Q1 2022 SP Plus Corp Earnings Call
Good afternoon, and welcome to the F T Plus Corporation first quarter 2022 earnings Conference call.
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At this time I'd like to turn the conference call over to you Mr. Kris Roy Chief Financial Officer, Sir. Please go ahead.
Thank you Jamie and good afternoon, everyone as Jamie just said I'm Kristopher Roy Chief Financial Officer of SP, plus welcome to our conference call. Following the release of our first quarter 2022 earnings during the call today management will make remarks, there may be considered forward looking statements.
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 risk factors in the company's annual report on Form 10-K and <unk>.
<unk> 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 non-GAAP measures 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 measures will be posted under the regulation G tab in the Investor Relations section of the SP plus.
Site. Please.
Please note this call is being broadcast live over the Internet and is being recorded.
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 Marc Baumann, Our chairman and Chief Executive Officer.
Hey, Thank you, Chris and good afternoon, everybody I am very pleased with our execution in the first quarter building on our market position across key verticals and service offerings amid the continued improvement in business conditions. This strong start to the year together with our current visibility and business development pipeline supports.
Our expectation that our profitability for the full year will approach or exceed pre pandemic levels. We see this as a significant accomplishment given that certain of our markets such as office and retail have only partially recovered from the impact of the pandemic, which we believe provides SP plus with additional growth opportunities in future.
<unk> periods.
The 28% year over year increase in first quarter adjusted gross profit benefited from the significant contract wins, we achieved over the last year and the operating leverage inherent in our post pandemic business model drove even greater year on year increases in adjusted operating income and adjusted EBITDA of 46% and 45.
5% respectively.
We view these metrics as representing an inflection point for SP, plus demonstrating the competitive advantages of our scale and industry, leading technology, which are driving improved same location performance strong new business activity and the expansion of the addressable market for our services.
Looking at our commercial segment, we experienced same location gross profit growth in nearly every vertical compared to Q1 of last year as business conditions continue to improve and we were also successful in adding new business that more than offset normal turnover, our sphere technology offerings continue to be an important differentiator for SP.
Plus and winning new contracts as clients are very receptive to innovative ways to increase the profitability of their locations. While also improving the consumer experience to touch free interactions and prepaid reservations.
We continue to grow our commercial segment location count, adding 70 locations on a net basis over the last 12 months, we had a very active quarter of new business, including our new contract with the city of Rochester, Minnesota, where we were selected for our ability to bring technology based solutions to the city's parking operations, which covers over 40.
300 parking spaces at 11 locations and also includes on Street meter collection and special event management services. In addition, we're very pleased to have renewed our contract with the National Football League to continue to provide parking transportation and mobility services for future events extending through 2027.
<unk> the Super Bowl NFL draft NFL kickoff in NFL Pro Bowl events.
<unk> plus has provided parking and transportation services to the NFL since 1999 through its SP, plus Gameday division, which manages events and large venue operations alongside local teams and partners. We're excited that sporting entertainment and social events are largely back from the pandemic turning to the aviation segment.
We saw strong year on year growth. Thanks to the new contracts SP plus has been awarded over the last two years and as services are reopening at airports now the domestic travel is on the upswing. This is another area, where our sphere technology offerings continue to drive growing interest from clients as it allows airports to collect additional revenue without.
<unk> infrastructure and operational costs in the first quarter SP plus renewed its contract with Salt Lake City Airport, where we provide a full suite of mobility services, including parking management shuttles for employees and the public ground transportation management, and hardstand shuttling to and from the aircraft when gates are not available.
<unk>.
We're also seeing continued interest in our curbside concierge offering where we recently checked in our one millionth bag under this program. We expect the second large airline to begin a pilot program shortly and we're engaged in conversation with a number of other potential airline partners.
<unk> of this services that it helps airports and airlines improve the overall traveler experience, while reducing congestion and the cost is borne by the passenger.
This morning, we issued a press release that announced our strategic partnership with system property as part of the agreement we took over operations at 25 parking properties previously managed by the motor parts Division of system property SP plus will also be the provider of choice for mobility solutions to system property as it actively explore.
