stock-based compensation plans, including grants, expense recognition, and unrecognized costs - The Company granted **18,660 shares** of common stock and **126,931 restricted stock units** (RSUs) during the six months ended June 30, 2023[78](index=78&type=chunk)[79](index=79&type=chunk) Stock-Based Compensation Expense (millions): | Item | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Stock grants | **$0.6** | **$0.6** | | Restricted stock units | **$1.4** | **$2.5** | | Performance Share Units (PSUs) | **$1.2** | **$2.3** | | Total (approx.) | **$3.2** | **$5.4** | - As of June 30, 2023, there was **$8.2 million** of unrecognized RSU expense (weighted average remaining period: ~**2.0 years**) and **$7.8 million** of unrecognized PSU expense (weighted average remaining period: ~**1.9 years**)[80](index=80&type=chunk)[82](index=82&type=chunk) [11. Net Income per Common Share](index=18&type=section&id=11.%20Net%20Income%20per%20Common%20Share) This section presents the basic and diluted net income per common share, reflecting profitability on a per-share basis Net Income per Common Share: | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Basic | **$0.63** | **$0.73** | **$1.05** | **$1.23** | | Diluted | **$0.62** | **$0.72** | **$1.04** | **$1.22** | - Diluted net income per common share decreased by **13.9%** for the three months and **14.7%** for the six months ended June 30, 2023, compared to the prior year periods[85](index=85&type=chunk) - Weighted average diluted common shares outstanding for the six months ended June 30, 2023, were **19,853,900**, down from **21,347,442** in the prior year[85](index=85&type=chunk) [12. Comprehensive Income (Loss)](index=19&type=section&id=12.%20Comprehensive%20Income%20(Loss)) This section reports components of other comprehensive income or loss, such as foreign currency translation adjustments Other Comprehensive Income (Loss) (millions): | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Translation adjustments | **$0.7** | **$(0.1)** | | De-designation of interest rate collars | — | **$0.5** | | Other comprehensive income (loss) | **$0.7** | **$0.4** | - Accumulated other comprehensive loss improved from **$(1.8) million** at December 31, 2022, to **$(1.1) million** at June 30, 2023, primarily due to positive foreign currency translation adjustments[86](index=86&type=chunk) [13. Segment Information](index=21&type=section&id=13.%20Segment%20Information) This section provides financial data for the company's operating segments, Commercial and Aviation, to assess their performance - The Company operates in two reportable segments: Commercial and Aviation, with an 'Other' segment for operational support and shared infrastructure costs[91](index=91&type=chunk)[92](index=92&type=chunk) - The Chief Operating Decision Maker (CODM) assesses segment performance primarily using operating income[90](index=90&type=chunk) Services Revenue by Segment (millions): | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Commercial | **$147.6** | **$132.9** | **$292.0** | **$264.1** | | Aviation | **$73.7** | **$63.6** | **$145.6** | **$116.8** | | Reimbursed management type contract revenue | **$220.9** | **$184.5** | **$429.9** | **$349.9** | | Total services revenue | **$442.2** | **$381.0** | **$867.5** | **$730.8** | [14. Subsequent Event](index=22&type=section&id=14.%20Subsequent%20Event) This section discloses significant events that occurred after the reporting period but before the financial statements were issued - On July 25, 2023, the Company acquired certain assets of Roker Inc., a US-based provider of fully-integrated parking solutions, for approximately **$3.1 million**[95](index=95&type=chunk) - The acquisition was funded using borrowings under the Senior Credit Facility and cash on hand[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2023. It covers an overview of the business, recent acquisitions, general business trends, detailed analysis of revenue, costs, and operating income by segment, and an assessment of liquidity and capital resources, including debt, stock repurchases, and cash flows [Important Information Regarding Forward-Looking Statements](index=23&type=section&id=Important%20Information%20Regarding%20Forward-Looking%20Statements) This section provides cautionary statements regarding forward-looking information, highlighting inherent risks and uncertainties - This report contains forward-looking statements, identified by words like 'expect,' 'estimate,' 'intend,' etc., based on current expectations and projections[98](index=98&type=chunk) - Readers are cautioned that actual results may differ materially due to uncertainties and factors discussed in the company's Form 10-K and other SEC filings[98](index=98&type=chunk)[99](index=99&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statements, except as required by federal securities laws[99](index=99&type=chunk) [Overview](index=23&type=section&id=Overview) This section provides a high-level summary of the company's business model, recent strategic acquisitions, and general market trends [Acquisitions](index=23&type=section&id=Acquisitions) This section details