SP PLUS CORPORATION Investor Presentation Update: Q4 2017
SP PLUS CORPORATION
Investor PresentationUpdate: Q4 2017
Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, regarding expectations, beliefs,
plans, intentions and strategies of the Company. The Company has tried to identify these statements by using words such as "expect," "anticipate,"
"believe," "could," "should," "estimate," "intend," "may," "plan," "guidance," "will," “are to be” and similar terms and phrases, but such words, terms and
phrases are not the exclusive means of identifying such statements. These forward-looking statements are made based on management's expectations
and beliefs concerning future events affecting the Company 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 management's control. Actual results, performance and achievements
could differ materially from those expressed in, or implied by, these forward-looking statements due to a variety of risks, uncertainties and other factors,
including, but not limited to, the following: intense competition; changing consumer preferences that may lead to a decline in parking demand; the
Company’s ability to preserve long-term client relationships; difficulty obtaining insurance coverage or obtaining insurance coverage at competitive
rates; risk that insurance reserves are inadequate because losses are worse than expected; losses not covered by insurance; risks associated with
management contracts and leases; deterioration of general economic and business conditions or changes in demographic trends; information
technology disruption, cyber attacks, cyber terrorism and security breaches; adverse litigation judgments or settlements; breach of credit facility terms
may restrict borrowing, require penalty payments or accelerate payment of the Company’s substantial indebtedness; the impact of public and private
regulations; financial difficulties or bankruptcy of major clients; failure of risk management and safety programs to reduce the cost of risk; labor disputes;
failure to attract and retain senior management and other qualified personnel; negative or unexpected tax events; risks associated with joint ventures;
weather conditions, natural disasters, and military or terrorist attacks, which may lead to emergency safety measures; adverse weather conditions that
lead to fluctuating financial results; risks related to any acquisitions undertaken by the Company; goodwill impairment charges or impairment of long-
lived assets; the risk that state and municipal government clients sell or enter into long-term leases of parking-related assets to the Company’s
competitors or clients; availability of adequate capital to grow the Company’s business; the Company's ability to obtain performance bonds on
acceptable terms; the impact of Federal health care reform; adverse changes in tax laws or rulings, uncertainties in the interpretation and application of
the 2017 Tax Cuts and Jobs Act of 2017; and actions of activist investors.
For a detailed discussion of factors that could affect the Company's future operating results, please see the Company's filings with the Securities and
Exchange Commission, including the disclosures under "Risk Factors" in those filings. Except as expressly required by the federal securities laws, the
Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances
or future events or for any other reason.
A copy of this presentation is available at www.spplus.com under Investor Relations.
2
SP+ at a Glance
3
Largest provider of parking management in the US
Leading provider of ancillary services including:
o Transportation
o Facility Maintenance
o Event Logistics
Operates approximately 3,600 locations in the US, Canada, and Puerto
Rico
Premier client base in Commercial, Institutional, Municipal, Airports,
Hospitality, and Event/Large Venue vertical markets
Operate under both management fee (outsource) and lease models
Current team includes over 20,000 highly trained and dedicated employees
Phase 4
Acceleration
2018+
Phase 3
Optimization
2015 - 2017
Phase 2
Integration
2012 - 2014
Past, Present and Future
4
Optimize business
with path to target
$100MM of
Adjusted EBITDA
Organic and
acquired growth
focused on new
products and
services
Phase 1
Standard Standalone
1929 - 2012
2004
Standard
Parking IPO
June 2004
2012
Standard
Parking
acquires
Central
Parking Oct
2012
2014
Standard
Parking/Central
Parking
integration
completed
2006-2010
Standard
Parking
makes
several
strategic
acquisitions
1929
Predecessor
company
founded in
Chicago
Key Investment Highlights
5
Market Leader with Scale Benefits
o Experienced high quality provider
o Diverse operating profile
o Turnkey solutions
Strong Financial Profile
o Lower-risk and more predictable business
o Strong balance sheet
