UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer Identification No.) |
Incorporation or Organization) |
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(Address of Principal Executive Offices, Including Zip Code)
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
☒ |
Accelerated Filer |
☐ |
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Non-accelerated Filer |
☐ |
Smaller Reporting Company |
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Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class |
Outstanding at August 2, 2023 |
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Common Stock, $0.001 par value per share |
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Shares |
SP PLUS CORPORATION
TABLE OF CONTENTS
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SP Plus Corporation
Condensed Consolidated Balance Sheets
(millions, except for share and per share data) |
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June 30, 2023 |
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December 31, 2022 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets |
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Goodwill |
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Other intangible assets, net |
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Deferred taxes |
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Other noncurrent assets |
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Total noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued and other current liabilities |
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Short-term lease liabilities |
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Current portion of long-term borrowings |
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Total current liabilities |
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Long-term borrowings, excluding current portion |
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Long-term lease liabilities |
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Other noncurrent liabilities |
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Total noncurrent liabilities |
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity |
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Preferred stock, par value $ |
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$ |
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$ |
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Common stock, par value $ |
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Treasury stock, at cost; |
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( |
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( |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained earnings |
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Total SP Plus Corporation stockholders’ equity |
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Noncontrolling interests |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
2
SP Plus Corporation
Condensed Consolidated Statements of Income
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Three Months Ended |
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Six Months Ended |
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(millions, except for share and per share data) (unaudited) |
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June 30, 2023 |
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June 30, 2022 |
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June 30, 2023 |
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June 30, 2022 |
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Services revenue |
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Lease type contracts |
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$ |
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$ |
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$ |
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$ |
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Management type contracts |
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Reimbursed management type contract revenue |
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Total services revenue |
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Cost of services (exclusive of depreciation and amortization) |
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Lease type contracts |
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Management type contracts |
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Reimbursed management type contract expense |
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Total cost of services (exclusive of depreciation and amortization) |
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General and administrative expenses |
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Depreciation and amortization |
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Operating income |
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Other expense (income) |
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Interest expense |
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Interest income |
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( |
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( |
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( |
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( |
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Total other expenses |
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Earnings before income taxes |
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Income tax expense |
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Net income |
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Less: Net income attributable to noncontrolling interests |
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Net income attributable to SP Plus Corporation |
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$ |
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$ |
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$ |
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$ |
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Common stock data |
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Net income per common share |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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See Notes to Condensed Consolidated Financial Statements.
3
SP Plus Corporation
Condensed Consolidated Statements of Comprehensive Income
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Three Months Ended |
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Six Months Ended |
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(millions) (unaudited) |
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June 30, 2023 |
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June 30, 2022 |
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June 30, 2023 |
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June 30, 2022 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Reclassification of de-designated interest rate collars |
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— |
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— |
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Foreign currency translation gain (loss) |
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( |
) |
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( |
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Comprehensive income |
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Less: Comprehensive income attributable to noncontrolling interests |
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Comprehensive income attributable to SP Plus Corporation |
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$ |
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$ |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
4
SP Plus Corporation
Condensed Consolidated Statements of Stockholders' Equity
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Common Stock |
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(millions, except share data) (unaudited) |
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Number |
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Par |
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Additional |
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Accumulated |
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Retained Earnings |
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Treasury |
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Noncontrolling |
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Total |
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Balance at January 1, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of restricted stock units |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Non-cash stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Noncontrolling interests buyout |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Repurchases of common stock |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance at March 31, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of stock grants |
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— |
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— |
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— |
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— |
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— |
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Non-cash stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance at June 30, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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(millions, except share data) (unaudited) |
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Number |
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Par |
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Additional |
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Accumulated |
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Retained Earnings |
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Treasury |
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Noncontrolling |
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Total |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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Reclassification of de-designated interest rate collars |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Non-cash stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at March 31, 2022 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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|||
Foreign currency translation |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Reclassification of de-designated interest rate collars |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of stock grants |
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— |
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— |
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— |
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— |
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— |
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Non-cash stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchases of common stock |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2022 |
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|
$ |
— |
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$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
See Notes to Condensed Consolidated Financial Statements.
5
SP Plus Corporation
Condensed Consolidated Statements of Cash Flows
|
|
Six Months Ended |
|
|||||
(millions) (unaudited) |
|
June 30, 2023 |
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|
June 30, 2022 |
|
||
Operating activities |
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Net income |
|
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Non-cash stock-based compensation |
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Provisions (reversals) for credit losses on accounts receivable |
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( |
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Deferred income taxes |
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||
Other |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
|
||
Accrued liabilities and other |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Acquisition of other intangible assets |
|
|
|
|
|
( |
) |
|
Proceeds from sale of equipment |
|
|
|
|
|
|
||
Noncontrolling interest buyout |
|
|
( |
) |
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
||
Proceeds from credit facility revolver |
|
|
|
|
|
|
||
Payments on credit facility revolver |
|
|
( |
) |
|
|
( |
) |
Proceeds from credit facility term loan |
|
|
|
|
|
|
||
Payments on credit facility term loan |
|
|
( |
) |
|
|
( |
) |
Payments of debt issuance costs |
|
|
|
|
|
( |
) |
|
Payments on other long-term borrowings |
|
|
( |
) |
|
|
( |
) |
Payments of withholding taxes on share-based compensation |
|
|
( |
) |
|
|
|
|
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of year |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures |
|
|
|
|
|
|
||
Cash paid (received) during the period for |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes, net |
|
$ |
|
|
$ |
( |
) |
See Notes to Condensed Consolidated Financial Statements.
6
SP Plus Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Significant Accounting Policies and Practices
The Company
SP Plus Corporation (the "Company") develops and integrates technology with operations management and support to deliver mobility solutions that enable the efficient and time-sensitive movement of people, vehicles and personal travel belongings. The Company is committed to providing solutions that make every moment matter for a world on the go while meeting the objectives of the Company's diverse client base in North America and Europe, which includes aviation, commercial, hospitality and institutional clients. The Company typically enters into contractual agreements with property owners or managers as opposed to owning facilities.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the financial statements have been condensed or omitted as permitted by such rules and regulations.
All adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation have been included. Operating results during the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for any other interim period or the fiscal year ending December 31, 2023. The financial statements presented in this report should be read in conjunction with the Company’s annual Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 24, 2023 with the Securities and Exchange Commission.
Principles of Consolidation
The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and Variable Interest Entities ("VIEs") in which the Company is the primary beneficiary. The Company is the primary beneficiary of a VIE when the Company has the power to direct activities that most significantly affect the economic performance of the VIE. If the Company is not the primary beneficiary in a VIE and has significant influence, the Company accounts for the investment in the VIE as an equity method investment. As of June 30, 2023 and December 31, 2022, assets related to consolidated VIEs were $
Cash and Cash Equivalents
Cash equivalents represent funds temporarily invested in money market instruments with maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements were $
Allowance for Doubtful Accounts
Accounts receivable, net of the allowance for doubtful accounts, represents the Company’s estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of its allowance for doubtful accounts on an ongoing basis, primarily using a review of specific accounts, as well as historical collection trends and aging of receivables, and records adjustments to the allowance as necessary. The Company’s allowance for doubtful accounts, which was included in Accounts receivable, net, within the Condensed Consolidated Balance Sheets, was $
Property and Equipment, Net
Property and equipment includes the Company's equipment, internal-use software, vehicles, leasehold improvements and construction/development in process. Property and equipment are stated at cost, less accumulated depreciation and amortization, whenever applicable.
Certain costs incurred in the planning and evaluation stage of internal-use software projects are recorded to expense as incurred. Costs associated with directly obtaining, developing or upgrading internal-use software are capitalized and included as Software in Property and equipment, net, within the Condensed Consolidated Balance Sheets. When the internal-use software is ready for
7
its intended use, it is amortized on a straight-line basis over the estimated useful life of the internal-use software, which is typically
Equipment and vehicles are depreciated on a straight-line basis over estimated useful lives ranging from
Equity Investments in Unconsolidated Entities
The Company has ownership interests in
Other Noncurrent Assets
Other noncurrent assets consisted of equity investments of unconsolidated entities, advances, deposits and cost of contracts, net, as of June 30, 2023 and December 31, 2022.
Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of insurance, accrued rent, compensation, contingent consideration, payroll withholdings, property, payroll and other taxes and other accrued expenses as of June 30, 2023 and December 31, 2022.
Noncontrolling Interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of income (losses) from the subsidiaries in which the Company holds a controlling interest, but less than 100 percent, ownership interest. The results of these subsidiaries are consolidated and included within the Condensed Consolidated Financial Statements.
During the six months ended June 30, 2023, the Company recorded a $
Additionally, during the six months ended June 30, 2023, the Company paid a former minority partner $
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired. In accordance with the Financial Accounting Standards Board's ("FASB") authoritative accounting guidance on goodwill, the Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances change that could cause goodwill to become impaired. The Company has elected to assess the impairment of goodwill annually on October 1 or at an interim date if there is an event or change in circumstances indicating the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level; the Company's reporting units represent its operating segments, consisting of Commercial and Aviation. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the use of acquired assets or the Company’s business strategy, and significant negative industry or economic trends.
8
The Company may perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount. If the Company determines impairment is present, the Company would need to perform a quantitative assessment. The determination of fair value of a reporting unit utilizes cash flow projections that assume certain future revenue and cost levels, comparable marketplace data, comparable company market valuations, assumed discount rates based upon current market conditions and other valuation factors, all of which involve the use of significant judgment and estimates. The Company also assesses critical areas that may impact its business, including economic conditions, market related exposures, competition, changes in service offerings and changes in key personnel.
Other Intangible Assets, net
Other intangible assets represent assets with finite lives that are amortized on a straight-line basis over their estimated useful lives. The Company evaluates other intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to their remaining useful lives. In addition, other intangible assets are reviewed for impairment when circumstances change that would indicate the carrying value may not be recoverable. Assumptions and estimates about future values and remaining useful lives of intangible assets are complex and subjective, and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors, such as changes in the Company's business strategy and forecasts. Although the Company believes the historical assumptions and estimates are reasonable and appropriate, different assumptions and estimates could materially impact reported financial results.
Long-Lived Assets
The Company evaluates long-lived assets, including ROU assets, leasehold improvements, equipment and construction/development in progress, for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company groups assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection that demonstrates continuing losses associated with the use of a long-lived asset or asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. If the asset or asset group is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset or asset group exceeds its fair value.
Assumptions and estimates used to determine cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets or asset groups and could result in impairment charges. Future events that may result in impairment charges include economic volatility or other factors that could decrease revenues and profitability of existing locations and changes in the cost structure of existing facilities, such as increasing labor and benefit costs.
Foreign Operations
The Company has foreign operations in Canada, Puerto Rico, the United Kingdom and India. Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the rate in effect on the respective balance sheet date, while income and expenses are translated at the average rates during the respective periods. Translation adjustments resulting from the fluctuations in exchange rates are recorded as a separate component of accumulated other comprehensive loss in stockholders’ equity within the Condensed Consolidated Balance Sheets, while transaction gains and losses are recorded within the Condensed Consolidated Statements of Income. Deferred taxes are not recorded on cumulative foreign currency translation adjustments when the Company expects the foreign earnings to be permanently reinvested.
2. Acquisitions
On
On
9
future and adjust the contingent consideration for any changes in the estimated fair value each reporting period. DIVRT's operations are included in the Commercial segment.
Both acquisitions enhance the Company's position as a global provider of frictionless technology solutions that are independent of the Company's legacy parking management and transportation related operations. The acquisitions of KMP and DIVRT have been accounted for as business combinations, and the assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition dates. Goodwill was measured as the excess of the consideration over the assets acquired, including other intangible assets, less liabilities assumed, based on their estimated fair values at the acquisition dates. Tax deductible goodwill related to the acquisitions was $
During the three and six months ended June 30, 2023, the acquisitions contributed $
The Company believes the information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however, the provisional measurements of fair value for the other intangible assets and goodwill of KMP and DIVRT are subject to change. As a result, during the measurement period, which may be up to one year from the acquisition dates, adjustments to assets and liabilities assumed will be recorded with corresponding adjustments to goodwill. The Company expects to complete the purchase price allocations for the KMP and DIVRT acquisitions as soon as practicable but no later than one year from the acquisition dates.
The estimated fair values of the assets acquired and liabilities assumed based on the information that was available as of the acquisition dates were as follows:
(millions) |
|
|
|
Cash and cash equivalents |
$ |
|
|
Accounts receivable |
|
|
|
Prepaid expenses and other current assets |
|
|
|
Other intangible assets |
|
|
|
Goodwill |
|
|
|
ROU asset |
|
|
|
Accounts payable |
|
( |
) |
Accrued and other current liabilities |
|
( |
) |
Deferred tax liability |
|
( |
) |
Other long-term borrowings |
|
( |
) |
Net assets acquired and liabilities assumed |
|
|
|
Less: cash and cash equivalents acquired |
|
|
|
Less: contingent consideration payable |
|
|
|
Net cash paid |
$ |
|
In addition to the acquisitions discussed above, on April 18, 2022, the Company acquired certain other intangible assets for a purchase price of $
As discussed above, during the year ended December 31, 2022, the Company recorded additions to other intangible assets of $
(millions) |
|
Estimated Life |
|
Estimated Fair Value |
|
|
Proprietary know how |
|
|
$ |
|
||
Customer relationships |
|
|
|
|
||
Trade names |
|
|
|
|
||
Covenant not to compete |
|
|
|
|||
Estimated fair value of identified intangible assets |
|
|
|
$ |
|
The fair values of other intangible assets acquired were determined to be Level 3 under the fair value hierarchy. The fair value estimate for all identifiable intangible assets is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset.
The estimated fair values of Proprietary know how were determined using the multi-period excess earnings method under the income approach utilizing projected financial information for each technology that was acquired. The estimated fair value of the customer relationships was determined using the distributor method and excess earnings method under the income approach. The estimated fair values of the trade names were determined using the relief from royalty savings method under the income approach. The Company considered the return on assets and market comparable methods when estimating an appropriate royalty rate for the trade names.
10
3. Leases
The Company leases parking facilities, office space, warehouses, vehicles and equipment and determines if an arrangement is a lease at inception. The Company subleases certain real estate to third parties. The Company's sublease portfolio consists of operating leases for space within leased parking facilities.
As discussed in Note 1. Significant Accounting Policies and Practices, the Company tests ROU assets when impairment indicators are present.
The components of ROU assets and lease liabilities and the classification within the Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022 were as follows:
(millions) |
|
Classification |
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Assets |
|
|
|
|
|
|
|
|
||
Operating |
|
Right-of-use assets |
|
$ |
|
|
$ |
|
||
Finance |
|
|
|
|
|
|
|
|||
Total leased assets |
|
|
|
$ |
|
|
$ |
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
|
||
Operating |
|
Short-term lease liabilities |
|
$ |
|
|
$ |
|
||
Finance |
|
|
|
|
|
|
|
|||
Noncurrent |
|
|
|
|
|
|
|
|
||
Operating |
|
Long-term lease liabilities |
|
|
|
|
|
|
||
Finance |
|
|
|
|
|
|
|
|||
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
The components of lease cost and classification within the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2023 and 2022 (unaudited) were as follows:
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(millions) |
|
Classification |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Operating lease cost (a)(b) |
|
Cost of services - lease type contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term lease (a) |
|
Cost of services - lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease |
|
Cost of services - lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on lease liabilities |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net lease cost |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Sublease income was $
11
Maturities, lease term and discount rate information of lease liabilities as of June 30, 2023 (unaudited) were as follows:
(millions) |
|
Operating |
|
|
Finance |
|
|
Total |
|
|||
2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2024 |
|
|
|
|
|
|
|
|
|
|||
2025 |
|
|
|
|
|
|
|
|
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
After 2027 |
|
|
|
|
|
|
|
|
|
|||
Total lease payments |
|
|
|
|
|
|
|
|
|
|||
Less: Imputed interest |
|
|
|
|
|
|
|
|
|
|||
Present value of lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|||
Weighted-average discount rate |
|
|
% |
|
|
% |
|
|
|
Future sublease income for the above periods shown was excluded, as the amounts are not material.
