SP Plus Corp (SP) 2021 Q3 法說會逐字稿

Good day, and thank you for standing by. Welcome to the SP Plus Corporation Third Quarter 2021 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Kristopher Roy, Chief Financial Officer. Please go ahead.

Thank you, Victor, and good afternoon, everyone. As Victor just said, I'm Kris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our third quarter 2021 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including statements as to the impact of COVID-19, outlook and expectations for 2021, and statements regarding the company's strategies, plans, intentions, future operations, and expected financial performance. Actual results, performance and achievements could differ materially from those expressed or implied due to a variety of risks, uncertainties or other factors, including those described in the company's earnings release issued earlier this afternoon, which is incorporated by reference for purposes of this call and available on the SP Plus website and the risk factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the SEC.

In addition, management will discuss non-GAAP financial information during the call. Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance. They are provided for informational purposes only. A full reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are discussed on the call, reconciliations to comparable GAAP measure will be posted under the Regulation G tab in the Investor Relations section of the SP Plus website.

Please note, this call is being broadcast live over the Internet and is being recorded. A replay will be available on the SP Plus website shortly after the end of the call and will be available for 30 days from today.

I will now turn the call over to Marc Baumann, our Chairman and Chief Executive Officer.

Hey, thank you, Kris, and good afternoon, everybody. We're pleased to report on SP Plus' strong third quarter results. Our performance continues to track the ongoing recovery in business conditions and benefits from our streamlined cost structure. Specifically, the progressive reopening of the economy, consumer preferences for driving their personal vehicles versus mass transit and rideshare options and improving air travel and hotel occupancy have all led to a broad-based uplift in demand for our services.

Third quarter adjusted gross profit reached 84% of what it was in the comparable quarter of 2019, which we see as a strong showing given that parking activity at our same locations as well as overall air traveling, hotel occupancy rates remain lower than what it was at this time 2 years ago, prepandemic. Results for the quarter benefited from our reduced cost structure with adjusted G&A costs 20% below third quarter 2019 levels. The net result is substantial growth in adjusted EBITDA, which was up 18% on a sequential basis. As demand for our services continues to increase, you can expect to see our G&A increase, but we believe much of the cost reduction is sustainable, and we expect to continue to leverage G&A as we grow top line gross profit.

From the onset of the pandemic, we work to reposition our portfolio restructuring or exiting certain unprofitable leases and reducing costs in our business model, all while continuing to invest in our Sphere technology initiatives and maintaining an organization that we believe is well-positioned for the recovery that is currently underway. With an improved value proposition for our clients, the proven ability to start up new locations quickly and our industry-leading technology offerings, we've been able to strengthen our leadership position and win new contracts in both our Commercial and Aviation segments. We believe this points to share gains for SP Plus that will support future long-term growth.

In our Commercial segment, we began servicing 69 new locations during the third quarter. This success has been a function of SP Plus' track record of providing superior service and offering innovative technology solutions, and we believe that some of our competitors have not performed up to expectations. Given how we have helped our clients navigate during the pandemic, together with our financial stability and our award-winning innovations, we believe that owners now see us as the provider of choice versus other competitors who they may have considered in the past.

We're particularly pleased to have recently commenced operations at the University of Toledo under its public-private partnership, ParkUToledo. SP Plus is responsible for day-to-day parking management, customer service and maintenance for 66 surface lots, representing more than 10,000 spaces. And just to clarify, given that we commenced operations in October, these locations are not included in the 69 new Q3 locations that I just referenced.

With the success of this P3, we believe there will be renewed enthusiasm for public-private partnerships, particularly in higher education. Complementing robust new business growth in the commercial segment, location retention was also strong at approximately 91% for the 12 months ended September 30, 2021. Our Commercial segment continues to recover nicely and see its share of new wins. While recovery in the office vertical has been slow, we've seen gross profit return to or even exceed prepandemic levels at residential locations as more people have purchased cards for the first time during the pandemic. Gross profit at healthcare and large venue locations have also recovered to or near prepandemic levels.

Many of our new commercial wins were a direct result of our technology offerings and solutions as clients recognize that technology can solve some of the challenges resulting from a tightened labor market and as wage inflation has enhanced the return on investment of our technology products. We can offer new clients attractive solutions that reduce staffing needs while boosting their bottom line and generating a healthy return for SP Plus. A win-win all around.