o Capital efficient business model
o Consistent and predictable free cash flow
Multi-Faceted EBITDA Growth Strategy
o Gross profit expansion
o Cost reduction opportunities
Market Leader with Scale Benefits
− Experienced High Quality Provider
− Diverse Operating Profile
− Turnkey Solutions
Key Investment Highlights
6
Market Leader with Scale Benefits
o Experienced high quality provider
o Diverse operating profile
o Turnkey solutions
Strong Financial Profile
o Lower-risk and more predictable business
o Strong balance sheet
o Capital efficient business model
o Consistent and predictable free cash flow
Multi-Faceted EBITDA Growth Strategy
o Gross profit expansion
o Cost reduction opportunities
Large and Experienced Provider…
Manages approximately 3,600 locations including 70 Airports
o $4 billion+ gross receipts collected per annum
o 2 million+ parking spaces
o 750,000+ monthly parkers
o 200 million+ transient tickets processed per annum
37 million passengers ride SP+ shuttle buses annually
Current team includes 20,000+ highly trained and dedicated employees
Experienced management team with extensive operational experience (on average, 20+ years of industry experience)
7
Building upon more than 80 years of
successful operating history
…With High Quality Operations
Best-in-class employee screening and training programs
Operational Excellence program
Loss control and internal audit programs
Safety management
Best-in-class client reporting capabilities
8
Quality demonstrated by high retention rates
Significant Presence in Highly Fragmented NA Market
9
Diverse Set of Vertical Markets…
10
CommercialTraditional
InstitutionalUniversities
Healthcare
MunicipalAirport
Local Government
Hospitality Event/Large
Venue
…and Service Offerings
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SECURITY
TECHNOLOGY AND
EQUIPMENT CONSULTING
MARKETING
SERVICES
TRANSPORTATION
PARKING/
VALET
EVENT
LOGISTICS
FACILITY
MAINTENANCE
METER COLLECTION /
ENFORCEMENT
Premier Client Base
12
Advantages of Scale
13
Leverage regional management and overhead
Robust employee screening and training
Lower procurement costs
o Equipment financing for clients
Enhanced technology capabilities (e.g., websites, PCI compliance, etc.)
Advanced client reporting capabilities
Ability to leverage local capacity for hotel valet and other opportunities
Investment in Revenue Management and Marketing services
14
Unique Value Proposition
SP+ Provides our Clients
Scale
Breadth of Services
Market Expertise
Produces the maximum return on assets –both financial and customer service
Allows clients to focus on core business
Ability to satisfy end-customer needs
Turnkey solutions
Results / Advantages
Key Investment Highlights
15
Market Leader with Scale Benefits
o Experienced high quality provider
o Diverse operating profile
o Turnkey solutions
Strong Financial Profile
o Lower-risk and more predictable business
o Strong balance sheet
o Capital efficient business model
o Consistent and predictable free cash flow
Multi-Faceted EBITDA Growth Strategy
o Gross profit expansion
o Cost reduction opportunities
Strong Gross Profit Expansion Opportunities
Focus on more complex, higher margin vertical markets
o Example: municipal, airports, institutional, university, event/large venue and
hospitality
Increase penetration of wide range of ancillary services
Revenue Management and Marketing Services programs
Reduce total cost of risk
Operational Excellence programs
Increase focus on technology, marketing and other consulting
16
KE
YService Opportunities Exist Across Vertical Markets
17
Commercial Institutions Municipal/
Airports
Hospitality Event/
Large Venue
Meter Collection
and Enforcement
Transportation/
Shuttle
Medium Opportunity Small OpportunityLarge Opportunity
Valet
Facility
Maintenance
Equipment
Consulting
Marketing Services /
Revenue Mgmt
Operational Excellence Programs
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Dedicated Operational Excellence team
o Analyze revenue, expense, ticket data by location
o Assess locations for additional service offerings
o Optimize labor costs by consolidating tasks and eliminating redundancies
o Labor and overtime scheduling and tracking
Dedicated Loss Prevention team
o Assist in implementing controls to prevent and detect losses
o Focus on detecting, investigating, and resolving revenue losses
Revenue Management and Marketing Services
19
Demand-based pricing
Inventory and channel management
SP+ branded website platform
o SP+ City websites
o Mobile app
Interactive marketing support
o Search marketing
o Direct and referral traffic
o Email marketing
Custom client parking guides
Custom developed sign packages
and collateral
Location advertising packages
Growth Through Strategic Partnerships
20
Announced partnership October 30,
2014 with Parkmobile USA, Inc.
