SP Plus Q4 2022 Earnings Report

SP Plus EPS Results

• Actual EPS: $0.56
• Consensus EPS: $0.73
• Beat/Miss: Missed by -$0.17
• One Year Ago EPS: N/A

SP Plus Revenue Results

• Actual Revenue: $206.40 million
• Expected Revenue: $205.59 million
• Beat/Miss: Beat by +$810.00 thousand
• YoY Revenue Growth: N/A

SP Plus Announcement Details

• Quarter: Q4 2022
• Date: 2/22/2023
• Time: N/A
• Conference Call Date: Wednesday, February 22, 2023
• Conference Call Time: 5:00PM ET

SP Plus (NASDAQ:SP) provides mobility solutions, parking services, parking management, ground transportation, baggage handling, and other ancillary services. The company operates in Commercial and Aviation segments. It provides on-site parking management, valet parking, ground transportation, facility maintenance, event logistics, remote airline check-in, security, municipal meter revenue collection and enforcement, and consulting services, as well as shuttle bus vehicles and drivers; baggage services, including delivery of delayed luggage and baggage handling services; wheelchair assist services; baggage repair and replacement services; and on-street parking meter collection and other forms of parking enforcement services. The company also offers facility maintenance services, including power sweeping and washing, painting and general repairs, and cleaning and seasonal services; patient transport services for healthcare clients; transportation, logistics, and implementation; valet services, such as vehicle staging and tracking systems, and doorman/bellman services; security services comprising training and hiring of security officers and patrol, as well as customized services and technology; wheelchair assist services; and an online and mobile app consumer platform through parking.com website; and revenue management services. In addition, it provides multi-platform marketing services, including SP+, AeroParker, and KMP Digitata brand websites that offer clients a platform for marketing their facilities, mobile applications, search marketing, email marketing, and social media campaigns. The company offers its services primarily under the SP+, Sphere, Bags, AeroParker, MetroParker, and KMP Digitata brands. The company was formerly known as Standard Parking Corporation and changed its name to SP Plus Corporation in December 2013. SP Plus Corporation was founded in 1929 and is headquartered in Chicago, Illinois.

SP Plus Q4 2022 Earnings Call Transcript

Key Takeaways

• SP Plus achieved double-digit growth in Q4 (16% adjusted gross profit increase) and full-year 2022 (22% adjusted gross profit), driving adjusted EBITDA up 24% and adjusted EPS up 44% to $2.72.
• Management issued 2023 guidance for 11% growth in both adjusted gross profit and adjusted EBITDA, projected adjusted EPS of $2.70–$3.20, and free cash flow of $60–$70 million, while investing in G&A to support future acceleration.
• The company is accelerating its technology expansion through Sphere and AeroParker solutions, plus acquisitions of Aeroparker, KMP Digitata, and Devert, aiming to boost technology-derived gross profit from under 2% to 10% by 2025 and processing one million digital transactions monthly.
• In the commercial segment, Q4 adjusted gross profit rose 11% (18% full year) led by large venues, hospitality, and return-to-office trends, while the aviation segment saw 30% Q4 growth (34% full year) from new airport contracts and increased travel activity.
• SP Plus maintained strong capital discipline with $49.3 million in share repurchases in 2022, a new $60 million buyback authorization, over $200 million in credit facility availability, and a balanced allocation toward organic initiatives, acquisitions, and debt management.

Presentation

[Operator]

Thank you for standing by. Welcome to the Q4 2022 SP Plus Corporation Earnings Conference Call. At this time, all participants are on a listen only mode. After the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star one one on your telephone. As a reminder, today's conference call is being recorded. I will now turn the conference to your host, Mr. Kris Roy, Chief Financial Officer. Please begin.

[Kris Roy, CFO at SP Plus]

Thank you, Valerie. Good afternoon, everyone. As Valerie just said, I'm Kris Roy, CFO of SP Plus. Welcome to our conference call following the release of our Q4 2022 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including those statements as to the outlook and expectations for 2023 and statements regarding the company's strategies, plans, intentions, and future operations and expected financial performance.

[Kris Roy, CFO at SP Plus]

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 the risk factors in the company's annual report on Form 10-K, 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.

[Kris Roy, CFO at SP Plus]

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. 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.

[Marc Baumann, Chairman and CEO at SP Plus]

Thank you, Kris, and good afternoon, everybody. I'm pleased to share highlights from a strong finish to a year of substantial double-digit growth for SP Plus and to discuss the business trends and initiatives that support our new growth targets. To begin, our performance in the Q4 demonstrated our industry leadership and kept a year of considerable year-on-year growth across all key financial metrics. We continued to effectively execute on our strategy by growing our existing contracts, improving our outstanding retention rate, and winning new business while also accelerating the deployment of our award-winning Sphere and AeroParker technology solutions. We saw robust gross profit growth in the Q4 and full year, and this strong performance was broad-based across our segments, verticals, and geographies.

[Marc Baumann, Chairman and CEO at SP Plus]

In the commercial segment, adjusted gross profit growth of 11% in the quarter and 18% for the year was led by our commercial large venue and hospitality verticals, reflecting increased leisure activity and favorable return to office trends and the ongoing rollout and successful adoption of Sphere. In fact, 2022 results reflect a record level of adjusted gross profit in our commercial segment. In the aviation segment, 30% of adjusted gross profit growth in the Q4 and 34% for the year was a function of an increase in the number of airports served and a significant uptick in travel activity. Lastly, measures reflecting our scale and reach in both our segments hit new record levels in 2022. We processed $4 billion of gross parking revenues.

[Marc Baumann, Chairman and CEO at SP Plus]

This is combined from our lease facilities and on behalf of our clients if it's a management contract. We transported 51 million passengers on shuttle buses and handled over 6.5 million pieces of checked luggage last year. Our commercial segment is comprised of over 3,100 locations, which reflects 106 net new locations added over the last 12 months. In fact, we've achieved net location growth over the last seven consecutive quarters, further demonstrating our success in growing our market share. Gross profit from new business in the commercial segment was the second highest level ever achieved. We improved our location retention rate to 93%. On the aviation side, we've expanded our presence to 158 global airports, adding 69 net new airports to our portfolio in 2022, including 65 unique airports from the acquisition of AeroParker.