recent strategic acquisitions aimed at enhancing the company's technology solutions and market presence - The company acquired KMP (Oct 2022) and DIVRT (Nov 2022) to enhance its frictionless technology solutions, and Roker Inc. (July 2023) as a subsequent event[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - KMP, a UK-based software provider, was acquired for approximately **$13.8 million**, and DIVRT, a developer of frictionless parking capabilities, for approximately **$17.6 million** with potential contingent consideration[100](index=100&type=chunk)[101](index=101&type=chunk) [Our Business](index=23&type=section&id=Our%20Business) This section describes the company's core business model, service offerings, and operational arrangements with clients - The company delivers mobility solutions by integrating technology with operations management, serving aviation, commercial, hospitality, and institutional clients in North America and Europe[103](index=103&type=chunk) - Operations are primarily under two types of arrangements: management-type contracts (fixed/variable fees, client responsible for most expenses) and lease-type contracts (company pays rent, collects revenue, responsible for most operating expenses)[104](index=104&type=chunk)[105](index=105&type=chunk) - Operating income is the primary focus for evaluating financial condition and operating performance, as revenue reporting differs significantly between contract types[106](index=106&type=chunk) [General Business Trends](index=24&type=section&id=General%20Business%20Trends) This section discusses prevailing market trends and client behaviors influencing the company's service demand and operational strategies - Clients increasingly recognize technology-driven mobility solutions as profit generators and service differentiators, leading to outsourcing of these services[107](index=107&type=chunk) - The Commercial segment maintained a high client retention rate of approximately **94%** for the twelve-month period ended June 30, 2023 (vs **91%** in 2022)[107](index=107&type=chunk) [Commercial Segment Facilities](index=24&type=section&id=Commercial%20Segment%20Facilities) This section provides a quantitative overview of the number of leased and managed facilities within the Commercial segment Commercial Segment Facilities: | Type | June 30, 2023 | December 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | :--- | | Leased facilities | **414** | **421** | **428** | | Managed facilities | **2,842** | **2,709** | **2,660** | | Total Commercial segment facilities | **3,256** | **3,130** | **3,088** | - Total Commercial segment facilities increased by **126** from December 31, 2022, to June 30, 2023, primarily driven by growth in managed facilities[108](index=108&type=chunk) [Aviation Segment - Airports Served](index=24&type=section&id=Aviation%20Segment%20-%20Airports%20Served) This section details the number of airports served by the Aviation segment, broken down by geographical region Aviation Segment - Airports Served: | Region | June 30, 2023 | December 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | :--- | | North America | **102** | **100** | **90** | | Europe | **58** | **58** | — | | Total Airports | **160** | **158** | **90** | - The number of airports served in the Aviation segment increased to **160** as of June 30, 2023, a significant rise from **90** airports at June 30, 2022, largely due to the KMP acquisition adding **65** unique airports in Europe[109](index=109&type=chunk) [Revenue](index=24&type=section&id=Revenue) This section defines the various components of revenue recognized under different contract types and their recognition criteria - Revenue from lease-type contracts includes gross receipts (net of local taxes), consulting fees, e-commerce technology fees, and customer convenience fees[110](index=110&type=chunk) - Management-type contract revenue consists of management fees (fixed, variable, performance-based), e-commerce technology fees, monthly subscription fees, and ancillary services, but excludes gross customer collections[111](index=111&type=chunk)[112](index=112&type=chunk) - Reimbursed management-type contract revenue represents direct reimbursement from clients for operating expenses incurred[113](index=113&type=chunk) [Cost of Services (Exclusive of Depreciation and Amortization)](index=25&type=section&id=Cost%20of%20Services%20(Exclusive%20of%20Depreciation%20and%20Amortization)) This section explains the composition of costs directly associated with providing services under different contract arrangements - Cost of services for lease-type contracts includes contractual rents/fees paid to clients and all operating expenses for the leased facility[114](index=114&type=chunk) - For management-type contracts, expenses are generally the client's responsibility, but certain costs under 'reverse' management contracts and for other aviation/ancillary services are included in cost of services[115](index=115&type=chunk) - Reimbursed management-type contract expense consists of directly reimbursed costs incurred on behalf of a client[116](index=116&type=chunk) [Gross Profit](index=25&type=section&id=Gross%20Profit) This