Q2 2023 SP Plus Corporation Earnings Call

August 2, 2023

Good day, and thank you for standing by.

Second quarter, 2000, and twenty-three SP Plus Corporation earnings Conference call.

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Please be advised that today's conference is being recorded.

I'd now like turn the conference over to your Speaker today, Kris Roy Chief Financial Officer. Please go ahead.

Thank you Catherine and good afternoon, everyone as Katherine just sat on first of all our Chief Financial Officer of SP, plus welcome to our conference call. Following the release of our second quarter 2023 earnings.

During the call today management will make remarks that may be considered forward looking statements.

Statements as to the outlook and expectations for 2023 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 available on the SP plus website.

Right and 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.

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 Marc Baumann, Our chairman and Chief Executive Officer.

Thank you Chris and good afternoon, everyone. This was another strong quarter for SP, plus adjusted gross profit and adjusted EBITDA were at record levels for both the second quarter and first half of this year by combining innovative technology solutions with a highly trained workforce, we continued to build on our competitive advantages.

Expand our addressable market and execute effectively on our long term growth strategy adjusted.

Adjusted gross profit increased at a double digit rate, reaching a second quarter record for SP, plus driven by solid growth in both our commercial segment, which was up almost 9% year on year and our aviation segment, which was up 24% above last year's second quarter. This strong performance is largely due to our continued success in winning new business.

This growing net new locations. This we're expanding the scope of services, we provide at existing locations.

Commercial segment adjusted gross profit growth was achieved across nearly all verticals led by hospitality healthcare and large event venues the breadth of capabilities. We bring to clients is exceptional possess positioning SP plus as a leader in the digital transformation of our industry.

We added 126 net new locations during the first half of 2023 with 55 net new locations added in the second quarter, our ninth consecutive quarter of net new location growth.

At the same time, we succeeded in increasing our location retention rate to 94% the highest in recent memory.

Turning to aviation Q2, adjusted gross profit increased 24% year over year, reflecting both organic and acquisition growth as we benefited from new contract wins and renewals as well as expanded services. We provided 160 global airports, notably our curbside Concierge service continues to.

Gained traction the pilot program, we launched with a second airline is performing above expectations and we anticipate to roll out. This service in additional airports with this airline in the near term.

Also we expect to bring additional airlines onto the program, which provides a cost effective way to ease congestion and enhance the travel experience.

Gross profit from technology solutions continued to grow in the second quarter and we are on track to double the 2022 contribution as a percentage of adjusted gross profit for the full year 2023.

More than a quarter of the new locations added during the second quarter were for Standalone sphere deployments, where we currently do not provide other SP plus services illustrating the appeal of our technology solutions and the ways of expanding our addressable market.

In addition to achieving strong financial performance, we succeeded and effectively executing on our long term growth strategy in the second quarter.

First we strengthened our leadership position by bringing innovative technology solutions and superior operations to existing and new clients. A great example of this is the technology overhaul, we implemented for the city of Richmond, Virginia, We replaced outdated equipment with our sphere technology solutions, which has already resulted in increased transaction.

As well as a significant boost in revenue other benefits include improved operating performance reduced operating costs and a completely digital frictionless consumer experience that eliminates the need for paper tickets.

In Baltimore SP, plus was chosen to design, an ambitious and tech forward parking plan for a large scale development project to transform a former industrial port into a vibrant shopping and entertainment hub also the city of Los Angeles, where we already operate one of the largest on street meter programs in the United States recently awarded.

Just an add on contract to manage the parking for an additional 23 facilities consisting of off street surface slots and parking structures, demonstrating how well our solutions and services are meeting the needs of the city.

We're experiencing similar positive momentum in our aviation business recent New awards in the Aviation segment include Omaha in West Palm Beach airports and contract renewals were secured at San Francisco Detroit Metropolitan in Buffalo Airports. In addition, we are beginning to regain traction with our sponsored remote airline check in service.

We recently started up operations at the Orlando Airport, and we will shortly begin to provide remote airline check in services at an airport serving a major tourist destination on the West coast, we hope to be able to talk to you more about this win on our next call.

And with the addition of one additional airline a remote check in services are now available to passengers traveling on eight airlines, which account for 96% of domestic travel.

Secondly, we continue to increase our addressable market and achieved revenue synergies in the second quarter SP plus is working together with public private partnerships or P. Threes that are helping universities monetize their assets with our role to bring being can manage their parking operations. The program has been so successful at one <unk>.

<unk> University in Ohio that another University and the state has asked us to replicate and expand upon it on their campus or technology is designed to enable students faculty staff and visitors to pay by phone QR code or via text based on the success of our initial <unk> deployment, we're seeing strong inbound activity dropped.

Kate This success and we expect this area of opportunity to continue to grow.

With respect to revenue synergies, we recently launched our Aero Parker online parking reservation system at Houston, Intercontinental, and Xavi airports, where SP plus was already providing parking management services, we're working together with our <unk> colleagues to further leverage our relationships and combined expertise to gain additional synergies.

Third we continue to leverage and monetize our technology investments in the second quarter, we processed $5 4 million transactions on SP, plus technology platforms up 36% sequentially transactions in June are up almost 70% over December 2022. These transactions include.

<unk> is an on demand transactions for both on and off street parking as well as that large venues and payment processing for remote airline check in and curbside pawn th. These.

These examples indicate how well our services are aligned with client demand and consumer preferences.

And finally last week, we announced the acquisition of certain assets of rocker a provider of fully integrated parking solutions that simplify permit violation and enforcement management for organizations and municipalities. We believe this transaction will enable SP plus to take advantage of the demand for municipal clients.

For a comprehensive mobility solution that helps them leverage smart city applications and from health care and University clients looking to digitize the complex permitting requirements that a comment on their campuses. This is the third technology acquisition. We've made in the last nine months, demonstrating our commitment to accelerate the pace of deployment of cutting edge.

Allergy offerings, which is a key element of our continued growth now I'm going to turn the call back over to Chris for Financial review Chris.

Thank you Mark strong business momentum continued in the second quarter, enabling us to reaffirm our full year guidance consistent with prior quarters comments about our financial performance and outlook, we will focus on Rss the results.

Adjusted gross profit and adjusted EBITDA were at record levels in the second quarter, adjusted gross profit, which excludes depreciation as well as integration and restructuring costs increased 12% year over year to $66 million.

<unk> to a number of factors, namely increased profitability at same locations, new business wins and successful deployment of technology enabled solutions at both existing and new locations.