[Marc Baumann, Chairman and CEO at SP Plus]

These are airports where we did not previously have a presence with either SP Plus Airports or Bags. We're now providing our curbside concierge services for two airlines at 40 airports. If you haven't done so already, you might wanna check out the updated investor presentation that we've just published on our investor relations website, where we've broken out some of these size metrics by vertical market. This positive momentum is continuing in 2023 and marks an inflection point in terms of our growth trajectory. Our work over the last several years has helped position SP Plus as a leader in the digital transformation of our industry, and now we're well-positioned to capture the growth opportunities presented by our technology innovation.

[Marc Baumann, Chairman and CEO at SP Plus]

As we noted in our earnings release, we expect another strong year of growth in 2023, with adjusted gross profit growth of 11% at the midpoint. Of which approximately two percentage points reflects the full year impact of the AeroParker acquisition. Our expected adjusted EBITDA growth, which is also 11% in 2023 at the midpoint of our guidance range, anticipates additional investments in G&A that we believe will set the foundation for achieving accelerated gross profit growth. Over the last several years, we've been making investments to build the leading-edge technology solutions we have today. In addition to our internal development efforts, in 2022, we significantly enhanced our technology position with two strategic acquisitions. AeroParker's industry-leading SaaS platform is poised to generate recurring technology revenues at 80 airports worldwide.

[Marc Baumann, Chairman and CEO at SP Plus]

This acquisition provides expanded opportunities to realize cross-selling synergies across our entire aviation portfolio as we leverage relationships and capabilities to grow our traditional parking and transportation business, as well as Bags' suite of services and now AeroParker's technology. As part of the AeroParker acquisition, we also acquired KMP Digitata, an award-winning digital marketing agency with an impressive client base both in and outside of the aviation space. With DIVRT, we acquired a partner whose technology solutions we've deployed since 2020 as part of Sphere's platform. Just as importantly, this acquisition laid the foundation for the establishment of the SP Plus Technology Innovation Lab based in India, which we believe will enable us to accelerate our progress along our technology roadmap.

[Marc Baumann, Chairman and CEO at SP Plus]

As we head into 2023, we're executing on our multifaceted growth strategy, which includes, one, strengthening our leadership position, two, expanding our addressable market and gaining revenue synergies from our recent acquisitions, and three, taking advantage of substantial opportunities to leverage and monetize our technology. With respect to our leadership position, SP Plus is uniquely positioned to blend innovative technology solutions and superior operational expertise to enable current and prospective clients to meet their varied objectives, whether those objectives are improving the bottom line, improving the consumer experience, or anything in between. Our technology solutions enable clients to upgrade their parking assets to align with consumer trends and preferences without making major capital expenditures, while also, in many cases, reducing operating costs. If there is an existing technology infrastructure, we provide highly trained people and the know-how to operate and optimize the use of that infrastructure.

[Marc Baumann, Chairman and CEO at SP Plus]

This compelling value proposition has been a key element of our success in winning new business over the last two years. The deployment of our technology across our existing footprint has increased the stickiness of our services, which we believe will continue to benefit our retention rate. In terms of expanding our addressable market and realizing revenue synergies, our suite of technology solutions include SaaS or platform as a service options that can be deployed whether or not SP Plus is the operator. Our solutions also enable an asset owner to optimize the value of their asset by converting traditionally free parking to paid parking or employing dynamic pricing techniques to maximize revenues. The recent acquisition of AeroParker gives SP Plus a global presence.

[Marc Baumann, Chairman and CEO at SP Plus]

Together with SP Plus, AeroParker now has the support and resources to further expand its industry-leading position and will have opportunities to leverage their premier technology to drive cross-selling synergies. Finally, a key focus in 2023 and beyond will be accelerating the deployment of our comprehensive portfolio of technology offerings to take advantage of substantial opportunities to leverage and monetize our technology, which we believe is an important component of our future profit growth. We're currently processing 1 million digital transactions per month on SP Plus-enabled technology platforms deployed across airports, on- and off-street parking locations, event venues, retail and entertainment complexes, and the like. Unlike other one-size-fits-all options, our technology solutions are adaptable to a broad range of operating situations to meet both consumer and client needs.

[Marc Baumann, Chairman and CEO at SP Plus]

While technology solutions today contribute less than 2% of our gross profit, our objective is to grow that to at least 10% of our gross profit by 2025. We believe these three strategic initiatives support the guidance we've given for 2023 and position SP Plus to achieve high single-digit gross profit growth in subsequent years. If we look further ahead, we see SP Plus playing an increasingly important role in the development of smart cities as parking assets have the capability to become multi-use mobility hubs. While still in the very early stages, we believe that our industry-leading technology capabilities will enable us to work cohesively with our clients to increase the value of their parking assets as the roadmap for smart cities evolves. At this point, I'd like to turn the call back over to Kris for a financial review.

[Kris Roy, CFO at SP Plus]

Thank you, Marc. I will discuss our operating and financial performance for the Q4 in full year 2022 and our outlook for strong growth in 2023. We exited the year with 16% year-over-year growth in adjusted gross profit for the Q4 of 2022. Several factors drove this performance. Our team executed effectively, growing our existing contracts, improving our already strong retention rates, and winning new business. Q4 2022 adjusted G&A expenses were up 20% year-over-year, largely due to the decision to make strategic investments in business development, technology, and other resources that we believe will enable us to capture and support accelerated growth in 2023 and beyond. Resulting adjusted EBITDA increased by 11% over the year ago quarter in Q4 2022. Adjusted earnings per share were $0.56, which was 10% higher year-over-year.

[Kris Roy, CFO at SP Plus]

Summarizing our full year 2022 performance. Adjusted gross profit was up 22% year-over-year, reflecting the improved business environment and our success in adding new contracts, including technology-only locations made possible by our Sphere technology. Full year adjusted G&A expenses in 2022 increased 21% year-over-year, primarily reflecting our strategic decision to make early investments to capture future growth. Full year 2022 adjusted EBITDA was 24% ahead of 2021, adjusted earnings per share increased 44% year-over-year to $2.70. Switching to cash flow. Full year 2022 cash flow increased 64% year-over-year. As a reminder, 2022 free cash flow benefited from a 20 and a half million dollar U.S. federal income tax refund, which offset higher capital expenditures compared to the prior year. At the end of December, we had over $200 million of availability under our senior credit facility.