section defines gross profit as revenue less the direct costs of services and related depreciation and amortization - Gross profit is calculated as revenue less the cost of generating such revenue (cost of services) and depreciation and amortization expenses related to cost of services activities[117](index=117&type=chunk) [General and Administrative Expenses](index=25&type=section&id=General%20and%20Administrative%20Expenses) This section outlines the various corporate overhead expenses, including compensation, office costs, and acquisition-related charges - General and administrative expenses include salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel, office expenses, and acquisition-related expenses[118](index=118&type=chunk) [Depreciation and Amortization](index=25&type=section&id=Depreciation%20and%20Amortization) This section describes the accounting policies for depreciating tangible assets and amortizing intangible assets over their useful lives - Depreciation is determined using a straight-line method over estimated useful lives of assets, or the lease term for leasehold improvements[119](index=119&type=chunk) - Intangible assets with finite lives, typically acquired through business acquisitions, are amortized over their remaining estimated useful lives[119](index=119&type=chunk) [Operating Income](index=25&type=section&id=Operating%20Income) This section defines operating income as a key metric for assessing the profitability of the company's core business operations - Operating income represents revenue less cost of services, general and administrative expenses, and depreciation and amortization[120](index=120&type=chunk) - It is the key metric used by the Chief Operating Decision Maker (CODM) for making decisions, assessing performance, and allocating resources to the Commercial and Aviation operating segments[120](index=120&type=chunk) [Segments](index=25&type=section&id=Segments) This section identifies the company's reportable operating segments and the types of services offered within each - The Company's operating segments are Commercial and Aviation, with an 'Other' segment for operational support teams and common infrastructure costs[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Commercial segment services include healthcare, municipalities, hotels, commercial real estate, and ancillary mobility solutions[122](index=122&type=chunk) - Aviation segment services include airports, airlines, baggage handling, and ground transportation[123](index=123&type=chunk) [Analysis of Results of Operations](index=26&type=section&id=Analysis%20of%20Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the current and prior reporting periods [Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022](index=26&type=section&id=Three%20Months%20Ended%20June%2030,%202023%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202022) This section compares the company's consolidated and segment-specific financial results for the three-month periods ended June 30 [Consolidated Results](index=26&type=section&id=Consolidated%20Results) This section presents a consolidated overview of the company's financial performance, highlighting key revenue, expense, and income variances Consolidated Financial Highlights (Three Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Services revenue | **$442.2** | **$381.0** | **$61.2** | **16.1%** | | Cost of services (exclusive of D&A) | **$376.3** | **$322.2** | **$54.1** | **16.8%** | | General and administrative expenses | **$31.8** | **$26.7** | **$5.1** | **19.1%** | | Depreciation and amortization | **$8.8** | **$6.5** | **$2.3** | **35.4%** | | Operating income | **$25.3** | **$25.6** | **$(0.3)** | **(1.2)%** | | Interest expense | **$7.3** | **$3.5** | **$3.8** | **108.6%** | | Net income | **$13.3** | **$16.3** | **$(3.0)** | **(18.4)%** | - Services revenue increased due to continued recovery in travel, new business, and acquisitions (**$1.1 million** from management type contracts, **$0.5 million** from reimbursed management type contracts)[127](index=127&type=chunk) - Net income decreased primarily due to higher interest expense and increased general and administrative expenses, which included higher compensation, stock-based compensation, and restructuring/integration costs[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Commercial Segment](index=27&type=section&id=Commercial%20Segment) This section analyzes the financial performance of the Commercial segment, focusing on revenue, gross profit, and operating income Commercial Segment Highlights (Three Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Total services revenue | **$147.6** | **$132.9** | **$14.7** | **11.1%** | | Gross profit (Lease type contracts) | **$13.0** | **$13.6** | **$(0.6)** | **(4.4)%** | | Gross profit (Management type contracts) | **$36.2** | **$31.7** | **$4.5** | **14.2%** | | Operating income | **$36.1** | **$34.7** | **$1.4** | **4.0%** | - Lease type gross profit decreased due to a sublease reserve and lower rent concessions (**$1.2 million** in 2023 vs **$1.5 million** in 2022), partially offset by increased transient and