SP Plus Corporation

Thank you for standing by and welcome to the Q4 2022 SP Plus Corporation Earnings Conference Call. At this time, all participants are on listen-only mode. After the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star one one on your telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Chris Roy, Chief Financial Officer. Please begin.

Thank you, Valerie. And good afternoon, everyone. As Valerie just said, I'm Chris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our fourth quarter 2022 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including those statements as to the outlook and expectations for 2023 and statements regarding the company's strategies, plans, intentions, and 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, 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. I'm pleased to share highlights from a strong finish to a year of substantial double-digit growth for SP Plus, and to discuss the business trends and initiatives that support our new growth targets. To begin, our performance in the fourth quarter demonstrated our industry leadership and kept a year of considerable year-on-year growth across all key financial metrics. We continued to effectively execute on our strategy by growing our existing contracts, improving our outstanding retention rate, and winning new business, while also accelerating the deployment of our award-winning Sphere and Errol Parker technology solutions. We saw robust gross profit growth in the fourth quarter and full year, and the strong performance was broad-based across our segments verticals, and geographies. In the commercial segment, adjusted gross profit growth of 11% in the quarter and 18% for the year was led by our commercial large venue and hospitality verticals, reflecting increased leisure activity and favorable return to office trends, and the ongoing rollout and successful adoption of SEER. In fact, 2022 results reflect a record level of adjusted gross profit in our commercial segment. In the aviation segment, 30% of adjusted gross profit growth in the fourth quarter and 34% for the year was a function of an increase in the number of airports served and a significant uptick in travel activity. And lastly, measures reflecting our scale and reach in both our segments hit new record levels in 2022. We processed $4 billion of gross parking revenues. This is combined from our lease facilities and on behalf of our clients if it's a management contract. We transported 51 million passengers on shuttle buses and handled over 6.5 million pieces of checked luggage last year. Our commercial segment is comprised of over 3,100 locations, which reflects 106 net new locations added over the last 12 months. In fact, we've achieved net location growth over the last seven consecutive quarters, further demonstrating our success in growing our market share. Gross profit from new business in the commercial segment was the second highest level ever achieved, and we approved our location retention rate to 93%. On the aviation side, we've expanded our presence to 158 global airports, adding 69 net new airports to our portfolio in 22, including 65 unique airports from the acquisition of Aeroparker. These are airports where we did not previously have a presence with either FP Plus airports or banks. And we're now providing our curbside concierge services for two airlines at 40 airports. If you haven't done so already, you might want to check out the updated investor presentation that we've just published on our investor relations website, where we've broken out some of these size metrics by vertical market. This positive momentum is continuing in 2023 and marks an inflection point in terms of our growth trajectory. Our work over the last several years has helped position SP Plus as a leader in the digital transformation of our industry, and now we're well positioned to capture the growth opportunities presented by our technology innovation. As we noted in our earnings release, we expect another strong year of growth in 2023 with adjusted gross profit growth of 11% at the midpoint, of which approximately 2 percentage points reflects the full year impact of the AeroParker acquisitions. and our expected adjusted EBITDA growth, which is also 11% in 2023 at the midpoint of our guidance range, anticipates additional investments in G&A that we believe will set the foundation for achieving accelerated gross profit growth. Over the last several years, we've been making investments to build the leading-edge technology solutions we have today. In addition to our internal development efforts, in 2022, we significantly enhanced our technology position with two strategic acquisitions. Aeroparker's industry-leading staff platform is poised to generate recurring technology revenues at 80 airports worldwide. This acquisition provides expanded opportunities to realize cross-selling synergies across our entire aviation portfolio as we leverage relationships and capabilities to grow our traditional parking and transportation business, as well as BAG's suite of services and now Aeroparker's technology. As part of the Aeroparker acquisition, we also acquired KMP Digitata, an award-winning digital marketing agency with an impressive client base both in and outside of the aviation space. With Divert, we acquired a partner whose technology solutions we've deployed since 2020 as part of Sphere's platform. Just as importantly, this acquisition laid the foundation for the establishment of the SP Plus Technology Innovation Lab based in India. which we believe will enable us to accelerate our progress along our technology roadmap. As we head into 2023, we're executing on our multifaceted growth strategy, which includes, one, strengthening our leadership position, two, expanding our addressable market and gaining revenue synergies from our recent acquisitions, and three, taking advantage of substantial opportunities to leverage and monetize our technology. With respect to our leadership position, SP Plus is uniquely positioned to blend innovative technology solutions and superior operational expertise to enable current and prospective clients to meet their varied objectives, whether those objectives are improving the bottom line, improving the consumer experience, or anything in between. Our technology solutions enable clients to upgrade their parking assets to align with consumer trends and preferences without making major capital expenditures, while also, in many cases, reducing operating costs. And if there is an existing technology infrastructure, we provide highly trained people and the know-how to operate and optimize the use of that infrastructure. This compelling value proposition has been a key element of our success in winning new business over the last two years. Additionally, the deployment of our technology across our existing footprint has increased the stickiness of our services, which we believe will continue to benefit our retention rate. In terms of expanding our addressable market and realizing revenue synergies, our suite of technology solutions include software-as-a-service or platform-as-a-service options that can be deployed whether or not SP Plus is the operator. Our solutions also enable an asset owner to optimize the value of their asset by converting traditionally free parking to paid parking or employing dynamic pricing techniques to maximize revenues. And the recent acquisition of AeroParker gives SP Plus a global presence. Together with SP Plus, AeroParker now has the support and resources to further expand its industry-leading position and will have opportunities to leverage their premier technology to drive cross-selling synergies. And finally, a key focus in 2023 and beyond will be accelerating the deployment of our comprehensive portfolio of technology offerings to take advantage of substantial opportunities to leverage and monetize our technology, which we believe is an important component of our future profit growth. We're currently processing a million digital transactions per month on SP Plus-enabled technology platforms deployed across airports, on and off street parking locations, event venues, retail and entertainment complexes, and the like. Unlike other one-size-fits-all options, our technology solutions are adaptable to a broad range of operating situations to meet both consumer and client needs. While technology solutions today contribute less than 2% of our gross profit, our objective is to grow that to at least 10% of our gross profit by 2025. We believe these three strategic initiatives support the guidance we've given for 2023 and position SP Plus to achieve high single-digit gross profit growth in subsequent years. And if we look further ahead, we see SP Plus playing an increasingly important role in the development of smart cities, as parking assets have the capability to become multi-use mobility hubs. While still in the very early stages, we believe that our industry-leading technology capabilities will enable us to work cohesively with our clients to increase the value of their parking assets as the roadmap for smart cities evolves. At this point, I'd like to turn the call back over to Chris for a financial review.