Turning to Aviation. Since July, TSA passenger screenings have been running at about 75% to 80% of 2019 levels, suggesting significant additional recovery potential. Our market position continues to grow and has been further enhanced by our recent contract wins, including the parking and shuttle operations at both Reagan National and Dulles International Airports, which started October 1st and covered 32,000 parking spaces and 55 shuttle buses. We've also added valet parking services at our existing Sonoma County Airport operation and curbside management at San Francisco International Airport, where we provide parking and other services.

Last quarter, we spoke about our Curbside Concierge program, which combines bag service offering with Sphere's mobile point-of-sale system to allow us to check-in passengers on multiple airlines for a modest service fee. Since we launched this new service in May, we've rolled out 20 Curbside Concierge locations for one airline client and expect to expand to another 20 airports by year-end. Additionally, we're in discussions with several other airlines, given their interest in reducing airport and terminal congestion and improving customers' experiences, all the while reducing their operating costs.

We continue to rapidly deploy our technology offerings, and to that end, we now have 412 facilities operating with our on-demand gateway solution and expect that we will have at least 450 locations up and running by the end of the year. Deployment of our on-demand gated solution is just starting to ramp up, and we currently have 119 locations either fully installed or pending installation, closing in on our goal of 150 by year-end. As a result of the deployment of these gated and gateway solutions as well as increased reservation activity, third quarter 2021 transactions on Parking.com was up 50% over Q2 of this year. The transaction growth is even greater on our mobile point-of-sale platforms, which is up 200% in the third quarter over Q2.

I'm pleased to note that SP Plus was honored to be recognized as the innovative organization of the year by the National Parking Association, a leading industry group that counts numerous parking operators and other mobility technology solution providers as its members. This award was in large part a function of their recognition of the strength and sophistication of our Sphere brand of technology products and solutions. In addition to strengthening our ability to win new business and add incremental services for existing clients, Sphere also enables us to reduce our costs as well as capture transaction fees that were previously being earned by an outside provider. We'll continue to invest in technology offerings that position SP Plus at the forefront for new and incremental business.

Lastly, we expect our full year gross profit in 2021 to be at the high end of our guidance range of $170 million to $185 million, and we expect our G&A costs to be at the lower end of the $85 million to $90 million range. In addition, we're uplifting our operating cash flow and free cash flow guidance ranges by $10 million, which Kris will discuss more fully in a few minutes. We're very pleased with our performance to date in 2021, and we're looking forward to further recovery in overall growth in 2022, as we hopefully put the pandemic behind us, see clients ramping up our service levels and outsourcing more to us, and continue to capture new business opportunities.

I'm now going to turn the call over to Kris for a financial review of the quarter.

Thank you, Marc. My remarks today will cover adjusted third quarter 2021 results, and I'll also update you on our expectations going forward based on the business developments and trends that Marc shared with you just a moment ago. For those who are listening to our call for the first time, you can find our GAAP results and a full reconciliation of all non-GAAP measures to GAAP measures in our earnings release issued earlier this afternoon.

Third quarter 2021 adjusted gross profit improved sequentially and year-over-year to $49.5 million, a 7% increase sequentially and a 17% increase year-over-year. Just a reminder that the third quarter 2020 number included a $5.6 million benefit from an early termination fee-related to certain aviation contracts. Marc spoke about the overall improving business conditions, and our performance definitely reflects that.

Adjusted G&A expenses for the third quarter of 2021 were $20.8 million compared to $15.5 million in the year ago quarter. This 34% increase year-over-year was due to a number of reasons, but mainly once our business started to recover, we've restored the base salaries that were reduced at the onset of the COVID-19 crisis. In addition, performance-based and long-term compensation, which was not a factor in 2020, is back to more normalized levels. If we compare this year's third quarter adjusted G&A to the prepandemic third quarter of 2019, it is 20% below those levels. While we believe a large portion of these cost savings are sustainable, we do expect that G&A will increase as we support and invest in our growing business activity.

Additionally, we are very pleased to report strong third quarter and year-to-date cash from operations and free cash flow. In the first 9 months of 2021, the company generated $30.1 million in cash from operations and free cash flow of $21 million compared to 27.9 and $18.9 million, respectively, a year ago. 2021 third quarter operating cash flow was $6.8 million, and free cash flow was $3.9 million. This quarter's cash flows reflect the payment of $15.9 million for 2020 payroll taxes that were deferred as part of the CARES Act.