monthly parking revenue[133](index=133&type=chunk) - Operating income increased by **4.0%** despite higher general and administrative expenses and **$0.4 million** in amortization from the DIVRT acquisition[133](index=133&type=chunk)[134](index=134&type=chunk) [Aviation Segment](index=28&type=section&id=Aviation%20Segment) This section analyzes the financial performance of the Aviation segment, focusing on revenue, gross profit, and operating income Aviation Segment Highlights (Three Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Total services revenue | **$73.7** | **$63.6** | **$10.1** | **15.9%** | | Gross profit (Lease type contracts) | **$1.0** | **$1.1** | **$(0.1)** | **(9.1)%** | | Gross profit (Management type contracts) | **$15.7** | **$12.4** | **$3.3** | **26.6%** | | Operating income | **$9.6** | **$8.5** | **$1.1** | **12.9%** | - Management type gross profit increased due to higher volume-based contracts, increased activity in other aviation services, acquisitions, and new business[139](index=139&type=chunk) - Operating income increased by **12.9%** despite higher general and administrative expenses and **$0.5 million** in amortization from the KMP acquisition[136](index=136&type=chunk)[137](index=137&type=chunk) [Other Segment](index=28&type=section&id=Other%20Segment) This section discusses the operating expenses and financial impact of the 'Other' segment, which includes corporate support functions - Operating expenses in the Other segment increased by **$2.8 million** (**15.9%**) to **$20.4 million**, driven by higher compensation, stock-based compensation, and investments in growth initiatives[138](index=138&type=chunk) - Increased integration, acquisition, restructuring, and other costs also contributed to the rise in expenses[138](index=138&type=chunk) [Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022](index=29&type=section&id=Six%20Months%20Ended%20June%2030,%202023%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202022) This section compares the company's consolidated and segment-specific financial results for the six-month periods ended June 30 [Consolidated Results](index=29&type=section&id=Consolidated%20Results) This section presents a consolidated overview of the company's financial performance, highlighting key revenue, expense, and income variances Consolidated Financial Highlights (Six Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Services revenue | **$867.5** | **$730.8** | **$136.7** | **18.7%** | | Cost of services (exclusive of D&A) | **$743.3** | **$620.6** | **$122.7** | **19.8%** | | General and administrative expenses | **$62.4** | **$51.2** | **$11.2** | **21.9%** | | Depreciation and amortization | **$17.2** | **$13.3** | **$3.9** | **29.3%** | | Operating income | **$44.6** | **$45.7** | **$(1.1)** | **(2.4)%** | | Interest expense | **$14.1** | **$8.3** | **$5.8** | **69.9%** | | Net income | **$22.6** | **$27.6** | **$(5.0)** | **(18.1)%** | - Services revenue increased due to continued recovery in travel, new business, and acquisitions (**$2.1 million** from management type contracts, **$1.1 million** from reimbursed management type contracts)[143](index=143&type=chunk) - Net income decreased primarily due to significantly higher interest expense (up **69.9%**) and increased general and administrative expenses (up **21.9%**), which included higher compensation, stock-based compensation, and restructuring/integration costs[141](index=141&type=chunk)[142](index=142&type=chunk)[144](index=144&type=chunk) [Commercial Segment](index=30&type=section&id=Commercial%20Segment) This section analyzes the financial performance of the Commercial segment, focusing on revenue, gross profit, and operating income Commercial Segment Highlights (Six Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Total services revenue | **$292.0** | **$264.1** | **$27.9** | **10.6%** | | Gross profit (Lease type contracts) | **$24.7** | **$22.8** | **$1.9** | **8.3%** | | Gross profit (Management type contracts) | **$67.5** | **$60.2** | **$7.3** | **12.1%** | | Operating income | **$67.3** | **$63.3** | **$4.0** | **6.3%** | - Lease type gross profit increased despite lower cost concessions related to service concession arrangements and rent concessions (**$2.5 million** in 2023 vs **$3.7 million** in 2022)[150](index=150&type=chunk) - Operating income increased by **6.3%** despite higher general and administrative expenses and **$0.8 million** in amortization from the DIVRT acquisition[148](index=148&type=chunk)[149](index=149&type=chunk) [Aviation Segment](index=31&type=section&id=Aviation%20Segment) This section analyzes the financial performance of the Aviation segment, focusing on revenue, gross profit, and operating income Aviation Segment Highlights (Six Months Ended June 30, millions): | Item | 2023 | 2022 | Variance Amount | Variance % | | :--- | :--- | :--- | :--- | :--- | | Total services revenue | **$145.6** | **$116.8** | **$28.8** | **24.7%** | | Gross profit (Lease type contracts) | **$2.3** | **$2.5** | **$(0.2)** | **(8.0)%** | | Gross profit (Management type contracts) | **$29.7** | **$24.7** | **$5.0** | **20.2%** | | Operating