Adjusted EBITDA increased 9% to a record $34 4 million compared to $31 7 million in the same period last year. This is particularly impressive given we continue to invest in G&A to support technology solutions that position us to deliver sustainable long term growth.

Profit growth.

Second quarter adjusted G&A, excluding acquisition integration and other costs was $30 6 million.

Compared to $26 3 million in last year's second quarter.

This level is consistent with our comments on last earnings call.

This level is consistent with our comments on the last earnings call. During that Q1, adjusted G&A was a good run rate for the remainder of the year.

Our expectation remains unchanged for the balance of the year.

As a result of higher interest rates and increased D&A expenses from technology related capital investments second quarter 2023, adjusted earnings per share were <unk> 78, compared to 81 in the second quarter of last year.

This was another solid quarter of cash flow generation, bringing our year to date operating cash flow to $21 million and free cash flow to $8 $3 million.

Compared to $35 7 million and $25 5 million in the year ago period, respectively.

As a reminder, 2022 included the receipt of a onetime federal income tax refund of $20 $5 million adjusting for this operating cash flow in the first half was up 38% and free cash flow increased 66% year over year.

Based on our visibility into the second half and our anticipation of continued investments for technology related capital expenditures, we reaffirm our free cash flow guidance of $60 million to $70 million or approximately $3 to $3 50 per share, which at the midpoint is 35% above 2022.

Levels adjusting for the tax refund.

We expect to deploy our healthy cash flows coupled with our $600 million credit facility to fund our capital allocation priorities, which include organic growth acquisitions and share repurchases.

With regard to our expectations for full year 2023, we are reaffirming our guidance on all metrics. Adjusted gross profit is expected to range from $240 million to $260 million, 11% above 2022 level at the midpoint.

Adjusted EBITDA is expected to be in the range of 125 million to $135 million.

11% above our ahead of 2022 at the midpoint and we're forecasting adjusted EPS to range from $2 70 to.

The $3 20 per share approximately 6% above 2022 levels at the midpoint.

Yes.

As you update your models I do want to point out that year to date revenues, excluding reimbursed management contract expenses increased 15% and adjusted gross profit increased 13%.

Based on our increased gross profit contribution from higher margin technology services, and a greater proportion of management fee contracts. We expect this close correlation of revenue and gross profit trend to continue.

Additionally, we still forecast 2023, G&A to be approximately $15 million higher than 2022, primarily due to the technology related investments that support future growth with that I'll turn the call back over to Mark.

Hey, Thanks, Chris first half results together with our current visibility underpin our confidence that 2023 will be a record year for SP plus in terms of adjusted gross profit and adjusted EBITDA performance, while we continue to make investments to support our multifaceted growth strategy.

Plus continues to build its market leadership within a business environment, where commercial retail and travel activity is increasing and where clients and consumers are seeking solutions and services that reduce congestion and offer low friction transaction options through our ongoing investments in technology and people were leading the digi.

The transformation of our industry and positioning SP plus to capture the considerable growth opportunities ahead, providing innovative solutions to make every moment matter for a world on the go.

Operator, let's open the line for questions.

As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from Daniel Moore with CJS Securities. Your line is open.

Thank you Anthony and Martin good afternoon.

Okay.

Yes, sorry about that let me start with.

Maybe I believe it's pronounced do constant mark.

Rocker.

Maybe talk a little bit more about that opportunity.

Anything you can disclose in terms of purchase price.

Run rate revenue, but more importantly, the revenue model and what are the exact capabilities that they bring to the table that would maybe would have been more difficult to build in house.

Sure I'd be happy to.

I mean, you do have it right as rocker and and we at SP plus have been.

Working in the areas that we've talked about for some time, we have many municipal clients University clients and.

Others and what we have found is that there is some functionality out there that we really would like to add to the sphere platform and a bit like what we told you last year when we were acquiring divert.

Firing Rockford gives us the ability to accelerate the deployment of additional functionality and in some cases bring bring those things to market more quickly than we would have before this is an early stage company, mostly we were acquiring.

The capability to add to our platform and it really is around digital permitting citations and enforcement and in some areas. The complexity of some of the client requirements weren't met by the current sphere platform. So this will roll into the sphere platform, we expect to integrate it fairly quickly and be out in the.

Marketplace proposing on opportunities that will enable us to sell this additional functionality, it's not a big acquisition it certainly doesn't.

Contribute anything meaningfully to our P&L in the short run it's more about making this fear platform more compelling in the marketplace.

Very helpful. Maybe.

Maybe switching gears a little bit.

And you can.

Can you use the recent contract extension and Mccormick place as an example, perhaps.

Maybe talk about how spheres changing your positioning your leveraging and negotiating renewals are there specific examples of kind of cross selling opportunities incremental services.

You are winning as these renewals come up.

Well as you pointed out we did get a five year extension with Mccormick place in Chicago. Its a client we serve for many many years, it's a very complex operation and I'm sure. They recognize that we operate their facilities very very efficiently and that was really a key ingredient for us in the renewal.

But in general clients are looking to reduce congestion and friction and whether thats in an event venue like the Mccormick place Convention center or just an everyday movement of people in and around airports and away from curves, where we can bring technology solutions either through sphere or bags, we're actually solving.

A problem for the traveling public and what we've learned in large venues.

A big consideration for those clients is really getting people in before the activity starts and not having people leave before it's over so a lot of it is is actually making it easy for people to get in and out it's as simple as that and we of course do that with our legacy operating business, but with technology, we have the tools to process.

This transactions to check credentials and to get people in and out more quickly than than before.

Excellent and last for me and I'll jump out back from Q, It sounds like curbside comps here.

Starting to gain significant traction.

I think you alluded to some additional airports, but also probably is critical.

Expect.

Additional airline agreements in the coming months quarters, any more detail on kind of the pace of those conversations. Thanks again.

Yes, certainly glad to address that and I think as you know from the conversations we've had over the years and particularly pre pandemic.

Their proprietary remote check in tool, which as I commented can now accommodate.

Lines instead of seven airlines that represents 96% at domestic employment offers the ability to get people checked in in some cases at the curve both the airport, but also in parking garages or other parking lots and other facilities away from the curb so it's about reducing congestion to technology.

Allergy and prior to the pandemic the business model was to go to airports or cruise lines, our ports and.

Ask them to sponsor our models so provide a free service for the traveling public and there is a lot of interest in this tool, but in many cases.

The concern that the sponsor was facing was <unk>.