Supplemental cash flow information related to leases during the six months ended June 30, 2023 and 2022 (unaudited) was as follows:
|
|
Six Months Ended |
|
|||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
Operating cash outflows related to operating leases |
|
$ |
|
|
$ |
|
||
Operating cash outflows related to interest on finance leases |
|
|
|
|
|
|
||
Financing cash outflows related to finance leases |
|
|
|
|
|
|
||
Leased assets obtained in exchange for new operating liabilities |
|
|
|
|
|
|
||
Leased assets obtained in exchange for new finance lease liabilities |
|
|
|
|
|
|
4. Revenue
The Company recognizes revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.
Contracts with customers and clients
The Company accounts for a contract when it has the approval and commitment from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Once a contract is identified, the Company evaluates whether the contract should be accounted for as more than one performance obligation. Substantially all of the Company’s revenues come from the following two types of arrangements: Lease type and Management type contracts.
Lease type contracts
Lease type contract revenue includes gross receipts (net of local taxes), consulting fees, e-commerce technology fees, customer convenience fees, gains on sales of contracts and payments for exercising termination rights. Performance obligations related to lease type contracts include parking for transient and monthly parkers. Revenue is recognized over time as the Company provides services. Under lease type arrangements, the Company pays the property owner a fixed base rent, percentage rent that is tied to the facility’s financial performance, or a combination of both. The Company operates the parking facility and is responsible for most operating expenses, but typically is not responsible for major maintenance, capital expenditures or real estate taxes. Certain expenses, primarily rental expense for the contractual arrangements that meet the definition of service concession arrangements, are recorded as a reduction of Service revenue – lease type contracts.
Management type contracts
Management type contract revenue consists of management fees, including both fixed and performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of the Company's technology solutions. In exchange for this consideration, the Company may have a bundle of integrated services that comprise one performance obligation and include services such as managing the facility, as well as ancillary services such as accounting, equipment leasing, consulting, insurance and other value-added services. Management type contract revenues do not include gross customer collections at the managed facilities as these revenues belong to the property owners rather than the Company. Management type contracts generally provide the Company with management fees regardless of the operating performance of the underlying facilities. Revenue is recognized over time as the Company provides services.
12
Service concession arrangements
Certain expenses (primarily rental expense), as well as depreciation and amortization, related to service concessions arrangements for lease type contracts, are recorded as a reduction of Service revenue – lease type contracts.
The Company recorded cost concessions related to service concession arrangements (recognized as an increase to revenue) of $
Disaggregation of revenue
The Company disaggregates its revenue from contracts with customers by type of arrangement for each of the reportable segments. The Company has concluded that such disaggregation of revenue best depicts the overall economic nature, timing and uncertainty of the Company's revenue and cash flows affected by the economic factors of the respective contractual arrangement. See Note 13. Segment Information for further information on disaggregation of the Company's revenue by segment.
Performance obligations
As of June 30, 2023, the Company had $
The Company expects to recognize the remaining performance obligations as revenue in future periods as follows:
(millions) (unaudited) |
|
Remaining |
|
|
|
$ |
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
Total |
|
$ |
|
Contract balances
Contract assets and liabilities are reported on a contract-by-contract basis and are included in Accounts receivable, net, and Accrued and other current liabilities, respectively, within the Condensed Consolidated Balance Sheets.
The following table provides information about accounts receivable, contract assets and contract liabilities with customers and clients as of June 30, 2023 (unaudited) and December 31, 2022:
(millions) |
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Contract asset |
|
|
|
|
|
|
||
Contract liabilities |
|
|
( |
) |
|
|
( |
) |
Changes in contract assets, which include the recognition of additional consideration due from the client, are offset by reclassifications of contract asset balances to accounts receivable when the Company obtains an unconditional right to consideration, thereby establishing an accounts receivable. The following table provides information about changes to contract assets during the six months ended June 30, 2023 and 2022 (unaudited):
|
|
Six Months Ended |
|
|||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Balance, beginning of period |
|
$ |
|
|
$ |
|
||
Additional contract assets |
|
|
|
|
|
|
||
Reclassification to accounts receivable |
|
|
( |
) |
|
|
( |
) |
Balance, end of period |
|
$ |
|
|
$ |
|
13
Changes in contract liabilities primarily include additional contract liabilities and reductions of contract liabilities when revenue is recognized. The following table provides information about changes to contract liabilities during the six months ended June 30, 2023 and 2022 (unaudited):
|
|
Six Months Ended |
|
|||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Balance, beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
Additional contract liabilities |
|
|
( |
) |
|
|
( |
) |
Recognition of revenue from contract liabilities |
|
|
|
|
|
|
||
Balance, end of period |
|
$ |
( |
) |
|
$ |
( |
) |
Cost of contracts, net
Cost of contracts expense related to service concession arrangements and certain management type contracts are recorded as a reduction of revenue. Cost of contracts expense during the three and six months ended June 30, 2023 and 2022 (unaudited), which was included as a reduction to Services revenue – management type contracts within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Cost of contracts expense |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
As of June 30, 2023 (unaudited) and December 31, 2022, cost of contracts, net of accumulated amortization, included in Other noncurrent assets within the Condensed Consolidated Balance Sheets was $
5. Legal and Other Commitments and Contingencies
The Company is subject to claims and litigation in the normal course of its business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of claims and legal proceedings brought against the Company are subject to uncertainty, the Company believes the final outcome will not have a material adverse effect on its financial position, results of operations or cash flows.