[Kris Roy, CFO at SP Plus]

During 2022, we spent $49.3 million to repurchase 1.5 million shares, leaving just over $10 million remaining under the May 2022 authorization as of December 31st, 2022. Last week, our board approved a new additional $60 million share repurchase authorization. Our free cash flow gives us the financial flexibility to pursue a capital allocation strategy that includes organic investments to support growth, acquisitions, and share repurchases while managing our debt levels, all with the goal of creating additional shareholder value. Our performance in 2022 and our significant investments in technology over the last several years have laid the foundation for our accelerated growth in 2023 and beyond.

[Kris Roy, CFO at SP Plus]

As a result, we expect full year 2023 adjusted gross profit to range from $240 million-$260 million, which at the midpoint represents year-over-year growth of approximately 11%. We expect adjusted EBITDA to be $125 million-$135 million, also 11% ahead of 2022 at the midpoint. For adjusted EPS, we expect a range of $2.70-$3.20 per share, approximately 6% above 2022 levels at the midpoint. We also anticipate free cash flow of $60 million-$70 million, or approximately $3.00-$3.50 per share. 2023 free cash flow at the midpoint is expected to be 35% above 2022 if you exclude the 20 and a half million dollar 2022 federal income tax refund.

[Kris Roy, CFO at SP Plus]

Additionally, I wanted to share some additional insights on other aspects of our business for modeling purposes. We continue to expect to see some seasonality with Q2 and Q3 typically being our strongest quarters of the year. On the G&A front, we've made significant investments in 2022, which is reflected in our Q4 2022 results. Q4 of 2022 is a pretty good run rate if you also layer in some additional incremental investments in early 2023. In terms of interest rates and corresponding interest expense, our senior debt is currently priced at 175 basis points above SOFR. We anticipate to peak and maintain at 4.75% in 2023, resulting in an all-in interest rate of approximately 6.5% and full-year interest expense of $24 million-$26 million.

[Kris Roy, CFO at SP Plus]

Given the levels of capital expenditures in 2022 and 2023, our D&A is expected to range from $34 million-$36 million, which includes the impact of purchase accounting related to the recent acquisitions. With that, I'll turn the call back over to Marc.

[Marc Baumann, Chairman and CEO at SP Plus]

Thank you, Kris. To sum up, we're pleased with our strong performance in 2022 and even more encouraged by our growth prospects for 2023 and beyond. We've made strategic investments to support our accelerated growth. We expect to leverage them beginning in 2024 as G&A growth moderates. In my 22 years at SP Plus, I've never seen the breadth of growth opportunities that we have in front of us today. Now it's all about execution as we seek to make every moment matter for a world on the go. We're confident that our new presidents of commercial and aviation will successfully lead their teams in building on the momentum from 2022 to achieve sustainable accelerated growth in 2023 and beyond. Valerie, I'd now like to open the call to questions.

[Operator]

Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one one on your telephone. Again, to ask a question, please press star one one. Our first question comes from Tim Mulrooney of William Blair. Your line is open.

[Marc Baumann, Chairman and CEO at SP Plus]

Good afternoon, Tim.

[Kris Roy, CFO at SP Plus]

Hi, Tim.

[Tim Mulrooney, Partner and Group Head of Global Services at William Blair]

Marc and Kris, good afternoon. Thanks for taking my questions and congrats on a nice quarter and a, for a pretty healthy outlook, which is where I wanna start. I mean, you know, you've taken up your growth outlook for gross profit pretty dramatically here. We typically think about SP Plus in that 3%-4% range, but a long-term target in the high single-digit range essentially implies a doubling in that target growth rate. Can you walk us through how you get to that step up in your outlook? Marc, I know you discussed technology as one component, but curious what the other primary factors are, and maybe you could also talk about your confidence level around the sustainability of that target.

[Marc Baumann, Chairman and CEO at SP Plus]

Sure. No, I'd be glad to, Tim. Of course, we've talked about our growth rates for quite a long time. As you recall, pre-pandemic, we put that target out of 3%-4% gross profit growth rate. Yet, in 2019, we achieved over 5% growth. That was a record for the company in terms of the performance of 2019. Of course, the pandemic has created lots of fog, and coming out of it, we've experienced faster growth as we've recovered. As we look at 2022 and evaluate what it means going forward, you know, I think it's worth drilling in a little bit on some of the details. As I mentioned in my prepared remarks, for our commercial segment, 2022 represented our best, second-best new business year ever.

[Marc Baumann, Chairman and CEO at SP Plus]

That was really a reflection, I think, of the fact that we are offering up an array of capabilities. A lot of those are fundamental operating capabilities, they're not just technology to a client base who are looking at what we are bringing to the marketplace and saying, "I'm gonna choose SP Plus over one of its competitors." We have a very, very strong pipeline of opportunities as we look forward, and we believe that we can continue to bring on new additional business as we look forward. The other thing is that as we do talk about technology, it's often part of the conversation in a client making a decision. We might bring technology only as an offering, we might bring technology along with our operating expertise, or we might talk about doing something with technology down the road.

[Marc Baumann, Chairman and CEO at SP Plus]

Technology has a couple of opportunities for us. One is, we're offering something to the client to help them capture more revenue to reduce their costs. In many cases, clients have aging, existing technology that needs to be replaced, we're saying to them, "You know, instead of going the traditional route and spending an awful lot of capital upfront, we can bring technology solutions that are gonna be more cost-effective or might not cost you anything to sort of replace your aging infrastructure." I think technology also offers us the, as I indicated in my remarks, the opportunity to bring paid parking to places that had free parking. We're really expanding the addressable market.

[Marc Baumann, Chairman and CEO at SP Plus]

In prior calls, we've talked a little about that, where retail shopping center, hotels, and other places often have no charge for parking, but there are some great locations near the door that people are willing to pay a premium to park at. I could go on and on within the commercial segment, but I think honestly, there's lots of opportunities to deploy technology to capture more transactions and to really show clients that we have the cutting-edge solutions that are gonna reduce friction for the people utilizing their services. When you flip over to aviation, I think there's a couple of things that are worth commenting on. One is, prior to the pandemic, as you know, we acquired Bags.

