SP Plus (SP) Misses Q4 EPS by 14c

SP Plus (NASDAQ: SP) reported Q4 EPS of $0.02, $0.14 worse than the analyst estimate of $0.16. Revenue for the quarter came in at $244.7 million versus the consensus estimate of $121.45 million.

Marc Baumann, Chief Executive Officer, stated, “Our business model continued to demonstrate its resilience in the fourth quarter, as increased holiday travel offset reduced activity in certain geographies due to the resurgence of COVID-19 infections. As a result, gross profit remained steady on a sequential basis, after adjusting for the previously disclosed early termination fees that benefitted the third quarter. The sequential increase in reported G&A was due to increased compensation costs, including restoration of the previously announced pay reductions as well as the impact of other compensation programs that normally would have been spread across several quarters.

“Our scale, client-centric culture and industry-leading technology strengthened our ability to navigate difficult, pandemic-driven business conditions throughout 2020. We had many new business wins, adding over 200 new locations in our Commercial Segment, while new business activity in our Aviation Segment was at its highest level in several years. At existing locations, many of our clients have expanded the scope of our services.

“At the same time, we made structural changes that improved our visibility and reduced our costs for the long-term. We exited 117 leases in the Commercial segment and converted almost 50 leases to management contracts, which tend to have greater predictability, and have considerably reduced our G&A run-rate.

“Our technology leadership has been a key driver of our ability to gain new business. We are a single-source provider of a suite of technology solutions that enable frictionless mobility. These solutions include prepaid reservations, on-demand payment and mobile point of sale capabilities, along with remote and on-site parking management. We also have a suite of services geared toward aviation, cruise and hospitality clients that aim to Make Travel Easier®. While we have focused on providing our technology solutions to existing clients, these solutions can also be used on a stand-alone basis, which substantially expands the addressable market for our Sphere™Technology by SP+ offerings.”

2021 Outlook

Mr. Baumann concluded, “We appreciate the dedication of our leadership team and all employees, as well as the support of our clients and their customers, all of which enabled us to remain operational throughout the pandemic and provide services at all active locations. This was one of the most challenging periods in our Company’s history, and we appreciate the collaborative ways in which we were able to work internally and with clients to achieve the best possible outcomes.

“While we expect that COVID-19 will continue to impact our clients and our business in 2021, improved visibility leads us to reinstate annual guidance on gross profit and G&A expenses. Based on our current outlook, we expect gross profit for full-year 2021 to range between $140 million and $160 million, and full-year 2021 G&A to be in the range of $75 million to $85 million. In addition, we expect to generate higher free cash flow in 2021 than in 2020. Gross profit guidance is based on our assumption that business activity levels in the first half of 2021 will be similar to the second half of 2020, adjusted for seasonality, with a pick-up in activity taking place in the second half of the year.

“At the onset of the pandemic, we increased our credit line by $45 million out of an abundance of caution. Given our expectation of higher free cash flow in 2021, we reduced the size of our revolving credit facility by $45 million in connection with a recently executed amendment that will give us additional flexibility and availability under our revised covenants.

“We see significant growth opportunities on the horizon that we believe will continue in 2021 and beyond. First, our ability to facilitate mobility in ways that eliminate inefficiencies, reduce friction and alleviate congestion is of critical importance during this health crisis, and we expect they will remain top of mind for clients and consumers for the foreseeable future.

“Second, because many experts believe there is significant pent-up demand for leisure travel, we expect that the need and desire to maintain safe distancing, alleviate congestion, and engage in touch-free transactions will be more important than ever when significant leisure travel resumes. This will play right into our sweet spot, as we have the programs and tools in place to accommodate the returning travelers.

“Third, the pandemic has driven consumer behavior change as it relates to shared-mobility and car ownership. We believe that for the foreseeable future, the preference will be for commuters to use their personal vehicles, which will increase the need for off-street parking and more actively managed on-street parking.

“Finally, many of our competitors have struggled financially or been operationally distracted during the pandemic. We believe this presents an opportunity to gain market share as we strengthen our national account relationships, leverage our differentiated technology offerings, and promote our marketing programs and revenue optimization capabilities. These capabilities become ever more important in sectors that were especially hard hit by the pandemic as our clients look to rapidly increase their revenues and recapture customers. SP+ is well suited to meet this challenge.”

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

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