6. Other Intangible Assets, net
The components of other intangible assets, net, as of June 30, 2023 (unaudited) and December 31, 2022, were as follows:
|
|
|
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
|||||||||||||||||||
(millions) |
|
Weighted |
|
|
Intangible |
|
|
Accumulated |
|
|
Intangible |
|
|
Intangible |
|
|
Accumulated |
|
|
Intangible |
|
|||||||
Covenant not to compete |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Trade names and trademarks |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Proprietary know how |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Management contract rights |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Customer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Other intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Amortization expense related to other intangible assets during the three and six months ended June 30, 2023 and 2022, (unaudited), respectively, which was included in Depreciation and amortization within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Amortization expense |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
14
7. Goodwill
The changes in the carrying amount of goodwill during the six months ended June 30, 2023 (unaudited) were as follows:
(millions) |
|
Commercial |
|
|
Aviation |
|
|
Total |
|
|||
Net book value as of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment losses |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|||
Net book value as of June 30, 2023 |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment losses |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
|
8. Borrowing Arrangements
Long-term borrowings, as of June 30, 2023 (unaudited) and December 31, 2022, in order of preference, were as follows:
|
|
Amount Outstanding |
|
|||||
(millions) |
|
June 30, |
|
|
December 31, |
|
||
Senior Credit Facility, net of original discount on borrowings(1) |
|
$ |
|
|
$ |
|
||
Other borrowings(2) |
|
|
|
|
|
|
||
Deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total obligations |
|
|
|
|
|
|
||
Less: Current portion of long-term borrowings |
|
|
|
|
|
|
||
Total long-term borrowings, excluding current portion |
|
$ |
|
|
$ |
|
Senior Credit Facility
On April 21, 2022 (the “Fifth Amendment Effective Date”), the Company entered into a fifth amendment (the “Fifth Amendment”) to the Company’s credit agreement (as amended prior to the Fifth Amendment Effective Date, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; certain subsidiaries of the Company, as guarantors; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to the Company a senior secured credit facility (the “Senior Credit Facility”). The Senior Credit Facility permits aggregate borrowings of $
As of June 30, 2023, the Company had $
The weighted average interest rate on the Senior Credit Facility was
15
Subordinated Convertible Debentures
The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. As of October 2, 2012, the Convertible Debentures were no longer redeemable for shares. The Convertible Debentures mature April 1, 2028 at $
9. Stock Repurchase Program
On February 14, 2023, the Company's Board of Directors (the "Board") authorized the Company to repurchase, on the open market, shares of the Company's outstanding common stock in an amount not to exceed $
In May 2022, the Board authorized the Company to repurchase, on the open market, shares of the Company’s outstanding common stock in an amount not to exceed $
Stock repurchase activity under the May 2022 stock repurchase program during the six months ended June 30, 2023 and 2022 (unaudited) was as follows:
(millions, except for share and per share data) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Total number of shares repurchased |
|
|
|
|
|
|
||
Average price paid per share |
|
$ |
|
|
$ |
|
||
Total value of common stock repurchased |
|
$ |
|
|
$ |
|
The Company recorded $
The remaining authorized repurchase amount under the May 2022 and February 2023 stock repurchase programs as of June 30, 2023 (unaudited), was as follows:
(millions) |
|
June 30, 2023 |
|
|
Total authorized repurchase amount |
|
$ |
|
|
Total value of shares repurchased |
|
|
|
|
Total remaining authorized repurchase amount |
|
$ |
|
10. Stock-Based Compensation
Stock Grants
The Company granted
Restricted Stock Units
During the six months ended June 30, 2023, the Company granted
Nonvested restricted stock units as of June 30, 2023, and changes during the six months ended June 30, 2023 (unaudited) were as follows:
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
Nonvested as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Nonvested as of June 30, 2023 |
|
|
|
|
$ |
|
16
The Company's stock-based compensation expense related to the restricted stock units during the three and six months ended June 30, 2023 and 2022 (unaudited), which was included in General and administrative expenses within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Stock-based compensation expense |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
As of June 30, 2023, there was $
Performance Share Units (“PSUs”)
During the six months ended June 30, 2023 and 2022, the Company granted
Nonvested PSUs as of June 30, 2023, and changes during the six months ended June 30, 2023 (unaudited), were as follows:
|
|
Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
||
Nonvested as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Nonvested as of June 30, 2023 |
|
|
|
|
$ |
|
The Company's stock-based compensation expense related to PSUs during the three and six months ended June 30, 2023 and 2022 (unaudited), which was included in General and administrative expenses within the Condensed Consolidated Statements of Income, was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Stock-based compensation expense |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
As of June 30, 2023, there was $
11. Net Income per Common Share
Basic net income per common share is computed by dividing net income by the weighted daily average number of shares of common stock outstanding during the period. Diluted net income per common share is based upon the weighted daily average number of shares of common stock outstanding during the period plus all potentially dilutive stock-based awards, including restricted stock and performance share units, using the treasury-stock method. Unvested performance share units are excluded from the computation of weighted average diluted common shares outstanding if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the period.
17
Basic and diluted net income per common share and a reconciliation of the weighted average basic common shares outstanding to the weighted average diluted common shares outstanding during the three and six months ended June 30, 2023 and 2022 (unaudited) was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||
(millions, except share and per share data) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Net income attributable to SP Plus Corporation |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
||||
Basic weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive impact of share-based awards |
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
There were
12. Comprehensive Income (Loss)
The components of other comprehensive income (loss) and the income tax benefit allocated to each component during the three and six months ended June 30, 2023 and 2022 (unaudited) were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
Translation adjustments |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Other comprehensive income |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
(millions) |
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
|
Before Tax Amount |
|
|
Income Tax |
|
|
Net of Tax Amount |
|
||||||
Translation adjustments |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
De-designation of interest rate collars |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive income (loss) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
The changes to accumulated other comprehensive loss by component during the six months ended June 30, 2023 (unaudited) were as follows:
(millions) |
|
|
|
Foreign |
|
|
Total Accumulated |
|
||
Balance as of December 31, 2022 |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassification |
|
|
|
|
|
|
|
|
||
Balance as of June 30, 2023 |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
The changes to accumulated other comprehensive loss by component during the six months ended June 30, 2022 (unaudited) were as follows:
(millions) |
|
Foreign |
|
|
Interest Rate Collars |
|
|
Total Accumulated |
|
|||
Balance as of December 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss before reclassification |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
||
Balance as of June 30, 2022 |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
18
Reclassifications from accumulated other comprehensive loss during the three and six months ended June 30, 2023 and 2022 (unaudited) were as follows:
(millions) |
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Classification in the Condensed Consolidated Statements of Income |
||||||||||
Interest Rate Collars: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
||||
Net realized loss |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
Other expenses |
||
Reclassifications before tax |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
||
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Reclassifications, net of tax |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
13. Segment Information
Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Company's Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s segments are organized in a manner consistent with which discrete financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance.
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by the CODM. The CODM is the Company’s chief executive officer.
Each of the operating segments are directly responsible for revenue and expenses related to their operations, including direct segment general and administrative expenses. The CODM assesses the performance of each operating segment using information about operating income (loss) as its primary measure of performance, but does not evaluate segments using discrete asset information. Therefore, assets are not presented at the segment level. There were no inter-segment transactions during the three and six months ended June 30, 2023, and the Company does not allocate other expense (income), interest expense (income) or income tax expense (benefit) to the operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.
The Company’s operating segments are Commercial and Aviation:
The Other segment includes costs related to the Company’s operational support teams and costs related to common and shared infrastructure, including finance, accounting, information technology, human resources, procurement, legal and corporate development.
19
Revenue, operating income (loss), general and administrative expenses and depreciation and amortization by operating segment during the three and six months ended June 30, 2023 and 2022 (unaudited) were as follows:
|
|
Three Months Ended |
Six Months Ended |
|
||||||||||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Management type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management type contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reimbursed management type contract revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total services revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Aviation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total general and administrative expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Aviation(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
14. Subsequent Event
On
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of SP Plus Corporation’s (“we”, “us” or “our”) results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Important Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q is being filed by us with the Securities and Exchange Commission (“SEC”) and contains forward-looking statements. These statements are typically accompanied by the words “expect,” “estimate,” “intend”, “will,” “predict,” “project,” “may,” “should,” “could,” “believe,” “would,” “might,” “anticipate,” or similar terms and phrases, but such words, terms and phrases are not the exclusive means of identifying such statements. These expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted under the Private Securities Litigation Reform Act of 1995. These forward looking statements are made based on our expectations, beliefs and projections concerning future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict and many of which are beyond our control. These forward-looking statements are not guarantees of future performance and there can be no assurance that our expectations, beliefs and projections will be realized. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Our actual results, performance and achievements could be materially different from those expressed in, or implied by, our forward-looking statements. Important factors which could cause or contribute to our actual results, performance or achievements being different from those expressed in, or implied by, our forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and other documents we file with the SEC, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and except as expressly required by the federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, changes in circumstances, future events or for any other reason.
Overview
Acquisitions
On October 11, 2022, we acquired K M P Associates Limited ("KMP"), a United Kingdom based software and technology provider serving aviation and commercial parking clients, primarily through its AeroParker technology, throughout the United States and Europe, for approximately $13.8 million, less cash acquired of $0.9 million, and assumed KMP’s debt of $0.3 million. Immediately following the acquisition, we repaid all of the debt assumed. KMP’s operations are included in the Aviation segment.
On November 10, 2022, we acquired certain assets of DIVRT, Inc. ("DIVRT"), a developer of innovative software and technology solutions that enables frictionless parking capabilities, for approximately $17.6 million. In addition, we may be required to pay the former owner of DIVRT a maximum amount of $7.0 million in contingent consideration if certain targets related to the number of our locations using the DIVRT technology are met by October 31, 2025. Based on a probability weighting of potential payouts, we accrued $4.0 million in projected contingent consideration as of the acquisition date. Our estimate of the potential payout increased to $4.3 million as of June 30, 2023, due to the changes in the present value of the estimated payout. We will continue to evaluate the potential payouts in the future and adjust the contingent consideration for any changes in the estimated fair value each reporting period. DIVRT’s operations are included in the Commercial segment.