As Marc already stated, based on our financial performance to date and our outlook for business trends going forward, we are uplifting our full year 2021 operating cash flow and free cash flow guidance ranges for both measures by $10 million. To be exact, operating cash flow is now expected to be in the range of $62 million to $76 million, representing a 72% increase at the midpoint compared to 2020 levels. Free cash flow is now expected to be in the range of $50 million to $60 million or 92% above 2020 levels at the midpoint. Embedded in our forecast is the expectation that we will collect a $20 million income tax refund in the fourth quarter of 2021, the majority of which was contemplated when we provided our original full year guidance. So the increase in cash flow expectations is truly a function of our business conditions improving.

With that, I'll turn the call back over to the operator to begin the Q&A session. Operator, we are now ready for Q&A.

(Operator Instructions) Our first question will come from the line of Tim Mulrooney from William Blair.

So first question, your implied guidance for gross profit, I guess, your guidance implies gross profit would be kind of flattish sequentially from the third quarter to the fourth quarter and EBITDA may be down a little bit sequentially. Now the economy is still recovering, so I would have thought there'd be some sequential improvement, but then I thought maybe there might be some seasonality with the holidays or other mitigating circumstances that you might be able to highlight for us.

Tim, this is Kris. So I think if you look at just the base business kind of pre-COVID, I would say that a large majority of our seasonality happens in both the first quarter and the fourth quarter. So I think as you look at the business in terms of performance for Q4, certainly, you have some recovery that's happening, but you also have some seasonality that's offsetting that. So I think you're going to -- as you look at the implied, both gross profit and G&A, I think both of those factors have been contemplated as we've looked at our full year guidance.

Okay. That's what I suspected. And just one more from me. More than labor inflation, some of my services companies are highlighting labor availability as one of their primary concerns right now. Is this also the case for you guys? Or is it less of an issue as you continue to integrate automated technology into your facilities?

Well, I think most companies have hourly workers, there's been challenges in filling open positions, and we're certainly no exception to that. But I'd say it has not inhibited our business and our ability to deliver our results. So if we have open positions that because of the shortages that are going on now, as I indicated in my remarks, there is an opportunity to introduce automation and maybe reduce the need for filling some of those open positions, and certainly, that is going on now.

But I would say also, what we have to recognize is that in many cases, we're going to have to put up labor rates in order to be able to attract talent, and particularly in jobs that as bus drivers and valet attendants and other jobs that -- where automation can't really be a factor.

And as we do that, our goal is clearly to recover those increased costs, and we've been able to do that so far, either in the case of lease locations where we were putting up parking rates on our own behalf, and then at management locations, those increased costs are going to be passed on to our client base for the most part. So I think it's a challenge for most businesses right now, but we feel like we're navigating through it pretty well.

Our next question will come from the line of Daniel Moore from CJS Securities.

Let me start with -- this may be a little squishy, but with gross profit approaching 85% of prepandemic levels, talk about the areas of your business that are still in that reopening phase. I'm thinking of bags specifically and maybe some of the lease agreements you mentioned this type locations. Just what would it take in terms of macro environment to get back to the 100% of prepandemic gross profit levels?

Sure. Well, I think if we look at our segments and talk maybe first about our Commercial segment, which is everything besides airports and bags. As I indicated, number of our verticals are back to prepandemic levels now and they're the ones that you might imagine, they would be -- we touched on a couple of them in the comments. But residential, in particular, and large venues, I think sporting events and other large activities like that have pretty much resume sort of normal levels of activity. Office buildings are lagging and certainly, while hotels are growing constantly, and we've added a number of new hotel clients during the quarter, they're still not back to prepandemic levels. So there's a few verticals like that, that are -- still have ways to come back in the Commercial segment.

And I think clearly getting people into the offices and not full time, but at least on a hybrid schedule, will definitely help. And I think as people travel more, both business travel and also leisure travel, we're going to start to see those hotels fill up. Turning over to the Aviation segment. It's really a function of level of travel that's going on. I referenced the TSA numbers. Clearly, there's been a strong rebound in the summer with leisure travel that has fallen back a little bit as people have gone back to school, but not falling back relative to 2019. So while there's less leisure travel going on now, it's -- the relationship to 2019 is pretty much the same as it was earlier a couple of months ago. Business travel is lagging, has not come back.

Now in our business, we obviously are more focused toward leisure travel and that's really what it's going to take for the Bags business to come back fully as a sustained rebound in leisure travel. I think the good news is that airlines are really excited about the fourth quarter. They're putting on capacity and expecting people to really want to make those reconnections over the holidays with family members or maybe get -- could go someplace warm if they're in a colder climate. So I think we'll continue to see improved recovery in the aviation segment, but that -- there's some ways to go before travel has returned to the levels that it was in 2019. And I think that's really what we need to see to get our own business back to 2019 levels.