income | **$18.2** | **$16.6** | **$1.6** | **9.6%** | - Management type gross profit increased due to new business, increased volume-based contracts, other aviation services, and acquisitions[156](index=156&type=chunk) - Operating income increased by **9.6%** despite higher general and administrative expenses and **$0.9 million** in amortization from the KMP acquisition[153](index=153&type=chunk)[154](index=154&type=chunk) [Other Segment](index=31&type=section&id=Other%20Segment) This section discusses the operating expenses and financial impact of the 'Other' segment, which includes corporate support functions - Operating expenses in the Other segment increased by **$6.7 million** (**19.6%**) to **$40.9 million**, driven by higher compensation, stock-based compensation, and investments in growth initiatives[155](index=155&type=chunk) - Increased integration, acquisition, restructuring, and other costs also contributed to the rise in expenses[155](index=155&type=chunk) [Analysis of Financial Condition](index=31&type=section&id=Analysis%20of%20Financial%20Condition) This section assesses the company's financial health, including liquidity, capital resources, indebtedness, and cash flow dynamics [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section evaluates the company's ability to meet short-term and long-term obligations, including cash position and borrowing capacity - As of June 30, 2023, the Company had **$24.6 million** in cash and cash equivalents and **$215.9 million** of borrowing availability under its Senior Credit Facility[157](index=157&type=chunk) - Management believes the Company will generate sufficient liquidity to satisfy obligations and remain in compliance with debt covenants for the next twelve months, despite macroeconomic conditions[157](index=157&type=chunk) - The Company does not believe its banking partners are exposed to significant credit risk and has sufficient assets and liquidity to cover future obligations[158](index=158&type=chunk) [Outstanding Indebtedness](index=32&type=section&id=Outstanding%20Indebtedness) This section details the company's total debt, including senior credit facilities and other borrowings, and compliance with covenants - Total indebtedness increased by **$21.5 million** to **$365.7 million** as of June 30, 2023, comprising **$341.8 million** under the Senior Credit Facility and **$23.9 million** in other debt (including finance lease obligations)[159](index=159&type=chunk)[166](index=166&type=chunk) - The weighted average interest rate on the Senior Credit Facility was **6.5%** for the six months ended June 30, 2023, up from **3.3%** in the prior year[161](index=161&type=chunk) - The Company was in compliance with its debt covenants under the Amended Credit Agreement as of June 30, 2023[159](index=159&type=chunk) [Stock Repurchases](index=32&type=section&id=Stock%20Repurchases) This section describes the company's stock repurchase activities and the remaining authorization under its programs - The Board authorized a new **$60.0 million** stock repurchase program in February 2023, with no repurchases made under it as of June 30, 2023[162](index=162&type=chunk) Stock Repurchase Activity (May 2022 Program, Six Months Ended June 30): | Item | 2023 | 2022 | | :--- | :--- | :--- | | Total number of shares repurchased | **285,700** | **176,500** | | Average price paid per share | **$36.53** | **$31.51** | | Total value of common stock repurchased | **$10.4 million** | **$5.6 million** | - As of June 30, 2023, **$60.2 million** remained authorized for repurchase under the combined May 2022 and February 2023 programs[165](index=165&type=chunk) [Daily Cash Collections](index=32&type=section&id=Daily%20Cash%20Collections) This section explains the company's cash collection processes and the factors influencing intra-month and intra-year liquidity fluctuations - The Company collects significant daily cash from parking locations, with handling varying by contract type (lease vs management)[166](index=166&type=chunk) - Liquidity fluctuates intra-month and intra-year based on contract mix and timing of significant cash payments, often requiring the use of the Senior Credit Facility despite carrying significant cash balances[167](index=167&type=chunk)[168](index=168&type=chunk) [Summary of Cash Flows](index=33&type=section&id=Summary%20of%20Cash%20Flows) This section provides a high-level summary of cash flows from operating, investing, and financing activities Summary of Cash Flows (Six Months Ended June 30, millions): | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | **$21.0** | **$35.7** | | Net cash used in investing activities | **$(13.5)** | **$(10.7)** | | Net cash provided by (used in) financing activities | **$4.7** | **$(26.0)** | | Net increase (decrease) in cash and cash equivalents | **$12.2** | **$(1.1)** | [Operating Activities](index=33&type=section&id=Operating%20Activities) This section analyzes cash flows generated from or used in the company's primary business operations - Net cash provided by operating activities decreased to **$21.0 million** for the six months ended June 30, 2023, from **$35.7 million** in the