As discussed in Note 14. Subsequent Events within the notes to the Condensed Consolidated Financial Statements, we recently acquired Roker Inc.
The acquisitions noted above enhance our position as a global provider of frictionless technology solutions that are independent of our legacy parking management and transportation related operations.
Our Business
We develop and integrate technology with operations management and support to deliver mobility solutions that enable the efficient and time-sensitive movement of people, vehicles and personal travel belongings. We are committed to providing solutions that make every moment matter for a world on the go while meeting the objectives of our diverse client base in North America and Europe, which includes aviation, commercial, hospitality and institutional clients.
We typically enter into contractual relationships with property owners or managers as opposed to owning facilities. We primarily operate under two types of arrangements: management type contracts and lease type contracts.
21
As of June 30, 2023, in our Commercial segment, we operated approximately 87% of our locations under management type contracts and 13% under lease type contracts, while in our Aviation segment, we served 160 airports across North America and Europe.
In evaluating our financial condition and operating performance, our primary area of focus is on our operating income. Revenue from lease type contracts includes all gross customer collections derived from our leased locations (net of local taxes), whereas revenue from management type contracts only includes our contractually agreed upon management fees and amounts attributable to ancillary services. Gross customer collections at facilities under management type contracts, therefore, are not included in our revenue. Accordingly, while a change in the proportion of our operating agreements that are structured as lease type contracts may cause significant fluctuations in reported revenue and cost of services, our operating income under lease type contracts will be comparable to the operating income under management type contracts.
General Business Trends
We believe that sophisticated clients recognize the potential for technology-driven mobility solutions, parking services, parking management, ground transportation services, baggage handling services and other ancillary services to be a profit generator and/or a service differentiator to their customers. By outsourcing these services, our clients are able to capture additional profit and improve customer experiences by leveraging the unique technology, operational skills and controls that an experienced services and technology solutions provider can offer. Our ability to consistently deliver a uniformly high level of services to our clients, including the use of various technology solutions and enhancements, allows us to maximize the profit and/or customer experience for our clients and improves our ability to win contracts and retain existing clients. Our focus on customer service and satisfaction is a key driver of our high retention rate, which was approximately 94% and 91% for the twelve-month periods ended June 30, 2023 and 2022, respectively, for our Commercial segment facilities.
Commercial Segment Facilities
The following table reflects our Commercial facilities (by contractual type) operated on the dates indicated:
|
|
June 30, 2023 |
|
|
December 31, |
|
|
June 30, 2022 |
|
|||
Leased facilities |
|
|
414 |
|
|
|
421 |
|
|
|
428 |
|
Managed facilities |
|
|
2,842 |
|
|
|
2,709 |
|
|
|
2,660 |
|
Total Commercial segment facilities |
|
|
3,256 |
|
|
|
3,130 |
|
|
|
3,088 |
|
Aviation Segment - Airports Served
The following table reflects the number of airports where at least one of our services was provided as of dates indicated:
|
|
June 30, 2023 |
|
|
December 31, |
|
|
June 30, 2022 |
|
|||
North America |
|
|
102 |
|
|
|
100 |
|
|
|
90 |
|
Europe |
|
|
58 |
|
|
|
58 |
|
|
|
— |
|
Total Airports |
|
|
160 |
|
|
|
158 |
|
|
|
90 |
|
The increase as of December 31, 2022 included 65 unique airports added as a result of the acquisition of KMP.
Revenue
We recognize services revenue from our contracts and certain fees for using our technology-driven mobility solutions as the related services are provided. Substantially all of our revenue comes from the following sources:
Lease type contracts. Consists of all revenue received at lease type locations, including gross receipts (net of local taxes), consulting and real estate development fees, e-commerce technology fees, customer convenience fees, gains on sales of contracts and payments for exercising termination rights. As discussed in Note 4. Revenue in the notes to the Condensed Consolidated Financial Statements, revenue from lease type contracts includes a reduction for certain expenses (primarily rent expense) related to service concession arrangements.
Management type contracts. Consists of management fees, including fixed, variable and/or performance-based fees, and in some cases e-commerce technology fees, customer convenience fees and monthly subscription fees related to the use of the
22
Company’s technology solutions and amounts attributable to ancillary services such as accounting, equipment leasing, baggage services, payments received for exercising termination rights, consulting, developmental fees, gains on sales of contracts, insurance and other value-added services. We believe we generally can purchase required insurance at lower rates than our clients can obtain on their own because we effectively self-insure for all liability, worker’s compensation and health care claims by maintaining a large per-claim deductible. As a result, we generate operating income on the insurance provided under our management type contracts by focusing on our risk management efforts and controlling losses. Management type contract revenues do not include gross customer collections, as those revenues belong to the client rather than to us. Management type contracts generally provide us with a management fee regardless of the operating performance of the underlying facility. In addition, management type contract revenue includes revenue related to our other aviation services. Other aviation services include our baggage delivery services, curbside concierge services, remote airline check-in services and other miscellaneous services provided to our airport and airline clients.
Reimbursed Management Type Contract Revenue. Consists of the direct reimbursement from the client for operating expenses incurred under a management type contract.
Cost of Services (Exclusive of Depreciation and Amortization)
Our cost of services consists of the following:
Lease type contracts. Consists of contractual rents or fees paid to the client and all operating expenses incurred in connection with operating the leased facility. Contractual rents or fees paid to the client are generally based on either a fixed contractual amount, a percentage of gross revenue or a combination thereof. Generally, under a lease type arrangement, we are not responsible for major capital expenditures or real estate taxes.
Management type contracts. Expenses under a management type contract are generally the responsibility of the client. As a result, these costs are not included in cost of services. However, “reverse” management type contracts, which typically provide for larger management fees, do require us to pay for certain costs, which are included in cost of services. In addition, certain costs related to providing our other aviation and ancillary services are included in cost of services.
Reimbursed Management Type Contract Expense. Consists of directly reimbursed costs incurred on behalf of a client under a management type contract.
Gross Profit
Gross profit equals our revenue less the cost of generating such revenue (“cost of services”) and depreciation and amortization expenses related to cost of services activities.
General and Administrative Expenses
General and administrative expenses include salaries, wages, incentive compensation, stock-based compensation, payroll taxes, insurance, travel and office related expenses for our headquarters, field offices and supervisory employees. Additionally, acquisition-related expenses are included in general and administrative expenses.
Depreciation and Amortization
Depreciation is determined using a straight-line method over estimated useful lives of the various asset classes, or in the case of leasehold improvements, over the term of the operating lease or its useful life, whichever is shorter. Intangible assets determined to have finite lives, usually acquired through the acquisition of businesses, are amortized over their remaining estimated useful life.
Operating Income
Operating income represents revenue less cost of services, general and administrative expenses and depreciation and amortization. This is the key metric our Chief Operating Decision Maker (“CODM”) uses for making decisions, assessing performance and allocating resources to our Operating Segments, Commercial and Aviation.
Segments
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by the CODM. Our CODM is our chief executive officer. The CODM uses this separate discrete financial information by segment to allocate resources and assess performance, primarily based on operating income.
Our operating segments are Commercial and Aviation, which are described below.
23
The Other segment includes costs related to our operational support teams and costs related to common and shared infrastructure, including finance, accounting, information technology, human resources, procurement, legal and corporate development.
Analysis of Results of Operations
New business relates to contracts that started during the current period. Contract terminations relate to contracts that have expired or terminated early during the current period but where we were operating the business in the comparative period presented. Conversions relate to contracts that were converted from lease type contracts to management type contracts after the prior year period.
Restructuring, integration and other costs include compensation expenses related to organizational changes within our Company, integration expenses related to our recent acquisitions, and severance and other costs primarily related to workforce reductions.
Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022
Consolidated results during the three months ended June 30, 2023 and 2022, respectively, included the following notable items:
|
|
Three Months Ended |
|
|
Variance |
|
||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
$ |
442.2 |
|
|
$ |
381.0 |
|
|
$ |
61.2 |
|
|
|
16.1 |
% |
Cost of services (exclusive of depreciation and amortization) |
|
|
376.3 |
|
|
|
322.2 |
|
|
|
54.1 |
|
|
|
16.8 |
% |
General and administrative expenses |
|
|
31.8 |
|
|
|
26.7 |
|
|
|
5.1 |
|
|
|
19.1 |
% |
Depreciation and amortization |
|
|
8.8 |
|
|
|
6.5 |
|
|
|
2.3 |
|
|
|
35.4 |
% |
Operating income |
|
|
25.3 |
|
|
|
25.6 |
|
|
|
(0.3 |
) |
|
|
(1.2 |
)% |
Interest expense |
|
|
7.3 |
|
|
|
3.5 |
|
|
|
3.8 |
|
|
|
108.6 |
% |
Income tax expense |
|
|
4.8 |
|
|
|
5.9 |
|
|
|
(1.1 |
) |
|
|
(18.6 |
)% |
Net income |
|
|
13.3 |
|
|
|
16.3 |
|
|
|
(3.0 |
) |
|
|
(18.4 |
)% |
Services revenue increased by $61.2 million, or 16.1%, attributable to the following:
Cost of services (exclusive of depreciation and amortization) increased by $54.1 million, or 16.8%, attributable to the following:
24
General and administrative expenses increased $5.1 million, or 19.1%, primarily due to higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and other growth initiatives, as well as higher restructuring, integration, acquisition and other costs of $1.3 million during the three months ended June 30, 2023 as compared to $0.3 million during the three months ended June 30, 2022.
Depreciation and amortization expenses increased $2.3 million, or 35.4%, primarily due to the amortization of other intangible assets related to the recent acquisitions and our continued investment in technology and growth initiatives.
Our effective tax rate was 26.5% and 26.6% during the three months ended June 30, 2023 and 2022, respectively.
Net income decreased $3.0 million, or 18.4%, primarily due to higher interest expense as a result of higher variable interest rates and the factors noted above, partially offset by lower income taxes.
The following tables summarize our revenues (excluding reimbursed management type contract revenue), gross profit, general and administrative expenses, depreciation and amortization, and operating income (expense) by segment during the three months ended June 30, 2023 and 2022.
Commercial
|
Three Months Ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
$ |
72.4 |
|
|
$ |
67.1 |
|
|
$ |
5.3 |
|
|
|
7.9 |
% |
Management type contracts |
|
|
75.2 |
|
|
|
65.8 |
|
|
|
9.4 |
|
|
|
14.3 |
% |
Total services revenue |
|
|
147.6 |
|
|
|
132.9 |
|
|
|
14.7 |
|
|
|
11.1 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
|
13.0 |
|
|
|
13.6 |
|
|
|
(0.6 |
) |
|
|
(4.4 |
)% |
Management type contracts |
|
|
36.2 |
|
|
|
31.7 |
|
|
|
4.5 |
|
|
|
14.2 |
% |
Depreciation and amortization |
|
|
(2.2 |
) |
|
|
(1.6 |
) |
|
|
(0.6 |
) |
|
|
(37.5 |
)% |
Total gross profit |
|
|
47.0 |
|
|
|
43.7 |
|
|
|
3.3 |
|
|
|
7.6 |
% |
General and administrative expenses |
|
|
9.3 |
|
|
|
7.8 |
|
|
|
1.5 |
|
|
|
19.2 |
% |
Depreciation and amortization(1) |
|
|
1.6 |
|
|
|
1.2 |
|
|
|
0.4 |
|
|
|
33.3 |
% |
Operating income |
|
$ |
36.1 |
|
|
$ |
34.7 |
|
|
$ |
1.4 |
|
|
|
4.0 |
% |
Gross Profit
General and administrative expenses increased $1.5 million, or 19.2%, to $9.3 million during the three months ended June 30, 2023, compared to $7.8 million during the three months ended June 30, 2022. The increase was primarily related to higher compensation and non-cash stock-based compensation expenses, as well as our continued investments in growth initiatives and higher restructuring, integration and other costs of $0.8 million during the three months ended June 30, 2023 as compared to $0.6 million during the three months ended June 30, 2022.
25
Operating income increased $1.4 million, or 4.0%, to $36.1 million during the three months ended June 30, 2023, compared to $34.7 million during the three months ended June 30, 2022, primarily due to the factors noted above, partially offset by $0.4 million of amortization expenses during the three months ended June 30, 2023 related to other intangible assets acquired as a result of the acquisition of DIVRT.
Aviation
|
Three Months Ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
$ |
3.9 |
|
|
$ |
3.5 |
|
|
$ |
0.4 |
|
|
|
11.4 |
% |
Management type contracts |
|
|
69.8 |
|
|
|
60.1 |
|
|
|
9.7 |
|
|
|
16.1 |
% |
Total services revenue |
|
|
73.7 |
|
|
|
63.6 |
|
|
|
10.1 |
|
|
|
15.9 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
|
1.0 |
|
|
|
1.1 |
|
|
|
(0.1 |
) |
|
|
(9.1 |
)% |
Management type contracts |
|
|
15.7 |
|
|
|
12.4 |
|
|
|
3.3 |
|
|
|
26.6 |
% |
Depreciation and amortization |
|
|
(1.5 |
) |
|
|
(1.1 |
) |
|
|
(0.4 |
) |
|
|
(36.4 |
)% |
Total gross profit |
|
|
15.2 |
|
|
|
12.4 |
|
|
|
2.8 |
|
|
|
22.6 |
% |
General and administrative expenses |
|
|
4.0 |
|
|
|
2.9 |
|
|
|
1.1 |
|
|
|
37.9 |
% |
Depreciation and amortization(1) |
|
|
1.6 |
|
|
|
1.0 |
|
|
|
0.6 |
|
|
|
60.0 |
% |
Operating income |
|
$ |
9.6 |
|
|
$ |
8.5 |
|
|
$ |
1.1 |
|
|
|
12.9 |
% |
Gross Profit
General and administrative expenses increased $1.1 million, or 37.9%, to $4.0 million during the three months ended June 30, 2023, compared to $2.9 million during the three months ended June 30, 2022 primarily due to higher restructuring, integration and other costs of $0.4 million during the three months ended June 30, 2023 as compared to a benefit of $0.5 million during the three months ended June 30, 2022, and our continued investments in growth initiatives.
Operating income increased $1.1 million, or 12.9%, to $9.6 million during the three months ended June 30, 2023, compared to $8.5 million during the three months ended June 30, 2022, primarily due to the factors noted above, partially offset by $0.5 million of amortization expenses during the three months ended June 30, 2023 related to other intangibles assets acquired as a result of the acquisition of KMP.
Other
Operating expenses within the Other segment increased $2.8 million, or 15.9%, to $20.4 million during the three months ended June 30, 2023, compared to $17.6 million during the three months ended June 30, 2022, primarily due to higher compensation and non-cash stock-based compensation expenses and our continued investments in business development and technology deployment and other growth initiatives, as well as higher integration, acquisition, restructuring and other costs of $0.5 million during the three months ended June 30, 2023 as compared to $0.2 million during the three months ended June 30, 2022.