<unk> its real estate portfolio, we see this as an excellent growth opportunity and look forward to deploying our sphere technology platform to optimize the consumer experience that system properties owned and managed properties.
You can see the first quarter was both successful from an execution standpoint, and busy from a business development perspective for SP, plus 2022 is off to a strong start and I'm pleased to report the positive business trends have continued as we've moved into the second quarter now I'll turn the call over to Chris for a financial review Chris. Thank you.
Mark as Mark discussed we.
We had a strong start to 2022 that lays the foundation for the remainder of the year as always I will provide additional color around our adjusted results for the first quarter of 2022 that underscores our confidence in our full year guidance in the first quarter adjusted gross profit, which excludes depreciation.
<unk> amortization and restructuring and other costs increased 28% year over year to $51 $4 million as we are seeing the benefit of contract wins in the past 12 months and also an improving business environment that mark spoke about earlier.
Just a reminder, that the year ago number included a $4 8 million benefit related to certain cost concessions, which did not reoccur with that in mind the year over year growth was even more impressive.
First quarter 2022, adjusted G&A expense, which includes restructuring and other costs amounted to $24 4 million.
While this was a 20% year over year increase is related to our continued investment in the business to support future growth and includes <unk> and.
And includes higher overall compensation cost, including performance based compensation I.
I am pleased to say that adjusted G&A in the first quarter of 2022 was still approximately 7% below the comparable period of 2019 due to a more streamlined cost structure that allows us to operate as a leaner organization and better leverage our gross profit.
Excluding amortization of acquired intangible assets restructuring and other costs first quarter 2022 adjusted earnings per share were <unk> 60.
Which is more than double last year's adjusted earnings per share of <unk> 22007 on a comparable basis.
As we move to our cash flow first of all I am pleased to say that we received the $20 million federal tax refund. We spoke about on our last call. As a result first quarter cash flow from operations was $26 4 million and free cash flow totaled $23 $8 million, even without the tax rate.
Both metrics were substantially above last year's first quarter levels were both cash from operations and free cash flow were negative.
This quarters performance was also impressive given our historic trends, where March where the March quarter is often negative.
As for the balance sheet, we recently amended and Upsized, our senior credit facility to $600 million while removing.
Moving a number of constraints and providing increased flexibility to pursue growth opportunities and to focus more broadly on capital allocation priorities. We are pleased with the support we received from our long standing lender group.
Based on our current results and visibility we are pleased to affirm our full year 2022 guidance.
Adjusted gross profit is expected to range from 20 $200 million to $220 million.
Which at the midpoint represents year on year growth of 13% over 2021, we expect adjusted EBITDA 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 and $80 million, which is a 79% increase at the midpoint compared to the 2021 full year number.
With that I'll turn the call back over to Mark.
Hey, Thank you Chris as you heard from Chris SP, plus now has a strengthened financial position together with increased borrowing capability as business conditions continue to improve we're in a position to consider additional growth avenues and value creation. This could include organic investment with strong rois and potential.
Acquisitions that would expand our addressable market as well as the deployment of capital allocation strategies that create additional value for shareholders. In summary, SP plus is rebounding from the pandemic as a stronger company and an even more formidable competitor our commitment to delivering the highest levels of service has kept our retention rates high.
And our new business pipeline robust, we look forward to continued growth as we move through 2022, Jamie we're now ready for questions.
Ladies and gentlemen, we will now begin the question and answer session.
To ask a question you May press Star and then one using a telephone keypad. If you are using a speaker phone. We do ask that you. Please pick up your handset before pressing the keys to ensure the best sound quality.
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Pause momentarily to assemble the roster.
Our first question today comes from Daniel Moore from CJS Securities. Please go ahead with your question.
Thank you good afternoon market afternoon, Chris Thanks for the color and taking questions.
Yes sure.
Got that.
Let's start with bags.
Or the.
Bags business travel rebounding sharply cruise lines, starting to book up again talk about the level of conversations on what that's been like with your customer base.
As you know over the last say four to eight weeks are you seeing accelerated interest in turning the service back on just kind of any any color as to the tenor of those conversations.
Sure that's a.