[Marc Baumann, Chairman and CEO at SP Plus]

As we turned the corner into 2019, we started introducing the Bags technology and operating capabilities to the SP Plus airports client base. We had a lot of really great interest in that of course, just as we were about to start to deploy some of these new solutions to our clients, the pandemic came along, and it put a hold on all of that. As we recovered from the pandemic, our clients have recovered from the pan-pandemic, it gives us an opportunity to reintroduce the Bags capabilities to the airport clients. Of course, with the recent acquisition with AeroParker, we can bring that into the equation as well.

[Marc Baumann, Chairman and CEO at SP Plus]

For example, you know, in North America, you know, SP Plus, legacy SP Plus, meaning without AeroParker and Bags, you know, provide services at 93 airports. There are seven of those airports, AeroParker is providing services. What that really means is that there are 86 airports where SP Plus, through its own airport operations or through Bags, have relationships with those airport clients, and we can be talking to them about the capabilities of AeroParker. On the flip side, because AeroParker is based in the U.K. and has numerous, over almost 60 airports outside of North America, you know, they're now in a position to bundle in their conversations the capabilities of Bags or maybe some of the other SP Plus technologies in their discussions with their client base too.

[Marc Baumann, Chairman and CEO at SP Plus]

I think for us, as we look at the cross-selling growth synergy between Bags, AeroParker, and the traditional SP Plus business, we see lots of opportunity for growth. Now just finally say, you know, what we are also seeing is in the competitive space for operations within North America in aviation, we have some clients who have not made, or competitors I should say, who have not made the investments in technology, who are perceived to be lagging the cutting edge in the minds of airport clients, or prospective airport clients, and they're receptive to someone coming in both with technology solutions, operating expertise, but at the same time, marketing strategies for them to drive revenue into those airports.

[Marc Baumann, Chairman and CEO at SP Plus]

I think all of those things really give us the confidence to expect our business to grow at a faster clip, you know, as we look into the future.

[Tim Mulrooney, Partner and Group Head of Global Services at William Blair]

All right. That's really helpful. Thanks, Marc. I mean, it's technology, cross-selling in aviation, and maybe some market share gains on the competitive side. Understood and appreciate all the color there. Switching gears, you know, Kris, the guide you said implies SG&A expense of $50 million higher, but some of that was placed in 2022. Appreciate your commentary you gave during your prepared remarks, I'm just curious, you know, how much of that $15 million was in 2022, and how much do you actually expect to layer in during 2023?

[Kris Roy, CFO at SP Plus]

If you look at the investments we started to make, I'd say we started to make those in late Q3, and certainly into Q4, we made some of those additional investments. I think if you look at that run rate in Q4, certainly that's a pretty good run rate. We're gonna make some additional investments in early 2023. I would see that, you know, if you look at Q4, it'd be slightly above that as it relates to, let's say, a Q1. You'll probably see a little bit of a bump in terms of G&A on top of that in kinda Q2, Q3, and Q4. I think in the earnings release, there was some commentary that, you know, if you look at our overall G&A spend in 2022, it was about $105 million.

[Kris Roy, CFO at SP Plus]

We kinda mentioned that we think we're gonna bring in approximately an additional $15 million into 2023. That gives you about $120 million in terms of G&A for 2023. I think what we are trying to do is just give you a little color in terms of how we're looking at the cadence of that G&A.

[Tim Mulrooney, Partner and Group Head of Global Services at William Blair]

Yep. Perfect. Last, last one for me, and I'll hop back in the queue. Lots of questions here. You know, how much did acquisitions contribute to gross profit in the Q4? What is your expectation for contribution from acquisitions to gross profit in 2023?

[Kris Roy, CFO at SP Plus]

Yeah. I would say if you look at Q4, you know, given that the acquisitions were a little later in the year, I wouldn't say it was a meaningful amount that contributed into Q4. What I would say is, I think what we're really excited about is the opportunities that these acquisitions present in terms of both Sphere, but also in KMP, in terms of the revenue synergies that Marc mentioned. If you kinda look at what it might mean from a 2023 perspective in terms of growth, you know, you might look at, let's say, I'd say about 2% of gross profit would be related to our acquisitions in terms of inorganic. I would say it's kinda two percentage points in terms of that gross profit. I think it's not necessarily what it is in 2023.

[Kris Roy, CFO at SP Plus]

I think it's what it can become in these outer years as we continue to look at KMP and the opportunities that are there.

[Marc Baumann, Chairman and CEO at SP Plus]

Yeah. I think that Kris has said it well, and I mean, if you look back to the remarks that both of us made, you know, we're guiding you 11% gross profit growth at the midpoint in 2023. We're saying beyond that, it's just sort of high single digits. Clearly in 2023, we get a little blip from the full year effect of those acquisitions.

[Tim Mulrooney, Partner and Group Head of Global Services at William Blair]

Yeah, that makes sense 'cause that's consistent then. Basically high single-digit organic gross profit growth right in line with your long-term outlook. It all lines up.

[Marc Baumann, Chairman and CEO at SP Plus]

That's right.

[Tim Mulrooney, Partner and Group Head of Global Services at William Blair]

That's great. Thanks for, thanks for all the color. I'll hop back in the queue.

[Marc Baumann, Chairman and CEO at SP Plus]

Thanks, Tim.

[Kris Roy, CFO at SP Plus]

Thanks, Tim.

[Operator]

Thank you. One moment, please. Our next question comes from the line of Daniel Moore of CJS Securities. Your line is open.

[Ross Coleman, Equity Research Analyst at CJS Securities]

Hi, this is Ross Coleman

[Marc Baumann, Chairman and CEO at SP Plus]

Hi, Daniel.

[Kris Roy, CFO at SP Plus]

Hello.

[Ross Coleman, Equity Research Analyst at CJS Securities]

Hi, this is Ross Coleman, in place for Dan Moore. I was just wondering, you know, SP has always fared well in recessions and, you know, you aggressively renegotiated your contract in 2020 and in 2021. How would you say SP is positioned to, you know, weather an economic storm? There've been a lot of, you know, mixed signals from the, you know, overall macroeconomic view. How would you say that kind of, you know, affects your end markets and your customers and contracts?

