SP Plus (SP) Tops Q1 EPS by 11c, Revenues Beat; Withdraws FY20 Guidance

SP Plus (NASDAQ: SP) reported Q1 EPS of $0.64, $0.11 better than the analyst estimate of $0.53. Revenue for the quarter came in at $409.7 million versus the consensus estimate of $228.06 million.

First Quarter Commentary

Marc Baumann, Chief Executive Officer, stated, “Our performance in January and February showed positive momentum trending ahead of our expectations following a record 2019, but business conditions changed rapidly in mid-March as the COVID-19 pandemic began to impact a number of our key vertical markets. In response, we took actions intended to ensure the safety and wellbeing of our workforce and others entering our facilities and at the same time moved aggressively to right-size our overall cost structure.

“We activated our business continuity plan to keep our administrative and field functions operational and implemented pandemic preparedness protocols and procedures, which included adopting strict guidelines for keeping our facilities clean and enforcing social distancing practices. I am proud of how well our employees and leadership teams have performed during this crisis and how quickly they have put the requisite safeguards into practice.

“The impact of COVID-19 on airlines, airports and the hospitality industry has been well-documented and persists today. As a service provider to these and other verticals, we are operating at significantly reduced activity levels. In light of this very challenging business environment, we have taken the following actions to significantly reduce our cost structure to preserve financial flexibility while maintaining our ability to ramp up quickly once activity starts to rebound:

• Significantly reduced payroll costs in response to revenue or volume declines
• Implemented salary reductions across the organization, including 40% for the CEO and the Board of Directors, and 20% for the senior leadership team
• Curtailed discretionary spending
• Restricted investments to only essential capital expenditures
• Suspended stock repurchases
• Upsized our revolving credit facility by $45 million

“As of yesterday, we had over $200 million of cash and availability under our upsized credit facility, which we believe gives us ample liquidity to manage through this crisis.

“We expect the COVID-19 pandemic will present a substantial challenge for most businesses, including ours, for the remainder of the year and potentially longer. Although the scope and scale of this crisis is unprecedented, SP+ has risen to the challenge presented by major disasters over our 90 year history – such as the September 11 terrorist attack, Hurricane Katrina, the 2008 Great Recession and other regional disasters. We believe our business model, together with the commitment of our employees and our close relationships with our clients and customers, will enable us to navigate through this unprecendented environment and emerge a better, stronger and more agile business”, concluded Mr. Baumann.

2020 Outlook

Mr. Baumann stated, “Given the rapidly evolving environment, it is difficult to predict the duration of this pandemic and its impact on our full year results. Therefore, we are withdrawing our previous guidance for 2020 financial performance and have suspended stock repurchases.

“SP+ is fully focused on emerging from this crisis as an even stronger competitor. With this in mind, we continue to invest in technology solutions that we believe will be essential to clients and end-consumers in the post-pandemic environment and enable us to further differentiate ourselves from our competitors. We are already seeing an increase in inquiries from potential clients who we believe are seeking a well-capitalized partner to help them navigate through today’s realities and prepare for a ‘new normal’ in which the ability to anticipate changing consumer preferences and accommodate a desire for touch-free transactions will be essential capabilities. Additionally, we are engaged with our aviation clients on outsourcing plans that provide them with more cost-effective options as they embark on a lengthy road to recovery. At the same time, we are evaluating and implementing structural changes that will enable us to further reduce costs while maintaining the high service levels for which SP+ is known,” Mr. Baumann noted.

For earnings history and earnings-related data on SP Plus (SP) click here.

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