Great question, Dan and I think we're reading a lot about particularly domestic travel in and the constraint on domestic travel is really airline capacity rather than consumer demand and I've made some trips myself recently been amazed at the amount of congestion that you see in airports and because of that congestion the airline.
<unk> that we serve in our airport clients that we serve are both very very concerned about alleviating that congestion and so I think for us.
Conversations have accelerated our proprietary remote check in capability, which we can offer as a sponsored model that's paid for by narrow reported airline or a cruise line is available and operating but we've also as we indicated in our prepared remarks have.
We have expanded the what we're calling curbside concierge, which is a travel or pay model and we are now.
He said processed over 1 million bags with one airline.
Over the past year and are now getting a lot of interest from other airlines, because they're seeing what's happening with their passengers trying to get through the terminals.
Very helpful maybe shipped to system property.
<unk> agreements.
Provide a little bit more detail that strategic partnership how does that differ from a typical management contract is that.
A template for other opportunities going forward.
Yeah, well I mean.
At one level, we're going to be taking over operations that they were formerly <unk>.
Handling themselves, but I think I think most businesses are starting to look at their core strengths and thats appropriate for example of one of those situations. They are real estate experts they are property owners and managers and they did some managing a parking. They also had some third parties, providing parking management services and as they look at the.
Our requirements to be successful as an operator, which is primarily around technology. They really noticed our sphere platform and said.
We arent going to be able to duplicate that ourselves, we're not prepared to make the investments that you've made to create that kind of an offering and so.
They came to US and said look is there a way for you to take over these operations, bringing cutting edge technology, but more importantly, as we focus our business on looking at additional real estate acquisitions and growth, we'd like you to be our partner of choice as we go forward because they recognize very well there.
A partner, who can optimize the revenue and the customer experience and parking operations is going to create value for that real estate. So I think that's really what's behind that particular arrangement, but I think what's exciting for us is that I do see it as a template for four other situations because theres lots and lots of people out there.
That for many years here, both owned real estate and operated parking management services and so I think they're going to increasingly see that their core strength is in real estate and at our core strength is in bringing technology to parking management operations and led by working with us they give an opportunity to.
Drive their bottom lines and drive their growth.
Very helpful. Last for me is just how would you describe Q1 results relative to your internal expectations clearly outpace some of the street's estimates, including ours, just wondering how we're pacing relative to your initial expectations embedded when you gave that.
Original guidance a couple of months ago.
Yeah, Dan This is Chris I would say it was.
Certainly it was a strong quarter for us probably a little stronger than we originally expected kind of coming into the year I think the recovery as Mark mentioned and kind of just passenger volumes that youre seeing in and people movement, certainly happened with probably a little earlier than we thought certainly spring break typically kicked that off.
And I think as we saw spring break kind of get into full swing I. Just think we saw a lot of people movement and a lot of activity out there. So that's really encouraging first quarter.
Alright, I'll jump back with any follow ups. Thank you.
Thanks, Dan.
And our next question comes from Kevin Steinke.
<unk> from Barrington Research. Please go ahead with your question.
Hey, good afternoon.
Hello.
Yes.
The question was asked about bags in trends there.
I think you mentioned some of the your.
Aviation clients starting to bring some of the services back you were outsourcing those services again to you that maybe they had in.
<unk> for a while and the pandemic can you just talk about the trend there how much room there is to.
You know recapture restart some of those services from your aviation clients that were in.
Early put on hold.
Sure I think if you go back to the Q4 call I talked about the aviation recovery being something that we didn't expect to be fully realized until 2023 2024, and it's really on the back of decision, making at aviation clients make to bring back our services I think.
What's happened since we made those statements is that.
Demand for these services has accelerated there is definitely more travel than I think anybody expected.
And the issue that's going to.
I think is looming and we're hearing it in with the airlines are saying is that they don't have the capacity to meet the demand and so therefore theyre going to be controlling their capacity, especially for the rest of this year as they look to bring on pilots and other staff that that they need to train and get ready to operate their businesses. So I don't think airline capacity in 2000.
22, overall is going to be above pre pandemic levels and that means that our level of services to them aren't going to be above pre pandemic levels, either but I think the good news is that.
