SP Plus Corporation

At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host today, Mr. Christopher Roy, Chief Financial Officer. Sir, the floor is yours.

Thank you, Joanna, and good afternoon, everyone. As Joanna just said, I'm Christopher Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our first quarter 2021 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including statements as to the impact of COVID-19, outlook for 2021, and statements regarding the company's strategies, plans, intentions, future operations, and expected financial performance. Actual results, performance, and achievements could differ materially from those expressed or implied due to a variety of risks, uncertainties, or other factors, including those described in the company's earnings release issued earlier this afternoon, which is incorporated by reference for purposes of this call and available on the SP Plus website, and the risk factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the SEC. In addition, management will discuss non-GAAP financial information during the call. Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance. They are provided for informational purposes only. A full reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are discussed on the call, reconciliations to comparable GAAP measure will be posted under the Regulation G tab in the Investor Relations section of the SP Plus website. Please note this call is being broadcast live over the internet and is being recorded. A replay will be available on the SP Plus website shortly after the end of the call and will be available for 30 days from today. I will now turn the call over to Mark Baumann, our Chief Executive Officer.

Mark? Thank you, Chris. I'm pleased to report that we saw a progressive improvement in business conditions in the first quarter, tied to further relaxation of pandemic-related restrictions and accelerated vaccine rollout. We believe that these factors have spurred consumer confidence and have led to a pickup in travel and other leisure activities, which of course is good for our business. At the same time, consumers remain cautious, which has translated into increased use of private automobiles rather than mass transportation in many large metropolitan areas. In short, these positive factors offset the seasonality that we typically experience in the first quarter of the year and resulted in the quarter coming in better than expected. We also had a $4.8 million benefit in the first quarter related to certain cost concessions that were one time in nature. Taking that non-recurring benefit out of the first quarter adjusted gross profit, the quarter was still slightly ahead of fourth quarter 2020 levels, despite the fact that Q1 is historically our slowest period, with the upside coming from both our commercial and aviation segments. While it's still early in the year, our first quarter performance increases our confidence in the gross profit and G&A guidance we provided in late February. With respect to G&A, we continue to closely manage our cost structure while making ongoing investments in our technology offerings to support future growth. Our G&A run rate is projected to be 26% lower in 2021 than it was in 2019 at the midpoint of our guidance. This significant reduction includes systemic changes and efficiencies that we've implemented throughout the company, which we believe will help us return more quickly to pre-pandemic levels of EBITDA. Additionally, once business conditions return to more normalized levels, we would expect to exceed pre-pandemic EBITDA levels as we leverage our more streamlined organizational structure and G&A cost base. At the same time, our operating structure and value proposition continue to improve. First of all, management contracts now comprise 86% of our commercial portfolio, up from 81% at the start of last year, creating more visibility and predictability. We believe that the stability resulting from this shift, which shields us from exposure to utilization as well as increasing labor rates and other operating costs, is especially important now and in the post-pandemic environment. While we're still open to lease arrangements with clients who require them, our leases will be structured in ways that mitigate risk, for example, through shorter terms or built-in cancellation clauses. Second, our market position has been further strengthened by a weakened competitive landscape, which has seen some operators fold altogether or suffer major financial setbacks and distractions, making them less desirable partners for facility owners. SP Plus has a reputation as an operator that lives up to its obligations and delivers on service levels, Consequently, we expect this environment should provide us the opportunity to increase our market share. And after a year of very challenging business trends, we're seeing improvements across our operating footprint. Let's first take a look at the travel landscape. Travel is picking up for a number of reasons, including improved customer confidence and pent-up demand after more than a year of quarantining and basically sheltering in place. In the first quarter, we saw travel volumes progressively increase, especially over spring break. This is consistent with TSA data that show a recovery in air travel underway with month-to-month sequential improvement in travel levels. Hotel occupancy rates also improved in many geographies during the first quarter. Based on the metrics we monitor, experts are generally predicting that travel will increase even more in the second half of the year. With airports increasingly busy, they're open to solutions like the ones we provide which reduce congestion and enable social distancing. We successfully managed the influx of post-Super Bowl travelers with our curbside concierge check-in at the Tampa International Airport, and the outstanding performance of our team led to a new ongoing contract at that airport. We continue to seek to provide additional service such as those for existing clients, expanding our growth potential and addressable market. Shifting to our commercial business, We expect commuters in metropolitan areas to continue to show a strong preference for using their personal vehicles for the foreseeable future. Available data on miles driven and tolls paid support our expectation for a continuation of that trend as more people return to their workplaces. In many urban locations, parking activity increased during the first quarter, and in some cases, businesses at or ahead of pre-pandemic levels. We think this is a trend that is here to stay, and this increased demand makes our technology offerings even more relevant and useful. We consider technology a key differentiator for SP Plus and an important competitive advantage for us in retaining clients and winning new business. Clients value our proprietary offerings, and we continue to invest in the digital transformation of our industry. We issued a press release earlier this week that highlights the great progress we're making with our various sphere products and digital offerings. We now have almost 400 facilities across the US and Canada that have transitioned to the Sphere Commerce on-demand gaitless solution, which allows daily parkers the option to bypass a pay station or any interaction with parking equipment or personnel to quickly and securely pay on their personal smartphone or device in the comfort of their own vehicle. We're also rolling out our touchless capabilities at gated locations and are making good progress. Momentum remains strong as both our clients and parking customers increasingly adopt our digital offerings, as evidenced by a 77% increase in reservation revenue on our ProprietaryParking.com platform from January to March of this year. In summary, we're very pleased with our first quarter performance, our market positioning, and the improving business conditions that we see on the horizon. Chris will now provide you with a more detailed financial review.