SP+ contributed its proprietary Click and
Park® parking reservation and
prepayment system
SP+ received 30% equity interest in
Parkmobile, LLC
Equity method of accounting
January 2018, sold equity interest in
Parkmobile, LLC for $19 million in gross
proceeds
Partnership Overview Strategic Rationale
Parkmobile is leading provider for on-
demand and prepaid mobile payments
for on- and off- street parking
Services are used in more than 600
locations in 45 states by millions of
registered users
Combined business is first to market
with a comprehensive solution
Provide solutions that help our clients
better serve their customers
Gross Profit Growth and G&A Reductions Drive EBITDA Growth
21
Net new location growth
Same location growth
o Higher penetration of ancillary services
o Improved pricing at lease locations
o Cost reductions at lease locations
o Growth in Revenue Management and
advertising programs
o Management fee CPI escalators
o Growth in consulting services
o Reduction in total cost of risk
Reengineer back-end support processes
Strategic sourcing
Further realign organization
Tighter cost controls
Reduce Absolute G&A CostsGrow $GP
EBITDA Growth
Key Investment Highlights
22
Market Leader with Scale Benefits
o Experienced high quality provider
o Diverse operating profile
o Turnkey solutions
Strong Financial Profile
o Lower-risk and more predictable business
o Strong balance sheet
o Capital efficient business model
o Consistent and predictable free cash flow
Multi-Faceted EBITDA Growth Strategy
o Gross profit expansion
o Cost reduction opportunities
Lower-Risk and More Predictable Business
23
More than 80% of contracts are management fee based
o Generally does not fluctuate in relation to variations in parking volumes
Disciplined approach to lease terms
o Preference for high percentage rent / low guaranteed rent
92% average location retention over the last twelve months
Diverse geographic, vertical market, and service line footprint
Strong Balance Sheet and Capital Efficient Model
24
Amended five-year senior credit agreement with improved pricing and
other favorable terms
Moderately levered business
o Targeting 2x-3x leverage
Generates substantial free cash flow
o Low capital investment requirement
o Negative working capital dynamics
Focus on capital allocation and returning value to shareholders
o Authorized $30MM share repurchase program
o Continue to evaluate options
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Financial Information
Consistent and Attractive Financial Performance
26
20132014
20152016
2017
$165.9
$169.9
$173.2
$177.2 $176.9
2013 2014 2015 2016 2017 Est 2018
$78.1 $76.9 $82.3
$91.3 $92.1
$94-$99
2013 * 2014 * 2015 ** 2016** 2017** Est.2018**
$18.2
$37.4 $36.9
$46.4 $39.7
$65-$70
* FCF was significantly impacted by payments on merger and integration related costs
** 2015 to 2017 free cash flows include significantly higher cash tax payments
***2018 expectation reflects impact of tax reform
See Non-GAAP reconciliation table in the Appendix for adjusted measures.
Adjusted Gross Profit ($MM) Adjusted G&A ($MM)
Adjusted Free Cash Flow ($MM)
2018 Expectations (selected measures):
$2.16 - $2.26 adjusted EPS
$94MM - $99MM adjusted EBITDA
$65MM - $70MM free cash flow
Adjusted EBITDA ($MM)
20132014
20152016
2017
$85.0
$90.0 $88.4
$83.0 $81.6
Long-Term Financial Objectives
Grow Gross Profit by low/mid single-digits
Continued G&A cost management
Continue growth of FCF
o Improved operating results
o Reduced CapEx
o Reduced interest costs
o Improved working capital management
Utilize excess FCF to drive shareholder value
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Summary Highlights
Large, high quality and experienced provider
o Blue-chip client base with a demonstrated history of client retention
o Geographic, vertical market and service line diversity
o Advantages of scale
o Experienced management team with significant operational experience
(on average, 20+ years of industry experience)
Multi-faceted growth strategy