[Marc Baumann, Chairman and CEO at SP Plus]

Sure. No, I'd be glad to touch on that. I mean, if you look back at past recessions, I don't think the pandemic is really what you would call a recession. That was one of those very unusual events. In a typical recessionary period, the number of miles driven by people only varies about 5%. People, even in a recessionary time, are driving places. Clearly, some of that, those miles driven are gonna vary because of a recession. Maybe there'll be a few discretionary trips people don't take. I think, you know, because our business is broad-based across geography and broad-based across verticals, you know, we haven't generally seen the kind of impact that other businesses do, you know, if there's a little slowdown in activity.

[Marc Baumann, Chairman and CEO at SP Plus]

The other thing I'd like to remind you of is that, you know, the bulk of our portfolio are management contracts within the commercial segment. Consequently, you know, we're not directly tied to the utilization of the parking facilities. We're generally getting our management fee. Clearly, within aviation, there is a travel and leisure component, that's present there. If a recession were to impact travel and leisure, you know, we'll definitely see some slowdown in our services. The thing that I think we talk about internally with our team is, despite our size, we really have a very small market share in any vertical or for any service.

[Marc Baumann, Chairman and CEO at SP Plus]

One of the ways that we can get growth and do get growth, even in a recessionary environment, is we either increase the penetration of the array of services that we provide at the locations we already operate, or we go out and get additional clients. A lot of times in a recession, clients are feeling their own financial pressures or prospective clients, and that's when they're often receptive to new ideas, new innovation, using technology to create efficiency or drive demand or reduce costs. So while we would all prefer not to have a recession, I think we have a nice business model that performs well in recessionary environments.

[Ross Coleman, Equity Research Analyst at CJS Securities]

You would say that you guys could be a technology-heavy alternative that, you know, uses their new capabilities to create, you know, efficiencies for customers, so in many cases you're the cheaper alternative?

[Marc Baumann, Chairman and CEO at SP Plus]

We could well be. I mean, I think as you might imagine, you know, there's lots of components to technology. One of the things that we expanded a lot, we did this before the pandemic, we expanded it more, and that's remotely managing parking facilities. There's probably around 600 facilities where we are remotely monitoring or managing at some point in the day part. One option during a recessionary period for clients is to say, "Let's, let's reduce the staffing levels. Let's do more remote management, more with technology, with our mobile point of sale and other technologies." You don't necessarily need the staffing levels that you might have needed in the past.

[Marc Baumann, Chairman and CEO at SP Plus]

I think the utilization of technology and the acceleration of the deployment of it is a way for our clients to mitigate the effects of recession on their business, but also enables us to get that growth from deploying those technologies.

[Ross Coleman, Equity Research Analyst at CJS Securities]

You help your clients, mitigate labor costs, at least in that situation. That makes a lot of sense.

[Marc Baumann, Chairman and CEO at SP Plus]

Absolutely.

[Ross Coleman, Equity Research Analyst at CJS Securities]

And I guess-

[Marc Baumann, Chairman and CEO at SP Plus]

Absolutely.

[Ross Coleman, Equity Research Analyst at CJS Securities]

-pulling on that thread, would you say there's any kind of, you know, technology offering you guys have made, you know, a plethora of acquisitions over the last couple of years that are, you know, your clients are really excited about, that are excited to have rolled out in their businesses or is really, you know, gained penetration really quickly and making you guys attractive to new clients?

[Marc Baumann, Chairman and CEO at SP Plus]

Sure. Well, I think there's a couple of things I could comment on there, Ross. One is that, you know, clients, you know, their objectives are often, you know, directly financial in nature, but they are also interested in providing a certain experience for their customers. You know, for the most part, the client cares about the consumer experience, is looking to reduce friction and hassle and problems and complaints.

[Marc Baumann, Chairman and CEO at SP Plus]

By deploying our mobile app, you know, in our on the cell phone or some of the technology that we're now using where you don't have to actually download our mobile app and create a credential, you can simply scan a QR code or text to pay from your smartphone, we're really reducing the friction in a transaction and we're making it easy for somebody to conduct a transaction with us and that's a very, very inexpensive thing to deploy. I think that makes some of these offerings very, very attractive. We know that a high proportion of our clients operate older equipment, and this might be investments that they've made sometime five, six, seven, sometimes 10 years ago or more. A lot of this equipment requires a lot of maintenance costs, a lot of support costs.

[Marc Baumann, Chairman and CEO at SP Plus]

Skilled technicians sometimes have to come out to fix it and address problems. Part of our technology offering that's coming from us just really in the last 12 months, is our ability to bring our own hardware and software solution to replace that aging technology. In many cases, we're able to offer that at low or no cost to the client. As opposed to their traditional, "I've got a problem, it's costing me a lot of money. I don't really have the capital funds to make that upgrade. It's a recessionary environment, I'm looking for every penny," we can come in and say, "Let us deploy our solutions and we're going to avoid your having to make that outlay. And at the same time, we're gonna capture more of the revenue and drive lower operating costs for your facility.

[Ross Coleman, Equity Research Analyst at CJS Securities]

Got it. That makes a lot of sense. I guess the key takeaways are that you can help customers reduce labor costs and also minimize maintenance and refurbishment costs by rolling out you guys', you know, new seamlessly deployed technologies. Got it. I really appreciate-

[Marc Baumann, Chairman and CEO at SP Plus]

That's right.

[Ross Coleman, Equity Research Analyst at CJS Securities]

-the color there. I'm gonna hop back on the queue. Thank you.

[Marc Baumann, Chairman and CEO at SP Plus]

Okay, Ross. Thank you.

[Operator]

Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one one on your telephone. Again, to ask a question, please press star one one. Our next question comes from the line of Kevin Steinke of Barrington. Your line is open.

[Kevin Steinke, Managing Director at Barrington Research]

Hey, good afternoon.

[Marc Baumann, Chairman and CEO at SP Plus]

Kevin.

[Kevin Steinke, Managing Director at Barrington Research]

-Kris.

[Marc Baumann, Chairman and CEO at SP Plus]

Good afternoon.