Do I want to pay on behalf of the public do I want to be paid on behalf of other stakeholders that might be benefiting from the service and so coming out of the pandemic are based leadership team recognize that there's a consumer pay model that really works and Thats, what consumer are curbside concierge really is and we've rolled it out to 40 airports with one airline.

We are having a successful pilot with a second airline and believe that we are on the verge of adding additional airports.

There, but as congestion continues to build and travel volumes go to levels above the pre pandemic period, we're getting some inbound interest for the first time from other airlines that wed like to join in and particularly because this service can be offered free to the airline it doesn't cost them anything for this to be provided.

But we're also seeing and I mentioned this in the prepared remarks that the sponsored models coming back there's many airports that have construction going on or the.

The travel volumes are just way beyond the pre pandemic levels and so they are willing to entertain once again the idea of this sponsored model and so we're now bringing a couple of those out as well, but fortunately for US. It's the same technology you need a case and only a question of whether the public is going to be paying for it whether weather.

The client might pay for it or potentially even a hybrid model, where it's subsidized by an airport and airline on behalf of the public and then the public place. The rest. So I think we feel very confident we have the right tool for reducing congestion the check in experience and.

<unk> for US is to see that I think both pricing models are now gaining traction in the marketplace.

Yes.

Sounds great I appreciate the color you might have one or two follow ups that will jump out and jump back. Thank you.

Thanks, a lot Dan Thanks, Dan.

Thank you and our next question.

It comes from Tim Mulrooney with William Blair. Your line is open.

Mark Chris Good afternoon.

Good afternoon, Tim.

Chris.

I'm looking at the SG&A and I appreciate all the color you gave but if I just step back and I look at <unk>.

SG&A as a percent of sales.

It looks like 13% in the first half of 'twenty three.

Into 2022, but well above the pre pandemic levels of around 910, 11% Mike My question is.

This is a temporary increase due to investments in technology or should we expect SG&A levels.

To remain around that like 13%, 13%, 14% beyond the short term guide that you gave.

For this year like has there been a structural change in your cost structure.

Yes, Tim this is <unk>.

The short answer is no I think.

Where we have seen opportunities in terms of growth in terms of new business wins technology, we really want to make some of those investments those investments don't immediately contribute to gross profit on day, one and so these are things that we think are out there in terms of providing for us to be able to deliver that kind of high single.

<unk> growth in the long term. So there are some investments this year that will pay off in the latter part of this year and into next year. So I don't see that this is not a trend thats going to continue to where we're going to continue to kind of continue that dumped the P&L with G&A and investments, we think theres going to be some operating leverage as we kind of move forward through this year and into <unk>.

Sure.

Okay. That's really helpful. Same question on Capex I see I look back at your P&L actually $10 million $10 million 8 million $9 million.

And then $22 million in 2022, it's going to be another $20 million this year.

Is that is that kind of the same story as with SG&A like you are making the investments now, but as a percentage of sales at Capex should go down over time or are we in a structurally different situation here.

I think it's we've certainly made some large investments last year I think it was around 'twenty one 'twenty two.

Right around there in terms of Capex this year.

Certainly if you look at it on a trend basis, we're kind of getting to that same point. This year as it relates to Capex I think in the back part of the schedule as we kind of said $19 million to $21 million or so in terms of a range.

That's a good range for this year I think as we look at future Capex.

Going to probably see Capex, maybe come down a bit I don't see that kind of upper levels sustaining through these next couple of quarters.

The next couple of years, but certainly where I think we really want to be focused on is are there things and Mark has mentioned this before are there things that we can develop that we think will benefit our clients and allow us to grow faster and so.

I say I would expect it to come down slightly I don't want to also take off the table those opportunities to make investments that we think can facilitate faster growth.

Understood. We wouldn't want you to do that either that makes sense just one more for me on your retention levels at 94%.

It's really high near the highest I think we've ever seen.

Do your technology solutions make your services stickier or is it too early to say that those solutions are having a tangible impact on retention rates and it's just more about execution.

Well I think our thesis is that they will make us stickier the more things that we provide for our client and do so successfully to fewer options. They have in terms of looking elsewhere to provide those services and theres nothing easier for our clients and to have a one stop shop with you everything and so whether a client need boots on the ground.

Or once needs technology needs both.

We are there to provide it and we're not just providing it in a simple scenario of surface parking lot or a parking garage, but really all of the various verticals and permutations of where people are parking and so I think our ability to manage complex environments and bring technology along if that's what the situation requires I think.

Does make us more sticky to the client. We're also benefiting I think from the fact that.

Some of our competitors have not invested in technology and many are lagging in technology and Theres, others, who are struggling operationally and aren't really.

Delivering value to the client base and so our new business wins and the retention of our existing business I think a reflection that when clients are thinking about who is best positioned to deliver against my objectives. They are thinking of SP plus.

Got it thank you Mark and Chris and congrats on a nice quarter guys.

Thanks, So much Tim Thanks, Tim.

Thank you and as a reminder to ask a question. Please press star one on your telephone.

And our next question will come from.

Marc Riddick with Sidoti Your line is open.

Hey, good afternoon, everyone.

Good afternoon.

So I was wondering if you could talk maybe sort of stretching out on the.

The retention question, because certainly 94% is obviously a really really good I was wondering if you talk a little bit about.

Maybe some of the pricing dynamics that youre seeing as far as renewals as well as and certainly I. Appreciate you providing color on net new wins in the technology contributions spears contributions to the new wins. So maybe you can talk a little bit about sort of the pricing dynamic when renewals come up and as well maybe you could talk then segway into.

So maybe the labor environment inflationary are realities.

Sure sure.

I would say that the competitive dynamic in pricing Hasnt really changed much for a long long time, and I think that's partly or talking about the pricing of what we charge for our services as opposed to what the consumer pays and the reality is is that what we're charging our clients to manage their facility are bringing technology solutions is it.

Very small amount as a percentage of revenue and so I think when a client is looking at who's going to provide the services. They are really looking at who is best poised to execute and deliver the value that the clients looking for whether it's a low friction consumer experience updated technology or maximizing profit.

And so I don't think.

The competitive pricing environment has changed much one of the things that's new for US is that as we develop the sphere platform.

We're able to offer to clients.

Or no upfront cost at the transaction volumes are high and a lower cost than maybe some of the traditional parking equipment companies are charging for those locations that don't have a lot of transactions and thats because were asking.