I appreciate the comments around G&A. When we do get back to more of a full reopening, whatever that looks like, how do we think about a reasonable quarterly or annual run rate for G&A?

Daniel, this is Kris. I think it's probably a little early to give kind of the full perspective around that. Certainly, we're -- we've taken a lot of costs out of the business structurally as we've looked at processes and really try to drive some incremental cost out of the business. I think as you look at some of the investments we're making on the growth of the business, not just around the Sphere Technology, but around business development activities and the like, I think it's probably just a little early. Let us kind of frame that up as we go through our budgeting season. And I think we'll be able to give you a little more perspective on that as we announce our fourth quarter results and our '22 guidance.

Got it. Safe to assume, based on the structural changes you've made and alluded to that it would be below 2019 levels?

I think that's the case. I mean I don't want to commit to how much that is. But I think the expectation would be that next year's G&A would certainly be less than 2019 G&A.

Perfect. And lastly, obviously, you've done a ton of work over the last 18 months, renegotiating leases and contracts on both temporary and permanent basis. At this stage, based on the path of reopening, where are you? What percentage of your agreements are where you would like them to be? And I'm just trying to get a sense if there are more -- there's more work to be done or if you might even benefit from some lingering underperforming contracts expiring or rolling off in the next year or so?

Sure. Yes, I think we're principally done with renegotiating deals. That being said, we have a large portfolio of leases, it's over 400 leases, and many are performing very well. And certainly, there are quite a few that are back to 2019 levels or beyond. And then we have some that are underperforming still and some of that is because of COVID and some of it is because of other factors that affect that location. So those will continue to get our attention. And if we can find ways to improve their performance, either by renegotiating or, in other cases, driving our Sphere Technology platform through those lease locations to take costs out or become -- drive more revenue, we're going to be doing all those things.

So I don't think you're going to see a radical change in our lease count as we go forward. We talked before about the fact that we were more than willing to do leases. We're just not willing to do leases that have long terms and no way out of them. We've been very, very prudent in the leases we've entered into over the past 18 months to try to make sure that we have the flexibility that we need. So I think we've got the portfolio in a good place. We've talked before about the fact that the remaining term in our lease portfolio is between 5 and 7 years. And so during that time period, for the most part, they're all going to burn off. And if we have any there that are underperforming and that we haven't been able to fix, they're going to drop away for sure.

(Operator Instructions) Our next question will come from the line of Marc Riddick from Sidoti.

So I wanted to circle back on one of the things you mentioned in your prepared remarks, which was around wage inflation and how it might -- if I heard it correctly, it might be helping to sort of put forward some of the benefits of the Sphere offerings. I was wondering if you could put a little more on that because it seems as though something that would make sense wonder if you could talk a little bit about that and how that might be a driver for technology service breakthrough going forward?

Well, I think if you look at some of the Sphere capabilities, in many cases, we're enabling a low friction using your mobile device to conduct your entire transaction. So you not only don't have to roll down the window of your car when you're entering the parking facility, you don't have to roll down the window and interact with a cashier when you're leaving. And so the increased penetration of those type of capabilities reduce the need for cashiers. There is no doubt about that. The other thing is just that we have productivity needs that we have to manage. We have to manage people pushing wheelchairs. We have to manage valet attendants who are putting cars away and getting cars out for customers.

We have to manage bus drivers and know where they are at and where they are in their routes. And so to the extent that we can deploy technology, we can improve the productivity of those people, even though those are not jobs that really could be replaced by automation, we can still help the people that are in those jobs to be more productive. And clearly, as I indicated to one of your questions, in some cases, we have to put up wages. I mean, there's just not a way around that. And we're competing in a marketplace for hourly workers with other organizations and that's just part of the feature of our business. And that's why, in particular, we like our business model, which is predominantly management contracts where those costs are passed on to clients.

Right, right. And I was wondering if you could swing back a little bit around -- and I appreciate, I think, one of the earlier questions rounding around the timing of the spending on technology offerings and going into the budgetary process. I was wondering if you could talk a little bit about maybe the scope of what you're looking at now versus maybe the beginning of the year? Are you getting the sense that some of the technology offerings that have been well received by customers or that have driven new sales, what have you. Has that evolved during the course of the year or is that along the lines of what you maybe saw when Sphere was first introduced?