26
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Consolidated results during the six months ended June 30, 2023 and 2022 included the following notable items:
|
|
Six Months Ended |
|
|
Variance |
|
||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
$ |
867.5 |
|
|
$ |
730.8 |
|
|
$ |
136.7 |
|
|
|
18.7 |
% |
Cost of services (exclusive of depreciation and amortization) |
|
|
743.3 |
|
|
|
620.6 |
|
|
|
122.7 |
|
|
|
19.8 |
% |
General and administrative expenses |
|
|
62.4 |
|
|
|
51.2 |
|
|
|
11.2 |
|
|
|
21.9 |
% |
Depreciation and amortization |
|
|
17.2 |
|
|
|
13.3 |
|
|
|
3.9 |
|
|
|
29.3 |
% |
Operating income |
|
|
44.6 |
|
|
|
45.7 |
|
|
|
(1.1 |
) |
|
|
(2.4 |
)% |
Interest expense |
|
|
14.1 |
|
|
|
8.3 |
|
|
|
5.8 |
|
|
|
69.9 |
% |
Income tax expense |
|
|
8.1 |
|
|
|
10.1 |
|
|
|
(2.0 |
) |
|
|
(19.8 |
)% |
Net income |
|
|
22.6 |
|
|
|
27.6 |
|
|
|
(5.0 |
) |
|
|
(18.1 |
)% |
Services revenue increased by $136.7 million, or 18.7%, attributable to the following:
Cost of services (exclusive of depreciation and amortization) increased by $122.7 million, or 19.8%, attributable to the following:
General and administrative expenses increased $11.2 million, or 21.9%, primarily due to higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and growth initiatives, as well as higher restructuring, integration, acquisition and other costs of $2.6 million during the six months ended June 30, 2023 as compared to $0.5 million during the six months ended June 30, 2022.
Depreciation and amortization expenses increased $3.9 million, or 29.3%, primarily due to the amortization of other intangible assets related to the recent acquisitions and our continued investment in technology and growth initiatives.
27
Our effective tax rate was 26.4% and 26.8% during the six months ended June 30, 2023 and 2022, respectively.
Net income decreased $5.0 million, or 18.1%, primarily due to higher interest expense as a result of the increase in variable interest rates and the factors noted above, partially offset by lower income taxes.
The following tables summarize our revenues (excluding reimbursed management type contract revenue), gross profit, general and administrative expenses, depreciation and amortization, and operating income (expense) by segment during the six months ended June 30, 2023 and 2022.
Commercial
|
Six months ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
$ |
137.0 |
|
|
$ |
126.3 |
|
|
$ |
10.7 |
|
|
|
8.5 |
% |
Management type contracts |
|
|
155.0 |
|
|
|
137.8 |
|
|
|
17.2 |
|
|
|
12.5 |
% |
Total services revenue |
|
|
292.0 |
|
|
|
264.1 |
|
|
|
27.9 |
|
|
|
10.6 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
|
24.7 |
|
|
|
22.8 |
|
|
|
1.9 |
|
|
|
8.3 |
% |
Management type contracts |
|
|
67.5 |
|
|
|
60.2 |
|
|
|
7.3 |
|
|
|
12.1 |
% |
Depreciation and amortization |
|
|
(4.1 |
) |
|
|
(3.4 |
) |
|
|
(0.7 |
) |
|
|
(20.6 |
)% |
Total gross profit |
|
|
88.1 |
|
|
|
79.6 |
|
|
|
8.5 |
|
|
|
10.7 |
% |
General and administrative expenses |
|
|
17.5 |
|
|
|
13.9 |
|
|
|
3.6 |
|
|
|
25.9 |
% |
Depreciation and amortization(1) |
|
|
3.3 |
|
|
|
2.4 |
|
|
|
0.9 |
|
|
|
37.5 |
% |
Operating income |
|
$ |
67.3 |
|
|
$ |
63.3 |
|
|
$ |
4.0 |
|
|
|
6.3 |
% |
Gross Profit
General and administrative expenses increased $3.6 million, or 25.9%, to $17.5 million during the six months ended June 30, 2023, compared to $13.9 million during the six months ended June 30, 2022. The increase was primarily related to higher compensation and non-cash stock-based compensation expenses, as well as our continued investments in growth initiatives and higher restructuring, integration and other costs of $0.8 million during the six months ended June 30, 2023 as compared to $0.7 million during the six months ended June 30, 2022.
Operating income increased $4.0 million, or 6.3%, to $67.3 million during the six months ended June 30, 2023, compared to $63.3 million during the six months ended June 30, 2022, primarily due to the factors noted above, partially offset by $0.8 million of amortization expenses during the six months ended June 30, 2023 related to the other intangible assets acquired as a result of the acquisition of DIVRT.
28
Aviation
|
Six months ended |
Variance |
|
|||||||||||||
(millions) (unaudited) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
|
Amount |
|
|
% |
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
$ |
7.5 |
|
|
$ |
6.9 |
|
|
$ |
0.6 |
|
|
|
8.7 |
% |
Management type contracts |
|
|
138.1 |
|
|
|
109.9 |
|
|
|
28.2 |
|
|
|
25.7 |
% |
Total services revenue |
|
|
145.6 |
|
|
|
116.8 |
|
|
|
28.8 |
|
|
|
24.7 |
% |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease type contracts |
|
|
2.3 |
|
|
|
2.5 |
|
|
|
(0.2 |
) |
|
|
(8.0 |
)% |
Management type contracts |
|
|
29.7 |
|
|
|
24.7 |
|
|
|
5.0 |
|
|
|
20.2 |
% |
Depreciation and amortization |
|
|
(2.8 |
) |
|
|
(2.2 |
) |
|
|
(0.6 |
) |
|
|
(27.3 |
)% |
Total gross profit |
|
|
29.2 |
|
|
|
25.0 |
|
|
|
4.2 |
|
|
|
16.8 |
% |
General and administrative expenses |
|
|
7.9 |
|
|
|
5.6 |
|
|
|
2.3 |
|
|
|
41.1 |
% |
Depreciation and amortization(1) |
|
|
3.1 |
|
|
|
2.8 |
|
|
|
0.3 |
|
|
|
10.7 |
% |
Operating income |
|
$ |
18.2 |
|
|
$ |
16.6 |
|
|
$ |
1.6 |
|
|
|
9.6 |
% |
Gross Profit
General and administrative expenses increased $2.3 million, or 41.1%, to $7.9 million during the six months ended June 30, 2023, compared to $5.6 million during the six months ended June 30, 2022 primarily due to our continued investments in growth initiatives, as well as higher restructuring, integration and other costs of $0.6 million during the six months ended June 30, 2023 as compared to a benefit of $0.4 million during the six months ended June 30, 2022.
Operating income increased $1.6 million, or 9.6%, to $18.2 million during the six months ended June 30, 2023, compared to $16.6 million during the six months ended June 30, 2022, primarily due to the factors noted above, partially offset by $0.9 million of amortization expenses during the six months ended June 30, 2023 related to other intangibles assets acquired as a result of the acquisition of KMP.
Other
Operating expenses within the Other segment increased $6.7 million, or 19.6%, to $40.9 million during the six months ended June 30, 2023, compared to $34.2 million during the six months ended June 30, 2022, primarily due to higher compensation and non-cash stock-based compensation expenses and our continued investments in business development, technology deployment and growth initiatives, as well as higher integration, acquisition, restructuring and other costs of $1.2 million during the six months ended June 30, 2023 as compared to $0.2 million during six months ended June 30, 2022.
Analysis of Financial Condition
Liquidity and Capital Resources
General
We continually project anticipated cash requirements for our operating, investing and financing needs, as well as cash flows generated from operating activities available to meet those needs. Our operating needs can include, among other items, commitments for cost of services, operating leases, payroll, insurance claims, interest and legal settlements. Our investing and financing spending can include payments for acquired businesses or assets, joint ventures, capital expenditures, distributions to noncontrolling interests, stock repurchases and payments on our outstanding indebtedness.
29
As of June 30, 2023, we had $24.6 million of cash and cash equivalents and $215.9 million of borrowing availability under our Senior Credit Facility (as defined in Note 8. Borrowing Arrangements within the notes to the Condensed Consolidated Financial Statements). The full impact of macroeconomic conditions, including higher inflation and rising interest rates, on our business and the businesses of our customers and clients is unknown. We believe we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months.
We continue to monitor the impact of the recent regional bank failures. Currently, we do not believe that our banking partners are exposed to any significant credit risk, and continue to believe that we have sufficient assets and liquidity to adequately cover future obligations as they come due.