prior year[170](index=170&type=chunk) - The decrease was primarily due to a **$20.5 million** U.S. Federal income tax refund received in 2022 and higher interest payments in 2023 (**$13.6 million** vs **$7.8 million**), partially offset by improved working capital[170](index=170&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities increased to **$13.5 million** for the six months ended June 30, 2023, from **$10.7 million** in the prior year[171](index=171&type=chunk) - This increase was mainly driven by higher purchases of property and equipment, primarily internal-use software (**$11.3 million** vs **$9.1 million**), and a **$2.2 million** noncontrolling interest buyout[171](index=171&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) This section explains cash flows associated with debt, equity, and dividend transactions - Net cash provided by financing activities was **$4.7 million** for the six months ended June 30, 2023, a significant increase from net cash used of **$26.0 million** in the prior year[172](index=172&type=chunk) - This shift was primarily due to increased borrowings on the Senior Credit Facility, which offset higher common stock repurchases (**$11.1 million** vs **$4.9 million**)[172](index=172&type=chunk) [Cash and Cash Equivalents](index=33&type=section&id=Cash%20and%20Cash%20Equivalents) This section reports the total amount of cash and highly liquid investments held by the company at the end of the period - Cash and cash equivalents increased to **$24.6 million** as of June 30, 2023, from **$12.4 million** at December 31, 2022[173](index=173&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no material changes in the company's primary risk exposures or management of market risks from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - No material changes in primary risk exposures or market risk management since the 2022 Annual Report on Form 10-K[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, confirming their effectiveness as of June 30, 2023. It also states that there have been no significant changes in internal control over financial reporting during the quarter and acknowledges the inherent limitations of any control system [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO, CFO, and Corporate Controller, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, at a reasonable assurance level[175](index=175&type=chunk)[178](index=178&type=chunk) - Disclosure controls are designed to ensure timely recording, processing, summarizing, and reporting of information required in SEC filings[176](index=176&type=chunk)[177](index=177&type=chunk) [Changes in Internal Control Over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There have been no significant changes in the company's internal control over financial reporting during the quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect these controls[179](index=179&type=chunk) [Inherent limitations of the Effectiveness of Internal Control](index=34&type=section&id=Inherent%20limitations%20of%20the%20Effectiveness%20of%20Internal%20Control) - A control system, regardless of its design, can provide only reasonable, not absolute, assurance that its objectives are met[180](index=180&type=chunk) - Due to inherent limitations, no evaluation of controls can provide absolute assurance that all control issues have been detected[180](index=180&type=chunk) PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal proceedings and risk factors [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine claims and litigation, including labor, contract, and personal injury matters, some potentially class actions. While outcomes are uncertain, management believes these will not materially impact financial position, results, or cash flows. Accruals are made for probable and estimable losses, with disclosures for material reasonably possible losses - The Company is subject to claims and litigation in the normal course of business, including those related to labor and employment, contracts, and personal injury[182](index=182&type=chunk) - Management believes the final outcome of these proceedings will not have a material adverse effect on the Company's financial position, results of operations, or cash flows[182](index=182&type=chunk) - Accruals are made when a loss is probable and reasonably estimable, recording the lowest amount in the estimated range of loss if no point is more likely[183](index=183&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Investors should carefully consider the risk factors discussed in the company's Annual Report on Form 10-K for December 31, 2022, and subsequent SEC filings. There have been no material changes to these risk factors since the last 10-K, but new risks can emerge and their impact is unpredictable - Investors should carefully consider risk factors discussed in the Annual Report on Form 10-K for December 31, 2022, and subsequent SEC filings[184](index=184&type=chunk) - There have been no material changes to the risk factors set forth in the 2022 Form 10-K[184](index=184&type=chunk) - New risks could emerge at any time, and their extent and impact on financial