We're now in a let's call it a more cost conscious world than we were pre pandemic in aviation and so whether it's airports, whether it's airlines or other other potential clients in cruise lines and resorts, they're all saying how can I deliver a really strong consumer experience, how can I alleviate friction and have a low touch.
<unk>.
Experience for people and not endure a lot of cost and I think the fact that we were able to test out our curbside concierge product.
During the pandemic and see that there is consumer acceptance for paying out of pocket for convenient center alleviation of friction has really encouraged a lot of our airport and airline clients to see that as a model going forward.
I can't emphasize enough the great success, we've had with one airline we've done a lot of research around how to consumers reacting to the paint for paying for these services and they are fine with it because they're getting something that they can value. So I think other airlines are seeing it now.
And definitely airports and airlines are both seeing the alleviation of congestion is almost their top priority right now.
Right Yeah, great that's helpful.
And any.
Just maybe an update on.
The.
Pace of.
Transaction volumes.
The volumes that Youre seeing on.
Yes through the parking dot com app and your ability to generate transactional fees through that.
Yeah, I'll just start with that.
That sounds fine.
Just talking about that before the call started in Chris and I didn't bring the exact data with us to the call, but I think we can say that we continue to set new records on an ongoing basis.
It's growing rapidly we have we're pushing the penetration of the gateway solution out to every location I know, we have more than 600 gateway locations running our gateway solution.
And adding more all the time, our gate gated solution, which was a little bit more technically complex and didnt start at the same time is now out there and I think we've got certainly more than 100 locations on that platform, but the transaction volumes are growing rapidly I was just talking to one of our executives today about.
His markets and he was just saying to me in Chicago, We've gone from.
2% transactions going through parking dot com to 11% in Chicago and just the last eight months. So there is definite and there is opportunity for that number to go even higher so I think as a company where for a long time, we were seeing our digital transaction volumes kind of hovering in that sort of 5% I think.
We've got markets and we've got client locations now where we're up at 30% 40% of transactions are going through our parking dot com mobile app and and I think theres, a long long way to go or continued growth in that space.
Alright, great.
You mentioned.
Your financial flexibility.
Your ability to invest in the business going forward, obviously organic.
Sounds like it's still a priority you also mentioned potential.
Potential acquisitions can you just give us some updated thoughts on what might be of interest.
On the acquisition front.
Sure I mean, I think we're clearly making sure that our business has all the capital that it needs to grow organically as fast as possible and the bar that we have said internally is that if our clients value in the technology space. We can provide a solution. So we are full four foot on the <unk>.
Gas pedal as we've been through the pandemic to accelerate our technology development and to rollout new technology capabilities. If we can partner with somebody or even potentially acquire somebody that can help us accelerate our technological transformation, that's something that we're going to be looking at and we are looking at but.
I think also now that businesses have stabilized and for the most part have a little bit of a more predictable and visible financial performance. We can turn our attention back to some of the areas that we have historically looked at whether it's.
Smaller regional parking companies.
We provide a lot of ancillary services around shuttle bus operations and the like that have grown nicely organically and so we'll just cast our view out there and looked at the business businesses that are out there in this space and always asking ourselves. The same question can we can an acquisition help us bring <unk>.
Something of value to our client base that we understand well.
And can help us accelerate our growth as a company on a sustained basis, we're not interested in just being a larger version of ourselves we're interested in being in more rapidly growing version of ourselves as you see as we grow we throw off significant amounts of free cash flow and we're going to want to use some of that to further accelerate the growth of the business.
Okay. Thank you for all the commentary and congratulations on the first quarter results.
Great. Thank you Kevin Thanks, Kevin.
Once again, if you would like to ask a question. Please press star and then one to join the question queue to withdraw. Your question you May Press Star two.
Our next question comes from Marc Riddick from Sidoti <unk> Company. Please go ahead with your question.
Yes.
Hi, good afternoon.
Hey, good afternoon Mark.
I was wondering a few things maybe we can start with sort of.
The competitive landscape certainly quite a bit of.
Success as far as gaining a.
New accounts in new orders as well as the announcements made today.
Things that have been set in place for quite some time I was wonder if you could talk a little bit about certainly you've talked about the benefits of technology and leading to new new order flow, but I wonder if you could talk a little bit about maybe the overall competitive dynamic and maybe what youre seeing there.