Outstanding Indebtedness
On June 30, 2023, we had total indebtedness of approximately $365.7 million, an increase of $21.5 million from December 31, 2022. The $365.7 million in total indebtedness as of June 30, 2023 included:
As of June 30, 2023, we were in compliance with our debt covenants under the Amended Credit Agreement (as defined in Note 8. Borrowing Arrangements within the Notes to the Condensed Consolidated Financial Statements).
As of June 30, 2023, we had $39.1 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $345.0 million.
The weighted average interest rate on our Senior Credit Facility was 6.5% and 3.3% during the six months ended June 30, 2023 and 2022, respectively. That rate included the letters of credit for both years and interest rate collars during the six months ended June 30, 2023 and 2022. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 7.0% and 3.4% during the six months ended June 30, 2023 and 2022, respectively.
Stock Repurchases
On February 14, 2023, our Board of Directors (our "Board") authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million.
In May 2022, our Board authorized us to repurchase, on the open market, shares of our outstanding common stock in an amount not to exceed $60.0 million in aggregate. During the three and six months ended June 30, 2023, 285,700 shares were repurchased at an average price of $36.53 per share under this program. As of June 30, 2023, $0.2 million remained available for repurchase under this program.
Stock repurchase activity under the May 2022 stock repurchase program during the six months ended June 30, 2023 and 2022 was as follows:
(millions, except for share and per share data) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Total number of shares repurchased |
|
|
285,700 |
|
|
|
176,500 |
|
Average price paid per share |
|
$ |
36.53 |
|
|
$ |
31.51 |
|
Total value of common stock repurchased |
|
$ |
10.4 |
|
|
$ |
5.6 |
|
No stock repurchases were made during the three months ended June 30, 2023 or the three months ended March 31, 2022.
The remaining authorized repurchase amounts under the May 2022 and February 2023 stock repurchase programs as of June 30, 2023 were as follows:
(millions) |
|
June 30, 2023 |
|
|
Total authorized repurchase amount |
|
$ |
120.0 |
|
Total value of shares repurchased |
|
|
59.8 |
|
Total remaining authorized repurchase amount |
|
$ |
60.2 |
|
Daily Cash Collections
As a result of day-to-day activity at our parking locations, we collect significant amounts of cash. Lease type contract revenue is generally deposited into our local bank accounts, with a portion remitted to our clients in the form of rental payments based on the terms of the leases. Under management type contracts, clients may require us to deposit the daily receipts into one of our local bank accounts, with the cash in excess of our operating expenses and management fees remitted to the clients at negotiated intervals. Other clients may require us to deposit the daily receipts into client designated bank accounts and the clients then reimburse us for operating expenses and pay our management fee subsequent to month-end. In addition, our clients may require
30
segregated bank accounts for receipts and disbursements. Our working capital and liquidity may be adversely affected if a significant number of our clients require us to deposit all parking revenues into their respective accounts.
Our liquidity also fluctuates on an intra-month and intra-year basis depending on the contract mix and timing of significant cash payments. Additionally, our ability to utilize cash deposited into our local accounts is dependent upon the availability and movement of that cash into our corporate accounts. For all these reasons, from time to time, we carry a significant cash balance, while also utilizing our Senior Credit Facility.
Summary of Cash Flows
Our primary sources of liquidity are cash flows from operating activities and availability under our Senior Credit Facility. Our cash flows during the six months ended June 30, 2023 and 2022 were as follows:
|
|
Six Months Ended |
|
|||||
(millions) |
|
June 30, 2023 |
|
|
June 30, 2022 |
|
||
Net cash provided by operating activities |
|
$ |
21.0 |
|
|
$ |
35.7 |
|
Net cash used in investing activities |
|
|
(13.5 |
) |
|
|
(10.7 |
) |
Net cash provided by (used in) financing activities |
|
|
4.7 |
|
|
|
(26.0 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
— |
|
|
|
(0.1 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
12.2 |
|
|
$ |
(1.1 |
) |
Operating Activities
Net cash provided by operating activities was $21.0 million during the six months ended June 30, 2023 as compared to $35.7 million during the six months ended June 30, 2022. The decrease in net cash provided by operating activities primarily resulted from the receipt of the $20.5 million U.S. Federal income tax refund during the six months ended June 30, 2022 and higher interest payments during the six months ended June 30, 2023 of $13.6 million as compared to $7.8 million during the six months ended June 30, 2022, partially offset by improved working capital.
Investing Activities
Net cash used in investing activities was $13.5 million during the six months ended June 30, 2023, an increase of $2.8 million from $10.7 million during the six months ended June 30, 2022. The increase in net cash used in investing activities primarily resulted from the increase in purchases of property and equipment, primarily related to our investments in internal-use software, of $11.3 million during the six months ended June 30, 2023 as compared to $9.1 million during the six months ended June 30, 2022, as well as the noncontrolling interest buyout of $2.2 million during the six months ended June 30, 2023.
Financing Activities
Net cash provided by financing activities was $4.7 million during the six months ended June 30, 2023, an increase of $30.7 million from net cash used in financing activities of $26.0 million during the six months ended June 30, 2022. During the six months ended June 30, 2023, we had increased borrowings on the Senior Credit Facility as compared to the six months ended June 30, 2022 due to lower net cash provided by operating activities, partially offset by higher common stock repurchases of $11.1 million under our May 2022 stock repurchase program during the six months ended June 30, 2023 as compared to $4.9 million during the six months ended June 30, 2022.
Cash and Cash Equivalents
We had Cash and cash equivalents of $24.6 million and $12.4 million as of June 30, 2023 and December 31, 2022, respectively. The cash balances reflect our ability to utilize funds deposited into our bank accounts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller, of the effectiveness of the design and operation of our disclosure controls and procedures (the "Evaluation") at a reasonable assurance level as of the last day of the period covered by this Form 10-Q.
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the
31
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures.
Based on the Evaluation, our Chief Executive Officer, Chief Financial Officer and Corporate Controller concluded that our disclosure controls and procedures were effective as of June 30, 2023.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Inherent limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to claims and litigation in the normal course of our business, including those related to labor and employment, contracts, personal injury and other related matters, some of which allege substantial monetary damages and claims. Some of these actions may be brought as class actions on behalf of a class or purported class of employees. While the outcomes of current claims and legal proceedings brought against us are subject to uncertainty, we believe the final outcome will not have a material adverse effect on our financial position, results of operations or cash flows.
We accrue a charge when we determine that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. We regularly evaluate current information available to us to determine whether an accrual should be established or adjusted. Estimating the probability that a loss will occur and the amount of a loss or a range of loss involves significant estimation and judgment.
Item 1A. Risk Factors
Investors should carefully consider the discussion of risk factors and the other information described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in subsequent filings by us with the SEC. New risks could emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
33
Item 2. Unregistered Sales of Equity and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
34
Item 6. Exhibits
Index to Exhibits
|
|
|
|
|
|
Incorporated by Reference |
||
Exhibit Number |
|
Description |
|
Form |
|
Exhibit |
|
Filing Date/Period End Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
8-K |
|
3.1 |
|
May 16, 2023 |
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Amendment to Fourth Amended and Restated Bylaws of the Company dated May 11, 2023 |
|
8-K |
|
3.2 |
|
May 16, 2023 |
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.3* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE*
104**
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Filed herewith
** Furnished herewith
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
SP PLUS CORPORATION |
|
|
|
|
Date: August 3, 2023 |
By: |
/s/ G MARC BAUMANN |
|
|
G Marc Baumann |
|
|
Chairman and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date: August 3, 2023 |
By: |
/s/ KRISTOPHER H. ROY |
|
|
Kristopher H. Roy |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
|
Date: August 3, 2023 |
By: |
/s/ GARY T. ROBERTS |
|
|
Gary T. Roberts |
|
|
Senior Vice President, Corporate Controller and Assistant Treasurer |
|
|
(Principal Accounting Officer and Duly Authorized Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36