performance cannot be predicted[184](index=184&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the company for the reporting period - Not applicable[186](index=186&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not applicable[187](index=187&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - Not applicable[188](index=188&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company for the reporting period - Not applicable[189](index=189&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to corporate documents, Section 302 and 906 certifications, and Inline XBRL documents - Exhibits include Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation and Amendment to Fourth Amended and Restated Bylaws[191](index=191&type=chunk) - Section 302 Certifications from the Chairman and CEO, CFO, and Corporate Controller are filed herewith[191](index=191&type=chunk) - Certification pursuant to 18 USC Section 1350 (Section 906 of Sarbanes-Oxley Act) and Inline XBRL documents are furnished/filed herewith[191](index=191&type=chunk) [Signatures](index=38&type=section&id=Signatures) This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy of the report - The report was signed on August 3, 2023, by G Marc Baumann (Chairman and Chief Executive Officer), Kristopher H. Roy (Chief Financial Officer), and Gary T. Roberts (Senior Vice President, Corporate Controller and Assistant Treasurer)[194](index=194&type=chunk)

Financial Data and Key Metrics Changes - Adjusted gross profit increased 12% year-over-year to $66 million, driven by profitability at same locations, new business wins, and technology-enabled solutions [9][10] - Adjusted EBITDA reached a record $34.4 million, up 9% from $31.7 million in the same period last year [102] - Adjusted earnings per share were $0.78, down from $0.81 in the same quarter last year [10] - Year-to-date operating cash flow was $21 million and free cash flow was $8.3 million, compared to $35.7 million and $25.5 million in the prior year [10] Business Line Data and Key Metrics Changes - Commercial segment adjusted gross profit grew nearly 9% year-over-year, while the aviation segment saw a 24% increase [95][96] - The company added 126 net new locations in the first half of 2023, with a retention rate of 94% [4][11] - Gross profit from technology solutions is expected to double the 2022 contribution as a percentage of adjusted gross profit for the full year 2023 [5] Market Data and Key Metrics Changes - The company processed 5.4 million transactions on its technology platforms, a 36% sequential increase, with June transactions up almost 70% compared to December 2022 [8] - The city of Los Angeles awarded an add-on contract for managing 23 additional facilities, indicating strong demand for the company's services [6] Company Strategy and Development Direction - The company aims to lead the digital transformation of the parking industry by leveraging technology solutions and expanding its addressable market [4][19] - SP Plus is focusing on public-private partnerships to help universities monetize their assets and manage parking operations [17] - The recent acquisition of Roker is expected to enhance the company's capabilities in digital permitting and enforcement management [100][108] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed guidance for full year 2023, expecting adjusted gross profit between $240 million and $260 million, and adjusted EBITDA between $125 million and $135 million [11][20] - The company is experiencing strong economic activity across various markets, with a notable uptick in demand in the Southeast and Southwest regions [64] - Management expressed confidence in achieving high single-digit growth in gross profit moving forward [73] Other Important Information - The company continues to invest in technology and personnel to support long-term growth, with G&A expenses expected to be approximately $15 million higher than 2022 [104] - The company is seeing strong inbound interest for its technology solutions, particularly in the context of increasing congestion and demand for efficient services [65] Q&A Session Summary Question: What is the outlook for SG&A as a percentage of sales? - Management indicated that the current SG&A levels are due to investments in technology and are not expected to remain at this level long-term [35][36] Question: How do technology solutions impact client retention? - Management believes that technology solutions will make services stickier, enhancing client retention rates [37][38] Question: What are the pricing dynamics for renewals? - Management noted that pricing dynamics have remained stable, with the ability to offer technology solutions at lower upfront costs [41][42] Question: How is the labor market affecting operations? - Management stated that labor challenges have moderated, and increases in labor costs are typically passed on to clients under fixed fee contracts [62] Question: Are there specific geographies showing more activity? - Management observed strong economic activity across various regions, particularly in the Southeast and Southwest, with notable growth in legacy markets like New York [64]