And if there's sort of other.
The things that you would point to that might lead to some of the <unk>.
Market share gains that you've seen.
Sure well I think when you look at the competitive landscape you have two types of companies out there and one are people that have historically been parking operators such as ourselves and <unk>.
Either are or are not in the process of transforming themselves into technology, driven businesses and so some of our legacy competitors in that space. There are some that have done very little with technology, and we're getting a lot of receptivity from their clients around bringing our sphere technology platform to those clients because they.
I just haven't quote unquote kept up and then we have some other large legacy competitors, who are focusing on things away from parking and maybe or whether it's last mile delivery or other things of that nature. Those are alternatives for to focus on but some of their clients are saying to us are they really interested in.
The performance of our facility any longer and then and then you turn your attention over to some pure technology competitors that are out there and many of them have a one size fits all mindset. So they've developed a technology solution whatever it might be and they go around trying to convince people that that one solution meets the car.
<unk> needs and there are some clients, where there'll be a solution that doesn't meet their needs, but the type of clients that we are going after generally have complex requirements and they are looking for a combination of a technology solution that is customized and oriented towards what they need but also very strong.
<unk> fundamental operating expertise is not just about buying a tech platform and putting it in place.
You need people, who have expertise in using their tech platform to get optimal results. So I think as we look to the future we see ourselves as being the leading player in trying to meet client needs, providing a combination of both cutting edge technology, but at the same time.
Proverbial boots on the ground and the and the management expertise to manage that technology to get results that are clients looking for and over and over again, when we announce new wins.
The clients are telling us over and over that's what they're looking for your technology and digital solutions, but also your extensive operating expertise and using those solutions to drive the results that we're looking for.
Great and then switching gears to <unk>.
Sort of a bigger picture sort of question on <unk>.
You talked about the flow of People's Love traffic conversations around travels once you could talk a little bit about maybe what youre seeing as far as the the level of folks returning to the office I think are less on the last call or maybe.
I think it was maybe on the last call that you talked about some of the profitability matrix of those were.
<unk> engaged in a hybrid approach as opposed to the traditional working in the office every day.
Maybe just sort of touch on the progress that you've seen so far this year and how that's looking.
Yes, well I think the trends are continuing on our return to office I know there was a little setback with <unk>.
In some cities and in some places with the with the variance that we're running around earlier in the year, but most places I think half half.
Can that continue to push back their resume the office states.
We obviously have continued to all of our office is operating throughout the pandemic because we have thousands of employees out there delivering services every day, but.
Most companies are looking at a hybrid model two days a week three days a week I think thats what people that work in offices are looking for as well.
Two.
The kind of jobs that people want to have now and if you were to say everybody is going to be in five days. Some of their workforce is going to be looking for other alternatives. So I think we've kind of settled in.
Our economy with people wanting that <unk> and its companies feeling comfortable that a hybrid model works and so what does it mean for US ultimately our contract base is predominantly management contracts. We've talked about this numerous times and that contract base means that we are trying to deliver solutions for our clients.
And those solutions involve optimizing our profitability for the client they involve bringing technology to drive costs out to make the client's operations Super efficient. It makes the facility we want to make the facility's appealing to the traveling public because they don't have a lot of friction and they can employ touchless or no touch.
Solutions with the parking dot com mobile app. So all of these are the things that we are bringing in an exchange for being paid a management fee and so our profitability is not directly tied in many many cases to the actual utilization of the facilities. So while it would be great to see more people back in the office to a certain.
Our business model is around providing solutions for clients.
One thing I have pointed out before.
Monthly parking is discounted parking and if somebody is coming in three days a week.
Might be paying as much for parking is they is in revenue terms is somebody would have paid for monthly parking. So the revenue shortfall even for the clients isn't as great. As you might think if the hybrid model is sort of the permanent way of business.
That's very helpful. Thank you and then I guess the last one for me for now as I was sort of wondering if you could sort of talk.
Talk a bit about.
Our future growth opportunities as far as are you beginning to see or to think about some of the opportunities to expand into.