Asking the consumer to pay a transaction fee and so our clients or prospective clients has the ability to upgrade antiquated technology capture more revenue and have more reliability in their tech platform and not have to make the capital outlays that they might have and of course as we as people feel financial.

Pressures are higher interest rates and the like not having to make capital outlays is an important priority for a lot of bulk of our current clients and prospective clients I think the labor challenges.

Moderated significantly obviously coming out of the pandemic there was a big reset that went on in terms of people werent in the workforce.

Wage rates rose significantly in many places.

And of course, there's a lot of demand for delivery drivers and the like I think some of those industries have.

Plateaued in terms of their growth trajectories and so.

We're finding in general that the labor market is in much better condition than it was say a year or two years ago.

That being said, it's another attraction of our business model, where we are heavily skewed towards management type contracts and of course as you know on the fixed fee contracts increases in labor costs are passed on to the client and so they don't affect our P&L directly.

Great and then I was wondering if we could shift gears it seems as though.

The prepared remarks as well as the.

The press release.

Strength that youre seeing and the activity that Youre seeing is it's quite broad base when it comes to industry vertical customers and the like I was wondering if you could sort of maybe touches.

It will bring us up to date on are you seeing any particular.

Geographies that are maybe a little more active than others as far as bringing on new business wins or or are there any sort of.

It seems that Theres a lot of green shoots, but wondering if there are any areas that low greener than others.

Yes, no that's a great point I'd say, it's fairly broad based I mean, there is the strong economic activity everywhere and of course, we're seeing for the most part the hybrid working model has I think become the new normal and so.

There are certain days of the week that has a lot of <unk>.

<unk> demand and Theres other days of the week that have less demand, but certainly.

Those people that serve people.

Traveling for work.

We have looked at their businesses, they're saying, where do I bring new technology to drive costs out of my business operation.

<unk> technology solutions that are innovative and can deal with the fact that there are fewer monthly parkers now and more daily Parkers and so interestingly a lot of our growth in new locations is really coming from <unk>.

Commercial office buildings hotels retail mixed use and residential properties. So I think these are the people that are super excited about how do we drive efficiency with technology, maybe take operating cost side of the business and and how do we ensure that we have optimally priced the parking and of course through our digital tool.

Rules are parking dot com.

Mobile app.

Web scraping tools for and our yield management experts.

Analysts are are able to advise clients and what's the optimal parking rates should be and really are able we are able to drive through our digital marketing programs to creative solutions to drive demand to the parking facilities that we operate in in these economic times, that's a major focal point for the four for our client base or a perspective.

Their client base obviously.

Many markets are experiencing more congestion because of migration the southeast and the southwest had a big uptick in people, but even in some of our legacy markets. We're seeing places like New York and others. We're seeing nice same store growth taking place across our portfolio and I think it's just a reflection of.

The fact that people are out and about and are pretty much returned to normal.

Now that depend amick is behind us.

Great and then last one for me I think.

Now, it's a bit of the Rasco acquisition I think was like the day after we did.

I didn't want to start.

Sort of a British update us kind of what your what youre seeing as far as the potential acquisition pipeline out there. Its certainly technology is certainly one of the key priority areas, but just wanted to talk a little bit about what the pipeline looks like and valuations in and.

It seems as though there's more room to grow there, but maybe you sort of bring us up to date on what youre seeing out there. Thanks.

I think we're definitely I'll comment on the technology space and Chris can maybe comment more broadly.

But.

Certainly what we are seeing is that there have been a number of early stage technology companies that have developed some functionality that actually is useful in the marketplace, but what they're finding is that it's a long slow slug to go sell clients one at a time.

That is the challenge because our the ownership or the property management and our industry is very fragmented and so I think some of them are realizing that in order to get the value out of their innovation, they really need to sell their business to somebody like us that already has a large geographic footprint.

And so realistically, we're seeing quite a bit of inbound activity around technology and people are saying, hey, we're going to come to market with this so we are looking.

At.

Selling our business. Unfortunately, because we have a tech roadmap for our business. We have the discipline to say is this really going to accelerate our growth.

Not looking to acquire technology for its own sake, but if we can accelerate the appointment of our sphere platform the capabilities of the sphere platform ensure that it can provide capabilities that other people can't provide than an acquisition makes sense provided we can get it at a good value.

That doesn't mean, we're not interested in operating businesses as well, but I think so.

Certainly we've seen because of this changing market dynamic opportunities over the past year to acquire technology businesses at valuations that enable us to really create value for our shareholders by making that acquisition.

And on the operating business side I would say, we continue to keep our.

Our eyes and ears.

Open in terms of opportunities that are out there I think we've mentioned this on prior calls that while we don't want to do is acquire an operating business that is kind of a slow growing version of who we are but we really want to find those opportunities where we can.

Uh huh.

Speed up or continue to grow our business at that high single digit basis, and maybe that could be through the deployment of technology solutions into that operating business that maybe hasnt leverage the technology that is there are available and so I think there are some opportunities we.

To look for those.

And we continue to keep our eyes and ears open.

Great. Thank you very much.

Thanks, Mark Thanks, Mark Thank you.

One moment for our next question.

We have a question from Kevin Steinke with Barrington Research Associates. Your line is open.

Hey, good afternoon Martin.

Good afternoon.

I think on your.

Our first quarter conference call.

You talked about.

Expecting gross profit.

To grow on a quarterly sequential basis throughout 2023.

With more significant sequential growth in the second half of 2023 so.

We had a really nice sequential growth in gross profit here in the second quarter.

About 13%.

And.

I just assumed pretty modest.

Actual growth in gross profit here over the next two quarters.

It's mid to the high end or a little bit above the high end of your adjusted gross profit.

Guidance range for 2023, so I mean is there any reason we should.

I think about the sequential comparisons kind of flattening out as we get into the second half of 2023 or is there maybe just a little bit of.

Conservatism.

The fact that you maintain that guidance.

Yes, Kevin This is Chris I think if you look at our traditional Q2, that's typically our strongest quarter and certainly we have a lot of new robust wins as it relates to.

The operating business as well as technology and certainly we had some strong <unk>.

Same store location growth. So certainly that is contributing to it I would say there is maybe a little bit of pull forward in terms of some new business that we expected in the back part of the year I think what I mentioned on the Q2 call is that we would expect to see some continued growth in the business that would be overshot the seasonality.

Audi would be overshadowed by the growth in the business I think if you look at and I mentioned this on the Q1 call I still think Q4 is going to be our strongest quarter. If you were to look at gross profit. So I think if you look at how we're going to sequence of the.

