SP+(US:SP)2024-05-01 20:05markdown [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** |