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SP

SP Plus Corp (SP)·Q3 2023 Earnings Summary

Executive Summary

  • Record gross profit with broad-based demand: GAAP gross profit rose 17% YoY to $64.2M; adjusted gross profit rose 16% to $67.7M on new contracts, same-location growth, and 94% trailing retention. Technology solutions were a key selling point, including demand from gaming and marquee hotels in Las Vegas and Atlantic City .
  • Sequential growth with mixed GAAP EPS: Total services revenue reached $460.7M and adjusted EBITDA increased to $34.9M in Q3; GAAP diluted EPS fell to $0.46 vs $0.62 in Q2 and $0.68 YoY, reflecting higher G&A and interest expense amid growth investments .
  • Guidance withdrawn and no call: In light of the pending acquisition by Metropolis Technologies for $54.00 per share cash, SP suspended 2023 guidance and did not host a Q3 earnings call, shifting the near-term narrative to deal approval and closing risk factors .
  • Portfolio expansion remains strong: Tenth consecutive quarter of net location growth (108 net adds in Q3), continued airport wins (Eppley Airport) and service rollout (Bags Remote Airline Check-in; AeroParker deployments) bolster medium-term positioning even as guidance is paused .

What Went Well and What Went Wrong

What Went Well

  • Commercial segment strength and record metrics: “Double-digit gross profit growth” across office, hospitality, municipal, and healthcare; 108 net new locations; 94% TTM retention underscores value of combined tech plus service offering .
  • Aviation wins and cross-sell momentum: New five-year contract at Eppley Airport; expansion of Bags Remote Airline Check-in in Charleston; four more AeroParker onsite go-lives demonstrating successful cross-selling .
  • Technology adoption accelerated: Considerable demand from gaming; Sphere platform adopted by marquee hotels in Las Vegas and Atlantic City; Remote Airline Check-In to be implemented at Harry Reid International (Las Vegas) .

What Went Wrong

  • GAAP EPS down YoY and sequentially: Diluted EPS of $0.46 vs $0.62 in Q2 and $0.68 in Q3’22; GAAP net income $9.2M vs $12.3M in Q2 and $14.3M YoY, pressured by higher interest expense ($7.4M in Q3 vs $3.8M YoY) and elevated G&A investments .
  • Higher GAAP G&A: GAAP G&A rose to $37.6M from $27.2M YoY; adjusted G&A also increased to $32.0M from $26.0M, driven by business development and technology deployment costs .
  • Guidance uncertainty and reduced communication: Financial guidance suspended and no earnings call due to the pending acquisition, limiting forward visibility and reducing typical management engagement with investors in the quarter .

Financial Results

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Total services revenue ($USD Millions)$404.4 $425.3 $442.2 $460.7
Gross Profit (GAAP, $USD Millions)$54.8 $55.1 $62.2 $64.2
Gross Profit Margin (%)13.6% (54.8/404.4) 13.0% (55.1/425.3) 14.1% (62.2/442.2) 13.9% (64.2/460.7)
Operating Income (GAAP, $USD Millions)$23.8 $19.3 $25.3 $21.0
Net Income (GAAP, $USD Millions)$14.3 $8.4 $12.3 $9.2
Diluted EPS (GAAP, $USD)$0.68 $0.42 $0.62 $0.46
Adjusted Gross Profit ($USD Millions)$58.2 $58.4 $66.0 $67.7
Adjusted Operating Income ($USD Millions)$27.1 $23.7 $29.6 $29.7
Adjusted Net Income ($USD Millions)$16.8 $11.6 $15.4 $15.6
Adjusted EPS (Diluted, $USD)$0.80 $0.58 $0.78 $0.79
Adjusted EBITDA ($USD Millions)$31.5 $28.2 $34.4 $34.9

Segment breakdown (Gross Profit):

Segment Metric ($USD Millions)Q3 2022Q1 2023Q2 2023Q3 2023
Commercial Gross Profit (GAAP)$40.9 $41.1 $47.0 $47.3
Commercial Adjusted Gross Profit$43.0 $43.1 $49.3 $49.4
Aviation Gross Profit (GAAP)$13.9 $14.0 $15.2 $16.9
Aviation Adjusted Gross Profit$15.2 $15.3 $16.7 $18.3

Contract-type revenue and gross profit (pre-D&A):

Contract Type ($USD Millions)Q3 2022Q2 2023Q3 2023
Management Type Service Revenue$134.9 $145.0 $153.5
Management Type Gross Profit (pre-D&A)$45.0 $51.9 $53.6
Lease Type Service Revenue$72.2 $76.3 $74.9
Lease Type Gross Profit (pre-D&A)$13.2 $14.0 $14.0

KPIs and operational metrics:

KPIQ1 2023Q2 2023Q3 2023
Net new locations (Commercial)71 55 108
TTM retention rate93% 94% 94%
Commercial facilities (Total)3,201 3,256 3,364
Airports served (Total)159 160 159
Cash from operations ($USD Millions)$7.7 $13.3 $32.5
Free cash flow ($USD Millions)$0.3 $8.0 $25.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Gross Profit ($USD)FY 2023$240–$260M Guidance suspended Withdrawn
Adjusted EBITDA ($USD)FY 2023$125–$135M Guidance suspended Withdrawn
Net Income (GAAP, $USD)FY 2023$43–$53M Guidance suspended Withdrawn
Adjusted Net Income ($USD)FY 2023$54–$64M Guidance suspended Withdrawn
EPS (GAAP, $USD)FY 2023$2.15–$2.65 Guidance suspended Withdrawn
Adjusted EPS (GAAP dil., $USD)FY 2023$2.70–$3.20 Guidance suspended Withdrawn
Free Cash Flow ($USD)FY 2023$60–$70M Guidance suspended Withdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Technology/Sphere adoptionQ1: 42% of new Commercial locations were standalone Sphere; goal to double tech contribution; strong appeal expanding addressable market . Q2: Tech contribution on track to double 2022; 36% of new locations standalone Sphere; tuck-in Roker assets acquisition .Considerable demand from gaming; marquee hotel adoption in Las Vegas/Atlantic City; Remote Airline Check-In coming to Harry Reid Intl; tech a key selling point enabling client upgrades without upfront capex .Accelerating tech adoption
Commercial demand breadthQ1: Double-digit gross profit growth across business/commerce, hospitality, residential . Q2: High single-digit GP growth led by healthcare, municipal, large event venues .Double-digit GP growth in Commercial; strength in office, hospitality, municipal, healthcare; 108 net new locations; 94% retention .Broad-based and strengthening
Aviation momentumQ1: Double-digit GP growth; added services; new wins . Q2: Double-digit GP growth; acquisition + organic; cross-selling across airports .New Eppley Airport contract; Bags check-in expansion; AeroParker live at 4 more airports .Stable to improving
Macro/back-to-office & travelQ2: Commercial, retail, and travel activity “on the rise” underpinning record H1 GP/EBITDA .Favorable back-to-office and travel volumes supported record quarter .Supportive
Regulatory/legal/deal—$54/share cash merger announced; guidance suspended; no Q3 call; closing subject to approvals and customary conditions .Deal-driven narrative

Management Commentary

  • “This was a record quarter for SP+ across key financial and operating metrics, reflecting increased client demand for our unique ability to deliver industry leading technology solutions and best-in-class onsite services at scale.” — Marc Baumann, CEO .
  • “Double-digit gross profit growth in our Commercial segment… notable strength from the office, hospitality, municipal, and healthcare verticals… tenth consecutive quarter of net location growth… trailing twelve-month retention rate of 94%.” — Marc Baumann, CEO .
  • “Our Aviation segment gross profit also increased at a double-digit rate… awarded a five-year contract [Eppley Airport]… began providing Bags Remote Airline Check-in at Charleston… went live with AeroParker’s online reservation system at four additional airports.” — Marc Baumann, CEO .

Q&A Highlights

  • No Q3 earnings call was held due to the pending acquisition; the company suspended 2023 guidance, limiting typical Q&A and forward commentary .

Estimates Context

  • S&P Global Wall Street consensus for Q3 2023 was unavailable; we attempted retrieval but the mapping for SP was missing in the SPGI CIQ company map, so estimates and # of estimates could not be obtained for EPS and revenue comparisons [GetEstimates error]. Comparisons to estimates are therefore not provided. Values would have been retrieved from S&P Global if available.*

Key Takeaways for Investors

  • Operational momentum continued: record gross profit, expanding adjusted EBITDA, and strong Commercial/Aviation execution support the medium-term thesis even as guidance is paused .
  • Investment for growth weighs on GAAP metrics: elevated G&A and higher interest expense pressured GAAP EPS despite adjusted performance; monitor Opex normalization and rate environment .
  • Technology is becoming a differentiator: accelerating adoption across gaming and marquee hotels, plus cross-sell at airports, suggests mix shift to higher-margin tech services over time .
  • Deal dynamics dominate near term: $54 cash offer from Metropolis and suspended guidance shift the stock’s catalyst set to regulatory/stockholder approvals, closing timeline, and any potential competing proposals .
  • Contract mix favorable: growth in management-type contracts and tech services should sustain correlation between revenue and gross profit and enhance margin durability .
  • Cash generation improved sequentially: CFO and FCF strengthened in Q3; watch seasonal/working capital dynamics and capex tied to tech investments .
  • Trading implications: with no call and guidance withdrawn, near-term moves likely track deal progress headlines; operational prints remain supportive if deal timing extends .