The remainder of the year Q3 is generally a slower quarter for US Q4 is typically maybe number two and in Q2 is always number one. So I think if you think about it and in terms of that in terms of a sequence basis I think that would help.

Okay, great. Thank you that's.

Very helpful.

And I wanted to follow up on your.

Comment about.

Adjusted gross profit and revenue for per excluding reimbursed expenses.

Growing at a similar pace in the first half of the year and that you would expect that trend to continue I guess.

Both growing at a similar rate but.

Does that imply some sort of stabilization in the <unk>.

<unk> contract base.

Just given the revenue recognition dynamics there of the different contract types.

Normally when you switch from a lease to a management fee contract.

Revenue will go down just based on the recognition, even though gross profit might be very similar.

Just wondering if that makes sense or if you've seen some sort of stabilization.

The lease side.

Yes, I think Kevin I think we are I think if you look at the lease location numbers that certainly has been somewhat of a static number its kind of in that 410 to 420 locations in terms of leases for the last few quarters.

We feel I definitely feel like Thats kind of static we certainly have nice momentum on our management contracts and I think that gives us increased visibility in terms of how we're seeing the revenue come into the business.

From time to time, we do get questions around what is the revenue trend looked like for SP and I think what we're trying to provide here is a little bit of guidance around not necessarily guiding to revenue, but giving some some color around how we're seeing the business evolve and mature in terms of that revenue growth and trying to link that into gross.

Profit, so I think thats close correlation from a gross profit perspective to revenue is there and I think it's primarily due to the management contracts that we have the technology and the contributions for technology and that our lease portfolio is somewhat static in terms of the number of locations we have.

Okay, great. Thank you.

And you mentioned their visibility.

<unk>.

Talked about in your earnings release.

Year to date, new business wins and the robust.

This development pipeline are supporting your high single digit.

Long term gross profit growth outlook.

Does that imply that youre starting to get some.

<unk> visibility into what 2024 could look like.

Yeah.

At what point do you start to get better visibility I guess into the into the next year.

I think if you look at this year certainly it's a really good year for us.

I think what.

What we said is we would deliver.

The low double digits in terms of gross profit growth.

In high single digits on a go forward basis.

And I think Thats still the case I think we feel really good with our business in terms of where we're at I think.

As we look out into the horizon I would still reiterate.

Feel really comfortable with that high single digit gross profit growth.

In terms of growth in the business.

Great. Thank you for the commentary I will turn it over.

Thanks, Kevin Thanks, Kevin.

Thank you and I'm showing no other questions in the queue I would like to turn the call back to Mr. Marc Baumann for closing remarks.

Hey, Thank you Catherine and thank you everyone for joining us. We're obviously very excited about our results for Q2, and particularly because they reflect the fastest organic growth rate we've ever delivered as a management team. So we're very excited about that and the prospects for a successful year and we look forward to.

Looking to you again next quarter. Thank you.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Good day and thank you for standing by welcome to the second quarter 2023, SP Plus Corporation earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one again.

Be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker today, Kris Roy Chief Financial Officer. Please go ahead.

Thank you Catherine and good afternoon, everyone as Katherine just said I'm Kristopher Roy Chief Financial Officer of SP, plus welcome to our conference call. Following the release of our second quarter 2023 earnings.

During the call today management will make remarks that may be considered forward looking statements, including statements as to the outlook and expectations for 2023 and statements regarding the company's strategies plans intentions future operations and expected financial performance.

<unk> and 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.

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.

Expand our addressable market and execute effectively on our long term growth strategy adjusted.

This growing net new locations as we're expanding the scope of services, we provide at existing locations.

We added 126 net new locations during the first half of 2023 with 55 net new locations added in the second quarter, our ninth consecutive quarter of net new location growth.

At the same time, we succeeded in increasing our location retention rate to 94% the highest in recent memory.

Gain traction the pilot program, we launched with a second airline is performing above expectations and we anticipate to roll out this service and Additionally reports with this airline in the near term.

Also we expect to bring additional airlines onto the program, which provides a cost effective way to ease congestion and enhance the travel experience.

Gross profit from technology solutions continued to grow in the second quarter and we are on track to double the 2022 contribution as a percentage of adjusted gross profit for the full year 2023.

In addition to achieving strong financial performance, we succeeded and effectively executing on our long term growth strategy in the second quarter.

What's more SP plus was chosen to design, an ambitious and tech forward parking plan for a large scale development project to transform a former industrial port into a vibrant shopping and entertainment hub.

Also the city of Los Angeles, where we already operate one of the largest on street meter programs in the United States recently awarded US an add on contract to manage the parking for an additional 23 facilities consisting of off street surface slots and parking structures, demonstrating how well our solutions and services are meeting the needs of the city.

We're experiencing similar positive momentum in our aviation business recent New awards in the Aviation segment include Omaha in West Palm Beach airports and contract renewals were secured at San Francisco Detroit Metropolitan in Buffalo Airports. In addition, we're beginning to regain traction with our sponsored remote airline check in server.

We recently started up operations at the Orlando Airport and will shortly begin to provide remote airline check in services at an airport serving a major tourist destination on the West coast, we hope to be able to talk to you more about this win on our next call.

And with the addition of one additional airline a remote check in services are now available to passengers traveling on eight airlines, which account for 96% of domestic travel.

Secondly, we continue to increase our addressable market and achieve revenue synergies in the second quarter SP plus is working together with public private partnerships or P. Threes that are helping universities monetize their assets with our role to bring being to manage their parking operations. The program has been so successful at one <unk>.

Large university in Ohio that another University and the state has asked us to replicate and expand upon it on their campus or technology is designed to enable students faculty staff and visitors to pay by phone QR code or via text based on the success of our initial <unk> deployment, we're seeing strong inbound activity throughout.

Kate This success and we expect this area of opportunity to continue to grow.

With respect to revenue synergies, we recently launched our Aero Parker online parking reservation system at Houston, Intercontinental and hobby airports, where SP plus was already providing parking management services, we're working together with our <unk> colleagues to further leverage our relationships and combined expertise to gain additional synergies.

<unk> is an on demand transactions for both on and off street parking as well as the large venues and payment processing for remote airline check in and curbside pawn tiered. These.

These examples indicate how well our services are aligned with client demand and consumer preferences.

Allergy offerings, which is a key element of our continued growth now im going to turn the call back over to Chris for a financial review Chris. Thank.

Patients new business wins and successful deployment of technology enabled solutions at both existing and new locations.

