SP Plus Corporation

Good day and thank you for standing by. Welcome to Quarter 2 2021 SP Plus Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mr. Christopher Roy, Chief Financial Officer. Sir, please go ahead.

Thank you, Rachel, and good afternoon, everyone. As Rachel just said, I'm Christopher Roy, Chief Financial Officer of SP+. Welcome to our conference call following the release of our second 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 chairman and chief executive officer.

Thank you, Chris, and good afternoon, everybody. This was another quarter of solid execution for SP Plus. Business conditions continue to improve as COVID restrictions eased and higher vaccination rates spurred consumer activity. I'm very pleased to report that we were able to manage effectively throughout this period, calibrating the service levels to accommodate increasing traffic in many locations while keeping costs in check. This enabled us to post robust adjusted EBITDA performance, which was 31% above first quarter 2021 and represented a 51% margin on gross profit, a strong indication of how we have streamlined our company to become a leaner, more flexible organization. Our better than expected performance in the second quarter was broad-based, tied to the recovery that is underway in many of the verticals we serve, as well as our size, scale, and reputation. This enabled SP Plus to effectively ramp up and expand our business with existing clients and win new business in both our commercial and aviation segments. Although most aspects of our business have not yet returned to where they were prior to COVID, And in fact, some verticals, such as large events and services, such as valet parking, remain significantly affected. We're pleased with the progress we're making. And we're increasingly confident in our ability to exceed pre-pandemic EBITDA levels once business conditions return to more normalized levels. In the second quarter, we started up over 80 new operations in our commercial division, representing a mix of hotel, commercial, and retail sites and several event venues. A few are former clients who were forced to close during the pandemic, but the majority are new wins. In many instances, it was our touchless technology and other innovative tools that sealed the deal for us. In others, it was because they were attracted to our tech solutions and robust marketing campaigns that for one client increased their monthly revenue by approximately 15% from where it was before we took over. And some chose SP Plus because of poor service rendered by the incumbent operator that cause consumer complaints and issues. We're making excellent progress in deploying our on-demand solutions for gated and gateless operations. We're now live at over 400 gateless locations. Transactions on the gateless platform grew over 200% during Q2 as we onboarded more locations, and we believe that there is considerable upside at same locations as we further optimize these operations. We have 25 gated locations up and running, and another 100 locations in the implementation queue. Great progress toward our goal of having 150 locations live on our gated solution by the end of the year. Reservations on parking.com are outpacing pre-COVID volumes as our technology offering is helping to facilitate the return of people to offices and central business districts. Additionally, increased car ownership and the consumer's reluctance to use mass transit and ride-share services due to COVID-19 have all been positive factors for our operations. Also, we're now powering various client websites using our SPHERE custom solutions, which is enhancing our stickiness to our clients. These microsites are an excellent fit for larger operations like those at stadiums and convention centers and for municipalities. 2021 has been another banner year for our aviation division. We have a number of new wins and renewals and are seeing additional opportunities to expand our relationships by providing additional services to our clients. A good example of this is the new white glove service we developed called Curbside Concierge, which is debuted at Tampa Airport to accommodate travelers following Super Bowl 55 earlier this year. This service allows travelers to check in with the airline and check their bags at the curbside for a nominal fee. In developing it, we combined bags' proprietary technology with the Sphere mobile point of sale system we built at SP+. giving us a unique offering that allows travelers to check in for multiple airlines. During the second quarter, we went live with this service at 10 markets with our first major airline client, with plans to expand to another 30 markets by the end of the year. We've seen strong interest from other airlines as well, as the industry looks to provide evaluated services for their customers and reduce congestion in their terminals, while also reducing their operating costs. Early survey results show 92% of respondents are highly satisfied with the service, with 95% indicating that they would use the service again. We see this as a potentially significant opportunity for bags to build back its revenue base in a post-COVID environment. Also, just last week we announced that, in partnership with two minority-owned businesses, we were awarded a 10-year contract renewal at the Bush Intercontinental, Houston Hobby, and Ellington Airports in Houston, Texas. This involves parking management services for approximately 36,000 parking spaces at Houston's two largest airports, as well as valet services, shuttle buses, ambassador and courtesy carts to transport passengers, and engineering services. In addition, we're also providing remote airline check-in services for valet customers at Houston Hobby. And we've been notified of several additional awards by large airport and airline clients, but are not in a position to talk about those as of yet. will be announcing some of these wins over the next several weeks. Additionally, we're working closely with our hospitality clients to ramp up operations to accommodate the return of leisure and business travelers. And here again, we believe there will be opportunities for SP Plus to provide an expanded array of services than in the past. In summary, second quarter results showed considerable sequential improvement, and with the first half completed, the added visibility of our portfolio, and our expectations for continued progress in the second half of this year, we're pleased to be able to raise our guidance for full year 2021. Specifically for 2021, we now forecast gross profit of $170 million to $185 million, up from our prior forecast of $140 million to $160 million. At the same time, we now expect G&A to be $85 to $90 million, as compared to $75 to $85 million previously. The higher G&A than we previously expected relates to higher accruals for performance-based compensation, as well as additional investments in technology initiatives and other resources to better position us to take advantage of new business opportunities as business activity continues to pick up. We're also initiating cash flow guidance, which Chris will discuss in his financial review. I'll now turn the call over to Chris.