Other markets or potential for attractive acquisitions in the future and if so sort of how that might sort of play into the <unk>.
The new business model and sort of how that could move forward together.
Sure well one of the things that we're looking at is how do we grow the market.
We obviously try to take things away from competitors, we've talked about that and we've talked about our new.
<unk>.
Provider of choice arrangement with system property, but.
One of the things we found is that our technology solutions can be brought to clients, where there is no need for a traditional operation and so we're increasingly adding clients, where we arent necessarily providing boots on the ground.
Situation requires boots on the ground, we're going to provide it but there are definitely situations in many of these are situations, where the client had not been charging for parking or had not been collecting revenue very efficiently in the past. So we definitely see that as a way for us to expand our addressable market with the technology platform that we're developing.
<unk> now.
Beyond that we are in most of the major geographies in North America, and so we're clearly trying to.
Spanned our market share take business from competitors get clients to outsource.
And we definitely see some of the traditional municipal and institutional spaces as places, where we can grow and get people to realize that if you do something internally you are not going to have the tech platform ready to go with the expertise to use it that somebody like SP plus has so I think that's another opportunity.
For us to continue.
Our organic growth as well.
Excellent. Thank you Mark.
Thank you.
And our next question comes from Tim Mulrooney from William Blair. Please go ahead with your question.
Mark Chris Good afternoon.
Hi, Tim.
So on that system is property development deal how much of that real estate, how much of their real estate portfolio to those 25 parking locations represent is that the entire portfolio I'm just curious on the.
The runway here that can be captured through additional properties.
Yes, no. It's only it's only about nine properties of theirs and the rest where other people that they were providing parking management services. So at some level. They were a small competitor of ours in primarily in southern California, but they do have a number of other properties and hope to continue to.
Grow their business as well and some of those properties are operated by third parties not buy them. In fact, none of them are operated by them. They are operated by third parties and if there is parking and many of those are on leases that will burn off and I think the traction of working with them is that as those leases come up.
It's going to give us an opportunity to further our relationship with them along with moving forward with them as they look at new properties. One of the things we try to do for our property ownership and property management clients is help them evaluate with the financial opportunity is from the parking operation, what especially if you bring in new technology like the sphere platts.
Form so we expect to be working with them to try to help them identify the financial opportunity for them of acquiring new properties.
Okay. That's very clear thanks, switching gears to pricing I wanted to ask about pricing.
The contracts themselves, but the actual cost of pricing with the consumer.
Across your portfolio.
The price of parking place parking ticket.
Going up right now and in line with just about everything else that we see I'm curious how much parking.
How much pricing on the parking might contribute to your lease location economics this year.
Yeah, well one thing we do and we've done this for a long time is we're constantly aware of what the competitive.
Parking pricing environment is around any facility, we operate and clearly if it's a management client we're recommending to our management clients what rates they should charge and for our leases. We we make those decisions ourselves one of the tools that we deployed during the pandemic as a web scraping tool.
Part of our tech platform, so that instead of having to walk around and do rate surveys, but with a clipboard, we can actually get that information and put it with our pricing experts and they can be making recommendations to our operating teams around changes to pricing. So that's an ongoing thing that we've been doing really for the last 18 months to try to inch.
Sure that we don't Miss opportunities to move pricing with the market I would say one of the things Thats happened is that the transient demand, particularly in markets like New York is so strong that we are reducing the allocation of.
Parking monthly Parkers and so you have the <unk>.
This strong transient demand the monthly parkers are discounted parking so we're allocating less of the parking facility to monthly parkers and and one of the ways that we do that as we put up the prices sharply for monthly parking in and we're motivating those people to pay to the market or to find an alternative for their monthly parking so theres Steph.
Currently an opportunity here during this time, but it's not driven by inflation as much as it is simply driven by supply and demand.
So we're seeing more and more demand and as that occurs we're going to continue to put up prices.
Okay, but you wouldn't characterize the.
Cost of pricing is increasing significantly this year relative.
The prior years like we're seeing across a lot of different businesses.
Probably not necessarily in 'twenty, two but bear in mind, if it's a lease location, Tim we do have to pay wages and benefits and we have other input costs too. So our team is going to be very keenly focused on ensuring that we're not seeing a loss of profitability at those lease locations as we may be in <unk>.