[Kevin Steinke, Managing Director at Barrington Research]

I wanted to. Good afternoon to you. I wanted to focus on one key phrase you had in your, you know, your press release and prepared remarks, when you said in 2023 a key focus will be accelerating the deployment of our comprehensive portfolio of technology offerings to capitalize on industry and consumer trends and realize revenue synergies from AeroParker. Can you just give a little more detail or color on, you know, exactly the steps you'll be taking there to, you know, accelerate deployment of your technology offerings and capitalize on the revenue synergies and maybe then any sort of, you know, detail on the investments behind those efforts to accomplish those objectives?

[Marc Baumann, Chairman and CEO at SP Plus]

Sure. I'd be glad to, Kevin. You know, again, I think it's probably useful to distinguish between our commercial business and our aviation business. You know, in the commercial business, you know, we have a large footprint. As we've talked about, we operate over 3,100 locations now. One way for us to deploy our technology is what I was just explaining to Ross on the last question, and that's really replacing aging equipment with our technology offerings. In some cases, that means bringing hardware and software. In other cases, we would just bring hardware to and plug that in, if you will, to the existing parking equipment there.

[Marc Baumann, Chairman and CEO at SP Plus]

All with the idea that we will allow consumers to transact in a lower friction, more efficient way. We are, in many cases, able to capture a consumer fee off of that transaction, and that's the way that we would get paid off of some of those transactions. We see ourselves as being able to drive growth in the commercial segment by bringing those capabilities in. We also, as we talked earlier, as I commented on the call, in my prepared remarks in an earlier question, you know, we're expanding our addressable market. There's lots of places that don't have technology now where it's free parking and where we can bring our solutions at low or no cost to the client, and we can generate revenue for the client and revenue for ourselves, again, primarily through these consumer fees.

[Marc Baumann, Chairman and CEO at SP Plus]

I think we see a lot of growth opportunity, you know, within our established footprint within commercial of 3,100 locations. Likewise, you know, we have the potential to go get new clients. As I indicated, it was our second best year ever in the commercial segment for new business, and we have a very robust pipeline of opportunities out there. Clearly, we're seeing that a combination of our operating expertise, our technology offerings are really resonating with clients who are looking to improve the experience of their customers, gain better control over revenue, and to have a better environment in general from the point of view of the services being offered. I think all of those are ways, you know, that we see ourselves gaining growth within that segment.

[Marc Baumann, Chairman and CEO at SP Plus]

I think in aviation, it's a lot of the same story, but the additive is that because we have AeroParker now, we have an additional, you know, service line that we can bring to clients. We had some recently where we've gone to some of our established airport clients, and we've said, "You know, we'd like to tell you about AeroParker, and look what it can do. It can provide reservation functionality for people who want to make those arrangements in advance. It can provide other convenience for e-commerce and other solutions that clients are looking to provide, again, for people traveling to an airport to reduce friction, make the travel experience better for them." I think there's been a lot of receptivity to that. AeroParker is out selling its services on its own.

[Marc Baumann, Chairman and CEO at SP Plus]

It's done very, very well prior to joining forces with us. I think as we look at those 86 airports in North America where we operate, either SP Plus airports or Bags, we can now be planning to introduce AeroParker to all of those clients, and vice versa in Europe. I think within aviation, we have the same thing. It's go sell additional services. It's also acquiring and winning on new deals, and at the same time, the cross-sell synergy that comes from having these three different platforms, if you will, as capabilities that we can bring to clients.

[Kevin Steinke, Managing Director at Barrington Research]

Okay, great. If you also could, just touch on, you know, maybe some of the investments you're making to either accomplish those objectives you were just discussing or, you know, just other investments in 2023, that you think are gonna help set you up for that faster rate of growth in 2023 and beyond. You know, maybe, you know, what's contributing to that $15 million increase in G&A.

[Kris Roy, CFO at SP Plus]

Yeah. I mean, Kevin, as you look at it, I think what we really wanna focus on in terms of bringing costs into the business is, can we accelerate the growth in our business? I think everything that we're doing as it relates to our G&A and our G&A costs is really looking to say, "What's the ROI on that, and how can we deploy those costs so that we can accelerate the pace of our growth?" I think you would look at it on the technology side, bringing individuals into the organization that can help support the deployment of our technology solutions, both across the commercial segment as well as the aviation segment.

[Kris Roy, CFO at SP Plus]

I think bringing in new business development individuals that can further allow us to get maybe a little bit deeper into clients maybe we haven't had a relationship with before or we haven't had the relationship at the same level that we've had before. Bringing in new individuals that can help us continue to grow the business. Lastly, support functions that can allow us to grow in terms of the gross profit growth and support that gross profit growth.

[Marc Baumann, Chairman and CEO at SP Plus]

I mean, the only thing I would add to what Kris is saying is that from the point of view of the development of the Sphere platform, AeroParker and Bags, the peak development is sort of behind us now. You know, you've seen us ramp up over the past few years once we started on this strategy. While we'll need to continue investing to develop to make sure that these products are at the cutting edge, that's how we win new business, is by demonstrating that we have capabilities that others don't have. You know, our main focus in 2023, and you'll see even more of this as we move into 2024, is to leverage the investments we've made already in technology and in G&A and try to accelerate our growth by the deployment of those capabilities. That's really the kind of our focus.

[Marc Baumann, Chairman and CEO at SP Plus]

During the pandemic and before the pandemic, a lot of our focus was on developing the capabilities. While we've done a lot of deployment, you know, 2023 is really, our key focus is on execution. We see that being the way that we get that, single-digit gross profit growth on an ongoing basis is the continued deployment. I think one thing that's important, you know, we've introduced, a new metric, you know, which is really to let you know our scale and reach around our airport footprint. As well as some other data that's in our investor presentation. The thing to bear in mind, we're providing some kind of a service or another at almost 160 global airports. In a lot of cases, it's one service. In some cases, it's several services.

[Marc Baumann, Chairman and CEO at SP Plus]

We have growth opportunities within aviation by simply deploying technology where we're only operating or additional operating services or additional technology where we may only be providing one or two services. Even without going and getting additional airports to provide our services, you know, we see opportunities to create sustained growth within the portfolio of clients that we already know and who know us.

