SP Plus Corporation

Good day and thank you for standing by. Welcome to the Q4 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, press star 0. I would now like to hand the conference over to your speaker today, Mr. Chris Roy. Please go ahead.

Thank you, Chino. And good afternoon, everyone. As Chino just said, I'm Chris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our fourth 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 2022, 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 list 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 operation 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 are presented in the tables accompanying the earnings release. In addition, GAAP gross profit has been updated to include depreciation and amortization. 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 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. Good to be with you today. We're pleased to report on the positive momentum we've experienced throughout 2021, which has accelerated our company's recovery from the pandemic and presents a runway for future growth. In other words, SP Plus has reached an inflection point with expectations for our 2022 operating performance to approach or exceed pre-pandemic 2019. which, by the way, was a record year for SB Plus on virtually all financial measures. We've seen a steady and consistent improvement in the levels of parking activity and demand for our services throughout the year, particularly in those markets that were most severely impacted by the pandemic, such as those tied to leisure travel and entertainment, resulting in our improved financial performance. We're very pleased to report fourth quarter results, which were in line with our expectations, and represented a strong finish to a year of progressive improvement for SP+. Fourth quarter 2021 adjusted gross profit was up 42% year-on-year, but remained 9% below fourth quarter 2019 levels. This excellent progress indicates there's still some additional runway for recovery, particularly in certain market verticals. EBITDA was just 2% below pre-pandemic fourth quarter 2019 levels, as we were able to achieve substantial operating leverage and improving business conditions given our streamlined cost structure, together with our success in capturing new business. Our commercial segment was a solid performer, both in the fourth quarter and full year, as we were able to successfully capitalize on changing consumer trends and our ability to quickly respond to the dynamic needs of our clients as things started to return back to normal. And our aviation segment 2021 was a year of significant growth, But there's a somewhat longer road back to full recovery for this segment, given the pandemic's ongoing impact on our travel clients. That said, 2021 was a year of strong new business and renewal activity, and by all accounts, the outlook for the travel industry is bullish. We're responding to the needs of our particularly hard-hit airport, airline, and cruise line clients and prospective clients by developing novel solutions such as curbside concierge and consumer-paid remote airline check-in services, that are gaining traction due to the positive impact on the traveler experience and the ability to reduce congestion while reducing our clients' costs. In addition, we're continuing to see a lot of excitement about our suite of innovative Sphere technology offerings, and we continue to lead the digital transformation of our industry. These competitive advantages continue to differentiate SP Plus and reinforce our market leadership. Our ability to exit 2021 with such strong results is due to the strategic priorities that we put in place in early 2020 upon the onset of the pandemic. In essence, as we managed through the worst of the times, we had three key objectives in mind. First, to streamline our cost structure while staying nimble and retaining the ability to scale up our activity levels to meet client demand. Second, to continue to invest in our technology offerings in an effort to meet the dynamic and diverse needs of our current and prospective clients. and third, to maintain our industry-leading position and our solid cash flow. Let me address our streamlined cost structure. We've taken a close look at costs throughout the organization and transformed our operations to become a leaner, more nimble organization. While some costs will naturally increase over time as the business grows, we're also reinvesting some of those savings back into initiatives and resources to drive faster growth. Technology remains a huge competitive advantage for SP Plus, which is why we accelerated our investments in this area, even during the most challenging of times. The beauty of our technology solutions is that they improve the consumer experience while increasing our clients' profitability through increasing top-line revenues and or lowering operating costs. Additionally, our offerings support the touchless way of doing business, which we believe will be the norm for the future. Our Sphere brand of technology products and service offerings are also serves to increase our value to our clients, which is supported by our high retention rates and allows us to expand our addressable market. We'll continue to invest further in these products and offerings as we view Sphere as a key differentiator for SB+. Our streamlined cost structure and technology offerings have created a path toward improved positioning and market share gains. We continue to pursue and win new business while maintaining existing business. In our commercial segment, we were able to maintain a high location retention rate of 91%, and our commercial segment location count was over 3,000 at the end of 2021. We also added several new aviation clients to our portfolio and added services at legacy operations. Importantly, we ended 2021 with a more stable base of business in light of the increased percentage of our base that is now managed locations. Thus, we believe that SB Plus is better positioned as we emerged from the pandemic than we were when we entered. Looking ahead, we expect 2022 to be another year of significant growth for SP+, in which gross profit and adjusted EBITDA will approach or exceed 2019 pre-pandemic levels. Adjusted gross profit is expected to range from $200 million to $220 million, which at the midpoint represents year-on-year growth of 13% over 2021 adjusted gross profit. We expect growth to come from both our commercial and aviation segments. In the commercial segment, we're anticipating a rebound in verticals like hospitality events and venues, municipal meters, and office buildings. In aviation, we're expecting a pickup in our activity levels across service areas, particularly valet, shuttle busing, and ground transportation management. Adjusted EBIT is expected to range from $110 million to $120 million, which at the midpoint represents 21% year-over-year growth. Our outlook for free cash flow is between $70 to $80 million, which contemplates the receipt of a $20 million income tax refund that we had expected but didn't receive in 2021. To sum up, we believe SP Plus is exceptionally well positioned for continued profitable growth. We continue to focus on delivering superior client service, which has kept our retention levels high and enabled us to sell in additional services to our existing clients. Our sphere capabilities have reinforced our market leadership and have given us opportunities to deploy our proprietary technology in new areas that expand our addressable market. And our strength in financial position and solid cash flow generation provide the financial flexibility to continue to invest in organic growth while pursuing capital allocation strategies that can create additional value for shareholders. Now I'm going to turn the call back over to Chris for his financial review. Chris? Thank you, Mark.