SP Plus Corporation

Good day, and thank you for standing by. Welcome to the SP Plus Corporation third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Christopher Roy, Chief Financial Officer. Please go ahead.

Thank you, Victor, and good afternoon, everyone. As Victor just said, I'm Chris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our third 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 and expectations 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 include 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.

Hey, thank you, Chris, and good afternoon, everybody. We're pleased to report on SP Plus's strong third quarter results. Our performance continues to track the ongoing recovery in business conditions and benefits from our streamlined cost structure. Specifically, the progressive reopening of the economy, consumer preferences for driving their personal vehicles versus mass transit and rideshare options, and improving air travel and hotel occupancy have all led to a broad-based uplift in demand for our services. Third quarter adjusted gross profit reached 84% of what it was in the comparable quarter of 2019, which we see as a strong showing given that parking activity at our same locations as well as overall air travel and hotel occupancy rates remain lower than what it was at this time two years ago pre-pandemic. Results for the quarter benefited from our reduced cost structure, with adjusted G&A costs 20% below third quarter 2019 levels. The net result is substantial growth in adjusted EBITDA, which was up 18% on a sequential basis. As demand for our services continues to increase, You can expect to see our G&A increase, but we believe much of the cost reduction is sustainable, and we expect to continue to leverage G&A as we grow top-line gross profit. From the onset of the pandemic, we worked to reposition our portfolio, restructuring or exiting certain unprofitable leases, and reducing costs in our business model, all while continuing to invest in our sphere technology initiatives and maintaining an organization that we believe is well-positioned for the recovery that is currently underway. With an improved value proposition for our clients, the proven ability to start up new locations quickly, and our industry-leading technology offerings, we've been able to strengthen our leadership position and win new contracts in both our commercial and aviation segments. We believe this points to share gains for SP Plus that will support future long-term growth. In our commercial segment, we began servicing 69 new locations during the third quarter. This success has been a function of SP Plus' track record of providing superior service and offering innovative technology solutions. And we believe that some of our competitors have not performed up to expectations. Given how we have helped our clients navigate during the pandemic, together with our financial stability and our award-winning innovations, we believe that owners now see us as the provider of choice versus other competitors who they may have considered in the past. We're particularly pleased to have recently commenced operations at the University of Toledo under its public-private partnership, ParkU Toledo. SP Plus is responsible for day-to-day parking management, customer service, and maintenance for 66 surface lots representing more than 10,000 spaces. And just to clarify, given that we commenced operations in October, these locations are not included in the 69 new Q3 locations that I just referenced. With the success of this P3, we believe there will be renewed enthusiasm for public-private partnerships, particularly in higher education. Complementing robust new business growth in the commercial segment, location retention was also strong, at approximately 91% for the 12 months ended September 30th, 2021. Our commercial segment continues to recover nicely and see its share of new wins. While recovery in the office vertical has been slow, we've seen gross profit return to or even exceed pre-pandemic levels at residential locations as more people have purchased cars for the first time during the pandemic. Gross profit at healthcare and large venue locations have also recovered to or near pre-pandemic levels. Many of our new commercial wins were a direct result of our technology offerings and solutions, as clients recognize that technology can solve some of the challenges resulting from a tightened labor market, and as wage inflation has enhanced the return on investment of our technology products. We can offer new clients attractive solutions that reduce staffing needs while boosting their bottom line and generating a healthy return for SP+. a win-win all around. Turning to aviation, since July, TSA passenger screenings have been running at about 75% to 80% of 2019 levels, suggesting significant additional recovery potential. Our market position continues to grow and has been further enhanced by our recent contract wins, including the parking and shuttle operations at both Reagan National and Dulles International Airports. which started October 1st and cover 32,000 parking spaces and 55 shuttle buses. We've also added valet parking services at our existing Sonoma County Airport operation and curbside management at San Francisco International Airport where we provide parking and other services. Last quarter, we spoke about our curbside concierge program, which combines bagged service offering with Sphere's mobile point-of-sale system to allow us to check in passengers on multiple airlines for a modest service fee. Since we launched this new service in May, we've rolled out 20 curbside concierge locations for one airline client and expect to expand to another 20 airports by year-end. Additionally, we're in discussions with several other airlines, given their interest in reducing airport and terminal congestion and improving customers' experiences, all the while reducing their operating costs. We continue to rapidly deploy our technology offerings, and to that end, we now have 412 facilities operating with our on-demand gateless solution and expect that we will have at least 450 locations up and running by the end of the year. Deployment of our on-demand gated solution is just starting to ramp up, and we currently have 119 locations either fully installed or pending installation, closing in on our goal of 150 by year end. As a result of the deployment of these gated and gateless solutions, as well as increased reservation activity, third quarter 2021 transactions on parking.com was up 50% over Q2 of this year. The transaction growth is even greater on our mobile point-of-sale platforms, which is up 200% in the third quarter over Q2. I'm pleased to note that SP Plus was honored to be recognized as as the Innovative Organization of the Year by the National Parking Association, a leading industry group that counts numerous parking operators and other mobility technology solution providers as its members. This award was in large part a function of their recognition of the strength and sophistication of our Sphere brand of technology products and solutions. In addition to strengthening our ability to win new business and add incremental services for existing clients, Sphere also enables us to reduce our costs, as well as capture transaction fees that were previously being earned by an outside provider. We'll continue to invest in technology offerings that position SP Plus at the forefront for new and incremental business. Lastly, we expect our full-year gross profit in 2021 to be at the high end of our guidance range of $170 to $185 million, and we expect our G&A costs to be at the lower end of the $85 to $90 million range. In addition, we're uplifting our operating cash flow and free cash flow guidance ranges by $10 million, which Chris will discuss more fully in a few minutes. We're very pleased with our performance to date in 2021, and we're looking forward to further recovery and overall growth in 2022 as we hopefully put the pandemic behind us, see clients ramping up our service levels and outsourcing more to us, and continue to capture new business opportunities. I'm now going to turn the call over to Chris. for a financial review of the quarter.