[Kevin Steinke, Managing Director at Barrington Research]

Okay, great. That's helpful color. I also wanted to ask, in terms of, you know, leverage, I guess you referenced in your press release, in the future, you think the high single digit gross profit growth beyond 2023 will lead to significant operating leverage and accelerated growth in EBITDA and EPS. I, you know, I know you're not providing guidance beyond 2023, but just kind of as you think about it strategically, do you feel like 2023 is more of an investment year where, you know, like you guided to EBITDA grows in line with gross profit and then beyond that, you start to see more of that operating leverage in 2024 and beyond?

[Kris Roy, CFO at SP Plus]

Kevin, this is Kris. I would say the short answer is yes. I think as we look at 2023, certainly it's a little bit of an investment year in terms of bringing additional resources into the organization that can support and generate faster growth. I think if you were to look at kind of that G&A ratio to GP ratio or GP to G&A ratio that we've kinda historically had, if you look at. This gives a little bit of a sense just in terms of where it's at relative to where we've been.

[Kris Roy, CFO at SP Plus]

If you look at the midpoint of gross profit of $250 million, you look at G&A in terms of $120 million, which is kinda what we've said in our earnings releases, you know, we're at $105 million, and we expect about $15 million of additional cost. That gives you a 48% G&A to GP ratio. If you go back to kind of that 2019 year on a pre-COVID basis, we're kind of right at that same level. We're right around 48%, 49%. I think while we've made a lot of investments in our G&A, I don't think it's been kinda outsized to where we've been historically.

[Kevin Steinke, Managing Director at Barrington Research]

Right. Okay. put get one more question in here. You know, you talked about the goal of 10% of your gross profit coming from technology solutions by 2025, and it's only about 2% now. Can you just define exactly, you know, what you mean by technology solutions? I know technology is infused into a lot of your services and your solutions, but are you specifically referring just to those, you know, recurring transaction fees? I mean, is that kind of where the 10% number comes from or?

[Marc Baumann, Chairman and CEO at SP Plus]

Yes. I mean, I think in a nutshell, we're talking about trying to capture fees or from monetizing our technology, and that might be software, it might be hardware, it might be hardware and software. As you say, Kevin, you know, technology and our operating business are very intertwined. We also see that the consumer is prepared to pay a fee, you can call it a convenience fee, a processing fee, some sort of a modest fee for the benefit of convenience or a service. We see we're getting these fees now. We see others in the marketplace charging fees like that, so we know that consumers, you know, readily accept that, and we see that as an area where we can grow. That growth really comes on the back of deploying the technology that we have already developed.

[Marc Baumann, Chairman and CEO at SP Plus]

That's what I meant about executing against the plan. We have the technology that can do those things. We don't need to do significant additional developments so that we can capture those kind of fees. Now, the job is really to get it out there into the marketplace as much as possible and to be in a position to capture those fees as we go forward.

[Kevin Steinke, Managing Director at Barrington Research]

All right, great. Thank you for taking the questions. I'll turn it over.

[Marc Baumann, Chairman and CEO at SP Plus]

Okay. Thanks, Kevin.

[Kris Roy, CFO at SP Plus]

Thanks, Kevin.

[Operator]

Thank you. One moment, please. Our next question comes from the line of Marc Riddick of Sidoti & Company. Your line is open.

[Marc Baumann, Chairman and CEO at SP Plus]

Good afternoon, Marc.

[Kris Roy, CFO at SP Plus]

Hello.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Good evening, everyone. I know you've covered quite a bit, first of all, and I wanna thank you for all the detail that you provided, both in prepared remarks as well as the slides. I was wondering if you could talk a little bit, maybe more big picture in the, and specifically around maybe what you're seeing with the return to office trends and maybe how that is, you know, working through your expectations and working through into the 2023 guidance commentary.

[Marc Baumann, Chairman and CEO at SP Plus]

Okay. Sure. I'd be glad to, Marc. And of course, if my commute to the office is any indicator, everybody must be back at work because the actual commute time, at least in the Chicago area, are every bit as significant as they were back pre-pandemic. We do know, because there's a lot of data out there, that most companies have settled into a hybrid model for office. And clearly, hybrid models, in order to optimize the revenue for our client base requires people that have cutting-edge technology, can offer unique solutions to what consumers are looking for. Because a lot of people aren't prepared to buy monthly parking if they're only coming in two, three, or even four days a week. Our technology platforms can enable those sorts of transactions.

[Marc Baumann, Chairman and CEO at SP Plus]

Of course, our digital marketing and other marketing services can enable us to attract parkers to the client locations that we serve. We actually feel very good about the office environment and don't really expect to see a significant additional return to office based on beyond what we are seeing now. You know, it's like 50%-60%, you know, in most major cities, and certainly on certain peak days like Wednesday, Thursday, it might even be more than that, and it's pretty dead on Monday and Friday. In terms of our growth, and we saw this in our new location growth, you know, we brought on almost as many offices in terms of new clients in 2022 as we did any vertical within commercial.

[Marc Baumann, Chairman and CEO at SP Plus]

I think that just indicates to us that the owners and property managers of office properties look at our operating capabilities and our technology capabilities and say, "These are gonna help me optimize the value of my asset.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Right. That makes perfect sense. I was wondering if you could talk a little bit around the, because it certainly seems as though you kind of have this under control, but maybe we could sort of talk a little bit more about the, you know, the concept of labor inflation and maybe what you're seeing there, because it certainly seems as though you've been able to manage that, you know, from the, you know, throughout the entire post-pandemic environment. Certainly it seems as though you're feeling fairly comfortable about what you expect to see despite the inflationary environment, going into and through 2023. Maybe you could talk a little bit about maybe what you're seeing there from a labor area that sort of gives that level of comfort.

[Kris Roy, CFO at SP Plus]

Yeah. Marc, this is Kris. I think, you know.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Hi, Kris.

[Kris Roy, CFO at SP Plus]

If you go back, and I know we talked about this kind of a couple of quarters ago, but we really did take a look at our kind of labor. As you look at the workforce, we really looked at it on a more market-by-market approach in terms of what is that market, what is the demands on that market, and how do we try and help our operational folks get people into the organization in terms of workforce. I think as you look at some of the inflationary pressures that have happened, either through individuals feeling a little bit of pinch in their pocketbooks or becoming more comfortable with kind of return to work given the pandemic is behind us, I think you're seeing folks get back into the labor force.