Adjusted EBITDA increased 9% to a record $34 4 million.

Compared to $31 7 million.

In the same period last year. This is particularly impressive given we continue to invest in G&A to support technology solutions that position us to deliver sustainable long term gross profit growth.

Second quarter adjusted G&A, excluding acquisition integration and other costs was $30 6 million compared to $26 3 million in last year's second quarter.

This level is consistent with our comments on last earnings call.

This level is consistent with our comments on the last earnings call. During that Q1, adjusted G&A was a good run rate for the remainder of the year, our expectation remains unchanged for the balance of the year.

As a result of higher interest rates and increased D&A expenses from technology related capital investments second quarter 2023, adjusted earnings per share were <unk> 78, compared to 81 in.

In the second quarter of last year.

This was another solid quarter of cash flow generation, bringing our year to date operating cash flow to $21 million and free cash flow to $8 3 million.

Compared to $35 7 million and $25 5 million in the year ago period, respectively.

Our visibility into the second half and our anticipation of continued investments for technology related capital expenditures, we reaffirm our free cash flow guidance of $60 million to $70 million or approximately three to $3 50 per share, which at the midpoint is 35% above 2022.

Levels adjusting for the tax refund.

We expect to deploy our healthy cash flows coupled with our $600 million credit facility to fund our capital allocation priorities, which include organic growth acquisitions and share repurchases.

Adjusted EBITDA is expected to be in the range of $125 million to $135 million.

11% above.

Of 2022 at the midpoint and we're forecasting adjusted EPS to range from $2 70.

To $3 20 per share approximately 6% above 2022 levels at the midpoint.

Yes.

As you update your models I do want to point out that year to date revenues, excluding reimbursed management contract expenses increased 15% and adjusted gross profit increased 13%.

Additionally, we still forecast 2023, G&A to be approximately $15 million higher than 2022, primarily due to the technology related investments that support future growth.

With that I'll turn the call back over to Mark.

Thanks, Chris first half results together with our current visibility underpin our confidence that 2023 will be a record year for SP plus in terms of adjusted gross profit and adjusted EBITDA performance, while we continue to make investments to support our multifaceted growth strategy SP plus continues to build its mark.

Leadership within a business environment, where commercial retail and travel activity is increasing and where clients and consumers are seeking solutions and services that reduce congestion and offer low friction transaction options.

Through our ongoing investments in technology and people were leading the digital transformation of our industry and positioning SP plus to capture the considerable growth opportunities ahead, providing innovative solutions to make every moment matter for a world on the go.

Operator, let's open the line for questions.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

Please standby, while we compile the Q&A roster.

Our first question comes from Daniel Moore with CJS Securities. Your line is open.

Thank you Anthony and Martin good afternoon.

Okay.

Yes, sorry about that let me start with <unk>.

Maybe I believe it's pronounced you pronounced it mark.

Rocker.

Maybe talk a little bit more of that opportunity.

Is there anything you can disclose in terms of purchase price kind of run rate revenue, but more importantly, the revenue model and what are the exact capabilities that they bring to the table that would maybe would have been more difficult to build in house.

Sure I'd be happy too and I mean, you do have it right as rocker and and we at SP plus have been working in the areas that we've talked about for some time, we have many municipal clients University clients and others and what we have found is that there is some functionality out there.

We really would like to add to the sphere platform and a bit like what we told you last year when we were acquiring divert.

Wiring Rockford gives us the ability to accelerate the deployment of additional functionality and in some cases bring bring those things to market more quickly than we would have before this is an early stage company, mostly we were acquiring.

The capability to add to our platform and it really is around digital permitting citations and enforcement and in some areas. The complexity of some of the client requirements.

Met by the current severe platform. So this will roll into the sphere platform, we expect to integrate it fairly quickly and be out in the marketplace.

Proposing on opportunities that will enable us to sell this additional functionality is not a big acquisition, it's really it doesn't.

Contribute anything meaningfully to our P&L in the short run it's more about making this fear platform more compelling in the marketplace.

Very helpful. Maybe.

Maybe switching gears a little bit.

Can you see the recent contract extension and Mccormick place.

As an example, perhaps.

Maybe talk about how skiers changing your positioning your leveraging and negotiating renewals are there specific examples of kind of cross selling opportunities incremental services.

That you are winning as these renewals come up.

Yes.

As you pointed out we did get a five year extension with Mccormick place in Chicago. Its a client we serve for many many years, it's a very complex operation and I'm sure. They recognize that we operate their facility is very very efficiently and that was really a key ingredient for us in the renewal but in general.

Clients are looking to reduce congestion and friction and whether thats in an event venue.

Mccormick place Convention center, or just an everyday movement of people in and around airports and away from curves, where we can bring technology solutions either through sphere or bags.

Actually solving a problem for the traveling public and what we've learned in large venues.

Big consideration for those clients is really getting people in before the activity starts and not having people leave before it's over so a lot of it is is actually making it easy for people to get in and out it's as simple as that and we of course do that with our legacy operating business, but with technology, we have the tools to process.

<unk> to check credentials and to get people in and out more quickly than than before.

Excellent and last for me and I'll jump out back from Q, It sounds like curbside concierge.

Starting to gain significant traction.

I think you alluded to some additional airports, but also probably is critical.

Expect.

Additional airline agreements in the coming months quarters, any more detail on kind of the pace of those conversations. Thanks again.

Yep Yep.

To address that and I think as you know from the conversations we've had over the years and particularly pre pandemic.

Their proprietary remote check in tool, which as I commented can now accommodate all.

Airlines instead of seven airlines that represents 96% at domestic employment offers the ability to get people checked in in some cases at the curve both the airport, but also in parking garages or other parking lots and other facilities away from the curb so it's about reducing congestion to tech.

Allergy and prior to the pandemic the business model was to go to airports or cruise lines, our ports and <unk>.

Ask them to sponsor a model so provide a free service for the traveling public and there is a lot of interest in this tool, but in many cases the concern that the sponsor was facing was do I want to pay on behalf of the public do I Wanna be pay on behalf of other stakeholders that might be benefiting from the service.

And so coming out of the pandemic our base leadership team recognize that there's a consumer pay model that really works and that's what consumer are a curbside concierge really is and we've rolled it out to 40 airports with one airline we're having a successful pilot with a second airline and believe that we are on the verge of adding additional airports.

