SP Plus Corporation (NASDAQ:SP) is a leading provider of parking management, ground transportation, and other technology-driven mobility solutions in North America and Europe. With a diverse client base spanning aviation, commercial, hospitality, and institutional sectors, SP Plus has established itself as a trusted partner in enabling the efficient and time-sensitive movement of people, vehicles, and personal belongings.
Business Overview
At the core of SP Plus's operations are two primary contractual arrangements: management type contracts and lease type contracts. Under management type contracts, the company typically receives fixed and/or variable monthly fees for providing its services, as well as incentive fees based on the achievement of certain performance objectives. These contracts also include revenue from ancillary services such as accounting support, equipment leasing, and consulting. In contrast, lease type contracts involve SP Plus paying its clients either a fixed base rent, a percentage of rent tied to the financial performance of the operation, or a combination of both. The company then collects all revenue and is responsible for most operating expenses, excluding major maintenance, capital expenditures, and real estate taxes.As of March 31, 2024, SP Plus operated approximately 88% of its Commercial segment locations under management type contracts and 12% under lease type contracts. In the Aviation segment, the company served 169 airports across North America and Europe, providing a range of services including shuttle and ground transportation, valet, baggage handling, and technology-driven mobility solutions.
Financial Performance
SP Plus has demonstrated resilience in its financial performance, even amidst the challenges posed by the COVID-19 pandemic. For the fiscal year ended December 31, 2023, the company reported annual revenue of $1,782.3 million, a net income of $31.1 million, and annual operating cash flow of $55.8 million. Its annual free cash flow for the same period was $34.4 million.During the first quarter of 2024, SP Plus continued to deliver solid results. The company reported services revenue of $451.9 million, a 6.3% increase compared to the first quarter of 2023. This growth was driven by a 7.7% increase in management type contract revenue and a 3.2% increase in Aviation segment revenue, partially offset by an 8.2% decrease in lease type contract revenue.
Gross profit for the first quarter of 2024 was $52.7 million, with a gross profit margin of 11.7%. The company's operating income for the quarter was $18.9 million, representing a 2.1% decrease from the same period in the prior year. Net income for the first quarter of 2024 was $8.5 million, an 8.6% decrease compared to the first quarter of 2023.
Segmental Performance
SP Plus's two operating segments, Commercial and Aviation, have demonstrated varying performance trends.The Commercial segment, which encompasses services in healthcare facilities, municipalities, government, hospitality, and other commercial real estate, reported a 2.4% increase in services revenue to $147.9 million during the first quarter of 2024. Gross profit for the Commercial segment increased by 3.6% to $42.6 million, with management type contract gross profit rising 15.0% and lease type contract gross profit declining 24.8%. The segment's operating income increased by 3.8% to $32.4 million.
The Aviation segment, which serves airports, airlines, and certain hospitality clients with baggage and parking services, reported a 3.2% increase in services revenue to $74.2 million during the first quarter of 2024. Gross profit for the Aviation segment increased by 19.3% to $16.7 million, with management type contract gross profit rising 17.9% and lease type contract gross profit increasing 7.7%. The segment's operating income grew by 30.2% to $11.2 million.
Liquidity
As of March 31, 2024, SP Plus had $17.8 million in cash and cash equivalents and $232.1 million in borrowing availability under its Senior Credit Facility. The company's total indebtedness stood at $350.4 million, a decrease of $1.7 million from December 31, 2023.During the first quarter of 2024, SP Plus generated $14.6 million in net cash from operating activities, an increase of $6.9 million compared to the same period in the prior year. Net cash used in investing activities was $5.6 million, a decrease of $3.2 million from the first quarter of 2023, primarily due to lower payments related to a noncontrolling interest buyout and reduced capital expenditures. The company used $10.2 million in net cash for financing activities during the first quarter of 2024, compared to $18.7 million in net cash provided by financing activities in the same period of the prior year.