o Unique value proposition complemented by vertical market specialization, value-added
and ancillary services and industry-leading technology
o Focus on revenue management, risk management and operational excellence
o Strategic partnerships and acquisitions
Attractive financial profile
o Predominantly lower-risk management contracts
o Limited capital investment requirement
o Strong balance sheet
o Predictable free cash flow
Focus on utilizing excess FCF to drive shareholder value28
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APPENDIX
GAAP to Non-GAAP Reconciliation - Historical
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($ thousands)
12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
Gross Profit 172.1$ 171.3$ 170.1$ 176.4$ 185.3$
Add: Non-routine structural and other repairs - 1.3 4.6 1.1 0.1
Subtract: Gross profit related to asset sales or dispositions (6.2) (2.7) (1.4) (0.2) (8.6)
Other, rounding - - (0.1) (0.1) 0.1
Adjusted gross profit 165.9$ 169.9$ 173.2$ 177.2$ 176.9$
General and administrative expenses 98.9$ 101.5$ 97.3$ 90.0$ 82.9$
Subtract: Restructuring, merger and integration costs and non-routine settlements (11.8) (8.5) (7.8) (6.8) (1.3)
Subtract: G&A related to asset sales or dispositions (2.2) (2.1) (1.0) - (0.1)
- (0.9) (0.1) - -
Other, rounding 0.1 - - (0.2) 0.1
Adjusted G&A 85.0$ 90.0$ 88.4$ 83.0$ 81.6$
Net income attributable to SP Plus 12.1$ 23.1$ 17.4$ 23.1$ 41.2$
Add (subtract):
8.8 (0.2) 4.8 15.8 27.7
Interest expense, net 18.4 17.4 12.5 10.0 8.6
31.2 30.3 34.0 33.7 21.0
Gain on sale of a business - - (0.5) - (0.1)
Gain on contribution of a business to an unconsolidated entity - (4.2) - - -
Equity in losses from investment in unconsolidated entity - 0.3 1.7 0.9 0.7
Other, rounding - 0.1 0.1 0.1
70.5$ 66.8$ 69.9$ 83.6$ 99.2$
Add: Non-routine structural and other repairs - 1.3 4.6 1.1 0.1
11.8 8.5 7.8 6.8 1.3
- - 0.4 - -
(4.2) (0.7) (0.5) (0.2) (8.6)
- 0.9 0.1 - 0.1
Other, rounding 0.1 - -
Adjusted EBITDA 78.1$ 76.9$ 82.3$ 91.3$ 92.1$
Net cash provided by operating activities 34.9$ 51.6$ 43.6$ 59.7$ 45.2$
Net cash (used in) provided by in investing activities (13.4) (15.0) (11.8) (13.8) 2.3
less: Cash received from sale of business, net - - (1.0) - (5.0)
Distribution to noncontrolling interest (2.8) (2.9) (3.1) (3.3) (3.2)
Effect of exchange rate changes on cash and cash equivalents (0.5) (0.2) (0.7) (0.3) 0.3
Other, rounding - 0.1 0.1 0.1 0.1
Free cash flow 18.2$ 33.6$ 27.1$ 42.4$ 39.7$
Add: Cash used for non-routine structural and other repairs - 3.8 9.9 4.0 -
Other, rounding - - (0.1) - -
Adjusted free cash flow 18.2$ 37.4$ 36.9$ 46.4$ 39.7$
Subtract: Parkmobile and other contemplated transaction costs
Twelve Months Ended
Add: Merger related minority interest
Add: Parkmobile and other contemplated transaction costs
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Add: Restructuring, merger and integration costs and non-routine settlements
Depreciation and amortization expense
Income tax expense (benefit)
Subtract: EBITDA related to asset sales or dispositions
GAAP to Non-GAAP Reconciliation – 2018 Outlook
31
2018 Outlook Per Share
Net income attributable to SP Plus, as reported Approximately $56 - $59 million $2.48 to $2.58
less: Net gain on Parkmobile transaction, after tax Approximately $7.5 million Approximately $0.32
Adjusted net income attributabe to SP Plus Approximately $48 - $51 million $2.16 - $2.26
Net income attributable to SP Plus, as reported Approximately $56 - $59 million
plus: Income tax expense Approximately $20 - $22 million
plus: Interest expense, net Approximately $8 - 9 million
plus: Depreciation and amortization Approximately $19 - $21 million
less: Net gain on Parkmobile transaction Approximately $10 million
EBITDA, as reported and adjusted Approximately $94 - $99 million
Net cash flow from operating activities Approximately $80 - $85 million
less: Capital expenditures, net Approximately $10 - $14 million
less: Distrbutions to non-controlling shareholders Approximately $3 - $4 million
Free cash flow Approximately $65 - $70 million