Are there, but as congestion continues to build and travel volumes go to levels above the pre pandemic period, we're getting some inbound interest for the first time from other airlines that wed like to join in and particularly because this service can be offered free to the airline it doesn't cost them anything for this to be provided but.

We're also seeing and I mentioned this in the prepared remarks that the sponsored models coming back there's many airports that have construction going on or the.

The the travel volumes are just way beyond the pre pandemic levels and so they are willing to entertain once again the idea of the sponsored model and so we're now bringing a couple of those out as well, but fortunately for us. It's the same technology in either case.

Only a question of whether the public is going to be paying for it whether whether the client might pay for it or potentially even a hybrid model where it's subsidized.

By an airport and airline on behalf of the public and then the public pays the rest. So I think we feel very confident we have the right tool for reducing congestion the check in experience and whats exciting for US is to see that I think both pricing models are now gaining traction in the marketplace.

Sounds great I appreciate the color might have one or two follow ups, but I'll jump I'll jump back. Thank you.

Thanks, a lot Dan Thanks, Dan.

Thank you and our next question.

It comes from Tim Mulrooney with William Blair. Your line is open.

Yeah.

Mark Chris Good afternoon.

Good afternoon, Tim.

Chris.

I'm looking at the SG&A and I appreciate all the color you gave but if I just step back and I look at <unk>.

SG&A as a percent of sales.

I will say, 13% in the first half of 'twenty three.

Going into 2022, but well above the pre pandemic levels of around 910, 11% Mike My question is.

Is this a temporary increase due to investments in technology or should we expect SG&A levels.

To remain around that like 13%, 13%, 14% beyond the short term guide that you gave.

For this year has there been a structural change.

Your cost structure.

Yes, Tim this is Ed.

The short answer is no I think.

<unk> growth in the long term. So there are some investments this year that will pay off in the latter part of this year and into next year. So I don't see that this is not a trend thats going to continue where we're going to continue to kind of continue to adapt the P&L with G&A and investments, we think theres going to be some operating leverage as we kind of move forward through this year and into next.

Sure.

Okay. That's really helpful. Same question on Capex I see I look back at your P&L ICD $10 million $10 million 8 million $9 million and then $22 million in 2022, it's going to be another $20 million this year.

Is that is that kind of the same story as with SG&A like Youre, making the investments now, but as a percentage of sales that capex should go down over time or are we in a structurally different situation here.

I think it's we've certainly made some large investments last year I think it was around 'twenty one 'twenty two.

Right around there in terms of Capex this year.

Certainly if you look at it on a trend basis, we're kind of getting to that same point. This year as it relates to Capex I think in the in the back part of the schedule as we call it 19% to $21 million or so in terms of a range I think thats a good range for this year I think as we look at future Capex.

Youre going to probably see Capex, maybe come down a bit I don't say that kind of upper levels sustaining through these next couple of quarters.

Our next couple of years, but certainly where I think we really want to be focused on is are there things and Mark has mentioned this before are there things that we can develop that we think will benefit the clients and allow us to grow faster and so when I say I would expect it to come down slightly I don't want to also take off the table.

Those opportunities to make investments that we think can facilitate faster growth.

Understood. We wouldn't want you to do that either that makes sense just one more for me on your retention levels over 94%.

I'm, just really high near the highest I think we've ever seen.

Do your technology solutions make your services stickier.

Is it too early to say that those solutions are having a tangible impact on retention rates and it's just more about execution.

Well I think our thesis is that they will make us stickier the more things that we provide for our client and do so successfully.

Your options they have in terms of looking elsewhere to provide those services and theres nothing easier for our clients and to have a one stop shop to do everything and so whether a client needs boots on the ground.

Or once you need technology needs both.

With the situation requires I think does make us more sticky to the client. We're also benefiting I think from the fact that.

Some of our competitors have not invested in technology and many are lagging in technology and Theres, others, who are struggling operationally or not really.

Got it thank you Mark and Chris and congrats on a nice quarter guys.

Thanks, So much Tim Thanks, Tim.

Thank you and as a reminder to ask a question. Please press star one on your telephone.

And our next question will come from.

Marc Riddick with Sidoti Your line is open.

Yes, hi, good afternoon, everyone.

Good afternoon.

So I was wondering if you could talk maybe sort of stretching out on.

The retention question, because certainly 94% is obviously really really good I was wonder if you can talk a little bit about.

Maybe some of the pricing dynamics that youre seeing as far as renewals as well as and certainly I. Appreciate you providing color on new wins and the technology contributions <unk> contributions to the new wins. So maybe you could talk a little bit about sort of the pricing dynamic when renewals come up and as well maybe if you could talk then segway into.

So maybe the labor environment inflationary are realities.

Sure sure.

I would say that the competitive dynamic in pricing hasn't really changed much for a long long time, and I think thats, partly what we're talking about the pricing of what we charge for our services as opposed to what the consumer pays and the reality is is that what we are charging a client to manage their facility are bringing technology solutions is it.

Small amount as a percentage of revenue and so I think when a client is looking at who's going to provide the services Theyre really looking at who is best poised to execute and deliver the value that the clients looking for whether it's a low friction consumer experience updated technology or maximizing profit.

And so I don't think.

The competitive pricing environment has changed much one of the things Thats new for US is that as we develop the sphere platform.

We're able to offer to clients.

Or no upfront cost at the transaction volumes are high and a lower cost than maybe some of the traditional parking equivalent companies are charging for those locations that don't have a lot of transactions and thats because were.

Asking the consumer to pay a transaction fee and so our clients or prospective clients is the ability to upgrade antiquated technology capture more revenue and have more reliability in their tech platform and not have to make the capital outlays that they might have and of course as we as people feel financial.

We have moderated significantly.

Obviously coming out of the pandemic there was a big reset that went on in terms of people werent in the workforce wage.

Wage rates rose significantly in many places.

And of course, there's a lot of demand for delivery drivers and the like I think some of those industries have to.

Plateaued in terms of their growth trajectories and so we're finding in general that the labor market is in much better condition than it was say a year or two years ago, but that being said, it's another attraction of our business model, where we are heavily skewed towards management type contracts and of course as you know on the <unk>.

Fixed fee contracts increases in labor costs are passed on to the client and so they don't affect our P&L directly.

Great and then I was wondering if we could shift gears it seems as though from the.

The prepared remarks as well as the press.

Press release.

Strength that you're seeing and the activity that youre seeing is it's quite broad based when it comes to industry vertical customers and the like I was wondering if you could sort of maybe touches.

It will bring us up to date on are you seeing any particular.

