SP+(US:SP)2023-08-03 02:56Financial 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]