Some higher labor costs are higher other input costs. So we're very very focused on that but what I would say is that in the earlier stages of the recovery meeting last year, there were situations, where we were like doubling monthly parking rates.
So I think I think we're through that period now, but I think we are in an inflationary environment. We are in a period, where consumers are expecting prices to go up but once again people have fixed fixed amount of money they want to spend for various services and they're going to be shopping competitively. So we have to <unk>.
Sure that the rates, we charge are competitive to the local marketplace that we're competing with four four parking parking.
<unk>.
Alright, Okay. Thanks last one from me.
I think hospitality one of the areas that got it hardest hit by the pandemic for you guys and I don't know that you've ever disclosed.
What percent of your commercial revenue comes from hospitality and you're valet business, but.
Can you help us understand where that business is that relative.
Relative to pre pandemic levels, but for example, if it was 10% of your business in 2019 is it.
Is it back to 6% to 7% today is it is it still significantly depressed relative to 2019, which also isn't necessarily a bad thing I mean, it represents an opportunity just trying to understand.
Yes that business is today.
While our commercial division is over 3000 locations as we've talked and probably pre pandemic hospitality locations represented maybe 10%.
I don't have the revenue and gross profit numbers here, but its roughly 10%. So is significant and important part of our commercial business and clearly we had some hotels close or eliminate services during the pandemic. So those those those numbers probably went down a bit but what I would.
Say now and that's the important thing for US is that the most significant part of our growth opportunity going forward with our traditional services is really in hospitality.
We added.
12 locations.
Just in the quarter 12 hotels, we've got more in the pipeline and you might say well why would that be and it's because.
From a competitive point of view.
Have a skill set we have more four and five diamond resorts than anybody else, we have expertise handling the most demanding clients for people like four seasons, and Ritz Carlton and I think as hotels are seeking to.
Restart and bring their businesses back to the pre pandemic levels. They recognize that the first impression and the latest impression at that property is what drives customer or guest satisfaction and likelihood to come back and so we're seeing a tremendous amount of interest from hotels, who are saying <unk>.
Outsource this before to somebody else and and they're having.
They're doing a good enough job theyre not theyre not focused on the Kpis that we're focused on and so if we look at sort of our competitors for operating hospitality.
Theyre stumbling a little bit and so we definitely see that as a real growth opportunity for us.
That's great color. Thank you.
Youre welcome.
And ladies and gentlemen, we do have an additional question. This comes from Marc Riddick from Sidoti <unk> Company. Please go ahead with your question.
Hi, again I just wanted to follow up with something I forgot to ask about I was wonder if you can touch a little bit on the.
The progress on both lists all locations kind of where we finished the year and how we started the year, there and where do you think that could go.
As well as.
What were looking like for our overall retention rates.
And.
I'll start with I'll, just start with those two things.
Yes, I think he may have turned their attention away mark for a second but I did comment on the gated and gateways.
We are.
Continuing to drive the penetration of both of those solutions to the gated solution is now probably.
Sorry, the gateway solutions, probably approaching 700 locations and will continue to drive that indicated solutions certainly over 100 now with more in the pipeline. So I think we continue to see that as a way to drive transaction volumes through our parking dot com mobile app and so I think that'll be a continued source of.
Upward growth for us during the rest of this year and I am sure into next year in.
In terms of retention, our commercial division location retention rate was 92% in the quarter, which is a strong retention rate were great glad to see it.
Up slightly from where it is much more we ran.
From where we ran most of last year I mean Q1 of last year was 87%. So so we're pleased to see that ticking up as we we focus hard on ensuring that we understand what clients are looking for and making sure that theyre pleased and delighted with what we're delivering.
Sounds very good thank you Mark.
Youre welcome.
And ladies and gentlemen, with that we'll be concluding today's question and answer session I'd like to turn the floor back over to Marc Baumann for any closing remarks.
Hey, Thanks, Jamey and I just wanted to thank all of you for joining US today. We're obviously very excited about our strong start to the year and very much looking forward to speaking with you next quarter take care and be well.
And ladies and gentlemen, with that we will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.
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