Geographies that are maybe a little more active than others as far as bringing on new business wins or or are there any sort of it.

It seems there's a lot of green shoots, but I'm wondering if there are any areas that low greener than others.

Yes, no that's a great point I'd say its fairly broad based with strong economic activity everywhere and of course, we're seeing for the most part.

The hybrid working model has I think become the new normal and so.

There are certain days of the week that has a lot of parking demand and theres other days of the week that have less demand.

But certainly.

Those people that serve people traveling for work.

We have looked at their businesses, they're saying, where do I bring new technology to drive costs out of my business operation.

These are the people that are super excited about how do we drive efficiency with technology, maybe take operating cost side of the business and and how do we ensure that we have optimally priced the parking and of course through our digital tools, our parking dot com.

<unk> mobile app.

Our web scraping tools for and our yield management experts.

Analysts are are able to advise clients on what the optimal parking rates should be and really are able we're able to drive through our digital marketing programs to creative solutions to drive demand to the parking facilities that we operate in in these economic times, that's a major focal point for the four for our client base or a prospect.

The client base obviously.

The fact that people are out and about and are pretty much returned to normal now.

Now that the pandemic is behind us.

Great and then last one for me I think the the announcement of the Rasco acquisition I think it was like the day after we did our.

I just wanted to ask if you could sort of British up to date as to kind of what your what youre seeing as far as the potential acquisition pipeline out there. Its certainly technology is certainly one of the key priority areas, but I just wanted to talk a little bit about what the pipeline looks like and valuations in and.

It seems as though there is theres more room to grow there, but maybe you can sort of bring us up to date on what you're seeing out there. Thanks, yes, well I think we're definitely I'll comment on the technology space and Chris can maybe comment more broadly.

But certainly.

And so realistically, we're seeing quite a bit of inbound activity around technology and people are saying, hey, we're going to come to market with this so we're looking.

At.

Selling our business. Unfortunately, because we have a tech roadmap for our business. We have the discipline to say is this really going to accelerate our growth we're not looking to acquire technology for its own sake, but if we can accelerate the appointment of our sphere platform the capabilities of the sphere platform.

Sure that it can provide capabilities that other people can't provide than an acquisition makes sense provided we can get it at a good value.

Doesn't mean, we're not interested in operating businesses as well, but I think.

And on the operating business side I would say, we continue to keep our.

Eyes and ears.

In terms of opportunities that are out there I think we've mentioned this on prior calls that yes, while we don't want to do is acquire an operating business that is kind of a slow growing version of who we are but we really want to find those opportunities where we can.

<unk>.

Speed up all are continuing to grow our business at that high single digit basis, and maybe that could be through the deployment of technology solutions into that operating business that maybe hasnt leverage the technology that is there are available and so I think there are some opportunities we continue.

To look for those.

And we continue to keep our eyes and ears open.

Great. Thank you very much.

Thanks, Mark Thanks, Mark Thank you.

One moment for our next question.

We have a question from Kevin Steinke with Barrington Research Associates. Your line is open.

Hey, good afternoon Martin.

Hi, good afternoon.

I think on your.

First quarter conference call.

You talked about.

We're expecting gross profit to grow on a quarterly sequential basis throughout 2023.

With more significant sequential growth in the second half of 2023 so.

Yes, we had a really nice sequential growth in gross profit here in the second quarter.

About 13%.

And.

I just assume pretty modest.

Actual growth in gross profit here over the next two quarters.

It's mid to the high end or a little bit above the high end of your adjusted gross profit.

Guidance range for 2023, so I mean is there any reason we should.

I think about the sequential comparisons kind of flattening out as we get into the second half of 2023 or is there maybe just a little bit of.

Conservatism.

The fact that you maintain that guidance.

Yes, Kevin This is Chris I think if you look at our traditional Q2, that's typically our strongest quarter and certainly we have a lot of new robust wins as it relates to.

The operating business as well as technology and certainly we had some strong <unk>.

Same store location growth. So certainly that is contributing to it I would say there is maybe a little bit of pull forward in terms of some new business that we expected in the back part of the year I think what what I mentioned on the Q2 call is that we would expect to see some continued growth in the business that would be overshot the seasonality.

<unk> would be overshadowed by the growth in the business I think if you look at and I mentioned this on the on the Q1 call I still think Q4 is going to be our strongest quarter. If you were to look at gross profit. So I think if you look at kind of how we're going to sequence out there.

Okay, great. Thank you.

Very helpful.

And I wanted to follow up on your <unk>.

Comment about.

Adjusted gross profit and revenue for her excluding reimbursed expenses.

Growing at a similar pace in the first half of the year and that you would expect that trend to continue I guess.

<unk> growing at a similar rate but.

Does that imply some sort of stabilization in the.

The lease contract base.

Given the revenue recognition dynamics there.

Different contract types.

Normally when you switch from a lease to a management fee contract.

The revenue will go down just based on the recognition, even though gross profit might be very similar.

Just wondering if that makes sense or if you've seen some sort of stabilization.

The lease side.

From time to time, we do get questions around what is the revenue trend look like for SP and I think what we're trying to provide here is a little bit of guidance around not necessarily guiding to revenue, but given some some color around how we're seeing the business evolve and mature in terms of that revenue growth and trying to link that into gross.

Profit. So I think that's close correlation from a gross profit perspective to revenue is there and I think it's primarily due to the management contracts that we have the technology and the contributions of our technology and that our lease portfolio is somewhat static in terms of the number of locations we have.

Okay, great. Thank you.

You mentioned their visibility.

And you.

Talked about in your earnings release.

Year to date, new business wins, and the robust business development pipeline are supporting your high single digit long term gross profit growth outlook.

Does that imply that youre, starting to get some decent visibility into what 2024 could look like or.

At what point do you start to get better visibility I guess into the into the next year.

I think if you look at this year certainly it's a really good year for us.

I think it.

What we said is we would deliver.

The low double digits in terms of gross profit growth.

And high single digits on a go forward basis.

And I think Thats still the case I think we feel really good with our business in terms of where we're at I think as we look out into the horizon I would still reiterate we feel.

We're really comfortable with that high single digit gross profit growth.

In terms of growth in the business.

Great well. Thank you for the commentary I will turn it over.

Thanks, Kevin Thanks, Kevin.

Thank you and I'm showing no other questions in the queue I would like to turn the call back to Mr. Marc Baumann for closing remarks.

Talking to you again next quarter. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2023 SP Plus Corporation Earnings Call

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