SP+(SP) - 2023 Q4 - Annual Results

Executive Summary & Business Highlights Key Financial and Operational Achievements 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] - Both Commercial and Aviation segments experienced double-digit gross profit growth in 2023[4] - 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] Strategic Growth Drivers 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] - Sphere technology offerings gained further traction with existing clients and enabled 120 new standalone deployments at locations not currently utilizing SP+ services[4] - Aviation segment benefited from recent airport contract wins, high travel volumes, and strategic technology acquisitions[4] Corporate Recognitions 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] - Included in the Forbes list of America's most successful Small-Cap companies for the second year in a row[5] Consolidated Financial Performance Financial Summary (GAAP & Non-GAAP) 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 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] - 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] | 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 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] - 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] | 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] Revenue and Gross Profit by Contract Type 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] - 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] Segment Performance Commercial Segment 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] - 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] Aviation Segment 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] - 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] Consolidated Financial Statements Summary Condensed Consolidated Statements of Income 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] - General and administrative expenses increased significantly to $140.4 million in FY 2023 from $109.1 million in FY 2022[31] Summary Condensed Consolidated Balance Sheets 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] - Goodwill remained substantial at $544.6 million, slightly up from $543.2 million in 2022[35] Summary Condensed Consolidated Statements of Cash Flows 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] Free Cash Flow 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] - 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] Non-GAAP Financial Measures Reconciliation Gross Profit Reconciliation 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 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 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 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 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 Merger with Metropolis Technologies, Inc. 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] - 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] - 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] - Due to the pending acquisition, SP+ will not host an earnings conference call for its fourth quarter 2023 results[18] Company Information and Disclosures About SP+ 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] - Provides mobility services for aviation, commercial, hospitality, and institutional clients throughout North America and Europe[2] - Employs over 20,000 team members[19] Cautionary Note Regarding Forward-Looking Statements 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] - Risks include the ability to successfully effect its strategic growth plan, intense competition, changing consumer preferences, difficulty obtaining insurance, and information technology disruption[22] - 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] Use of Non-GAAP Financial Measures Explanation 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] - 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] - 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] - 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] Contact Information 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]