[Kris Roy, CFO at SP Plus]

I think that's certainly, opening up more opportunities to bring in folks into the organization as well as tamp down kind of that inflationary pressure that we saw kind of earlier in the year in terms of labor rates. I think all in all, things seem to be going pretty well. I think they've gone well historically for us, but I think we're in a pretty good spot from a labor participation.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Okay, great. Another, just another big picture kind of question I was sort of thinking about and I was wondering if there's something that you're seeing as of yet or if it's part of your current forecast. Are there any thoughts as to maybe what you're seeing with municipalities and the benefit you may or may not see eventually from them spending more, you know, from infrastructure funding or other funding availabilities? Are you beginning to see more of that type of activity, or do you forecast that being something that could be a benefit down the road?

[Marc Baumann, Chairman and CEO at SP Plus]

Well, municipalities definitely have financial pressures on them, as we may all know including in the cities we live in, and a lot of those are just the demand for services, you know, pension obligations and the like. Clearly, I think municipal leaders are looking for options to improve and to generate more revenue and to do so in an effective way. At the approximately 90 municipalities where we provide services on street, you know, and that would be cities like Los Angeles or New Orleans or Atlanta, Georgia, you know, we're bringing, again, the same cutting-edge technology, the low-friction solutions, text to pay, scan to pay, using your mobile device to facilitate a transaction.

[Marc Baumann, Chairman and CEO at SP Plus]

When we bring those things to bear, what the clients experience is a higher capture rate of the revenue because it make it so easy to pay, it's almost like, well, I might as well do it. Your compliance levels are very high. There's definitely renewed interest in what can we do there. Many cities across country still have the traditional single-head parking meters that accept coins. If they do, and there's about 3,000 cities out there that, you know, that have on-street parking, you know, there's huge opportunities for them to simply outsource their operation to somebody like us. We can do it all. We can bring the technology. We can write parking tickets. We can do enforcement. You know, our whole array of services, you know, are there.

[Marc Baumann, Chairman and CEO at SP Plus]

You mentioned financing or other options, you know, and we're seeing this. It hasn't resumed in the municipality space yet, but universities are really looking at some of these same issues. We partner with some financial backers for, in effect, a P3 privatization at the University of Toledo last year, which has gone exceptionally well and where the university was getting both upfront cash flow from investors, but also sharing in an increased revenue stream that's been brought about by us bringing in our technology, capturing more of the revenue. They have an ongoing higher revenue stream than they had previously, plus this upfront payment.

[Marc Baumann, Chairman and CEO at SP Plus]

I think once you get a couple of these success stories, being known in the, you know, out there in the world, if you will, there's gonna be others clamoring to do the same thing. We're actively working with the same financial partner to talk to other prospective universities who now can see the value. It's almost a little bit like having your cake and eating it too. I can get some needed upfront funds that maybe help me with something that I need, but I can also have a higher revenue stream than I had before when I was doing it myself.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Great. The last one for me, I promise, 'cause I know we've been going. We're up against it now. I was wondering if you could talk a little bit about the pricing dynamic that you're seeing, both with the existing customers, new customers, and then, you know, how those thoughts into maybe what the consumer price increases may sort of play out as to how that sort of played into the setting of your 2023 guide. Thanks.

[Marc Baumann, Chairman and CEO at SP Plus]

Sure. Well, I think I mean, when we like to talk about the people who own the assets or manage the assets that we operate as clients and those people, you know, clearly, if you can demonstrate value to them, if you can show them that bringing operating expertise, marketing strategies, digital strategies, digital solutions in the form of hardware and software that create both a better experience for their consumers and also more money to their bottom line, they're prepared to pay a fair fee for that. So it, and we have never started a business to try to be the low cost solution. We have always thought to be the people that provide solutions that create the most value for asset owners.

[Marc Baumann, Chairman and CEO at SP Plus]

If we do that, then we find that we're able to be paid fairly for those services. With respect to the public itself, I think there's, you know, there's been a lot of inflationary increases in parking rates in most cities, and a lot of it has been driven by the fact that a lot of folks are not comfortable yet riding on mass transit. They often in the past also had monthly passes on for mass transit. They've gotten used to maybe being in their car. There is a lot more travel and commuting to work and to other places by car than there was before. Uber and Lyft, you know, rates have gone higher or often waiting times are higher.

[Marc Baumann, Chairman and CEO at SP Plus]

As a consequence, you know, there is definitely the ability to raise parking rates, but at the same time convert more of the parking facilities for daily parking as opposed to monthly parking. Of course, monthly parking is discounted parking. From the vantage point of clients, from the vantage point of ourselves, where we're operating lease locations, if we can bring in more daily parkers and fewer monthly parkers, you know, we can actually generate more bottom-line profit for those facilities. Those dynamics are still going on. You know, like inflation generally in our economy, there were big increases, you know, coming out of the pandemic that's leveling off now.

[Marc Baumann, Chairman and CEO at SP Plus]

We have web tools that we've developed where we are scraping competitive parking rates around the facilities we operate, and that enables us to recommend changes to pricing to our clients or for ourselves at our lease locations. We're monitoring it very carefully and constantly, you know, for opportunities to increase parking rates and generate more profit for clients and more bottom line for ourselves.

[Marc Riddick, Senior Equity Analyst at Sidoti & Company]

Excellent. Thank you very much.

[Marc Baumann, Chairman and CEO at SP Plus]

Thanks, Marc. Thanks, Marc. You too.

[Operator]

Thank you. I'm showing no further questions at this time. I turn the call back over to Marc Baumann for any closing remarks.

[Marc Baumann, Chairman and CEO at SP Plus]

Great. Well, thank you. Thanks to all of you for joining us today. We are excited about the prospects for our future. We've tried to lay out some new metrics and targets so that you can get a better idea of what we're working on and how we see things panning out. We look forward to bringing you another update after Q1 in early May. Take care and have a good evening.

[Operator]

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Participants

Executives

• Kris Roy, CFO
• Marc Baumann, Chairman and CEO

Analysts

• Kevin Steinke, Managing Director at Barrington Research
• Marc Riddick, Senior Equity Analyst at Sidoti & Company
• Ross Coleman, Equity Research Analyst at CJS Securities
• Tim Mulrooney, Partner and Group Head of Global Services at William Blair