Well, I think some aspects of Sphere here have been in place for a while. For example, Sphere Remote, where we can remotely manage facilities, and we're now up to over 500 locations on Sphere Remote, and that's up substantially, at least 20% during the pandemic. And so we continue to see demand from clients who are saying, you know what, I don't need to have staff at the facility, particularly at off-hours, nights, and weekends. That's a cost-saving, it reduces the pressure on labor availability as well. So we expect that will continue to grow. I mean that's -- it's a sizable number of locations, but there's a lot more that we can go it.

And generally speaking, when we bring that service in, we are continuing to earn our typical management fee from the client, and this is -- this becomes an additive service that we're providing. Now some of the other things we've talked about, the Sphere gateway solution, as we indicated, we're in the 400 range in terms of locations, and those are primarily going to go into surface lots and places that have not had revenue control equipment. And there are still many, many more locations to go.

Clearly, we've been focused on making sure that if they're lease locations, we've deployed that technology but with management clients, we have to work with them to enable those capabilities. So there is still, I think, quite a bit of deployment that will -- you'll see us engaging in over the next 12 months. But at the same time, we're not standing still. We're looking at the capabilities with Sphere and what are the -- what functionality do we want to add to it so that it can become really the -- the Parking.com can be the app of choice for people that are looking for places to park.

And then I guess the last thing from me. I wanted to just -- if we could circle -- well, I guess I could come up with 2, but maybe I'd see if I could fit it in. You made mention of public-private partnership activity and I was wondering if there was anything in particular, maybe it's a function of timing or the timing of customers coming out of the pandemic and being in a better position to do these things? Or I was wondering if there was anything in particular that you saw more recently that was driving greater activity or interest for that to be the call out?

Sure. Well, I think if you look back at the history of people, let's just call it, privatizing parking, there haven't been that many case studies. Maybe there's a dozen over the last 20 years. And some have worked out okay, and there have been some that haven't worked out so well. And the Chicago meters here get talked about a lot is being -- having being one that didn't really work for the taxpayers and was really maybe not the right way to structure a deal like that. So when those things happen, everybody sort of backs away and they sort of wait to see whether there's a better structure or someone who wants to try a new idea. But the underlying pressures that local government has, if they're operating their own parking or universities have to find cost savings to find additional sources of revenue to find ways of optimizing assets, those are still there.

And in fact, they're building. I mean, we all read about pension, obligations, growing and the like. And so I think there's a need for it and a demand for it. And there's no doubt that any institution, whether it's local government or university who would want to go down this pit is going to find -- is going to have the opportunity to get some additional cash infusion right out of the chute, not provided by us, but by the financial player who's doing the P3 with us and then get optimized performance. That's the part that SP Plus provides. We optimize the performance of those operations to generate ongoing cash flow. So I just think that there's a strong case, but we need to get a -- see a few successes in the marketplace, and that's what gets people comfortable that they're not taking a too big of a chance when they go down these paths. So I think the demand is there. I think the success, hopefully, ParkUToledo will become a wonderful case study of what to do and how to make it work. And then we'll see others coming along over the next many months.

And our next question comes from the line of Kevin Steinke from Barrington Research.

So you clearly highlighted some of the new business momentum in the Aviation segment. You also mentioned in the earnings release that you're currently in final renewal negotiations with 2 major airports. Was this -- that just meant to indicate that you feel like you're going to close those or -- what are the status of that -- those 2 negotiations right now?

Yes. I mean, I would say, in general, Kevin, our retention rate with our airport group is the highest -- it's really the highest part of our business. It's -- we don't always retain everything, but we generally do much more so than in our business in general. So I think we're just indicating that we have a couple of nice legacy deals that we're getting, we're in the completion stages of renewing, we'll probably be talking about before long. But our main focus for new business is obviously on winning new opportunities, and we talked about some of those, and that can be completely new opportunities such as the parking and shuttle at Reagan and Dulles, so it can be additional services.

We've operated the parking at San Francisco Airport for quite some time. We've renewed it many times over the years, but the curbside management was provided by one of our competitors. And so our ability to win that contract really enhances the scope of what we're doing. And we're looking around at our current airport portfolio where we're now running more airports than we ever have in the history of the company. So we have continued to add airport locations, and we're looking for opportunities for us to bid on services provided by our competitors at those airports that we already operate some form of parking or other management because, obviously, the clients are already familiar with us and would view us as a qualified bidder.

And that being said, we're also watching the bid list for new opportunities, and we'll continue to go after new airport operations. And I think we have plenty of them out there that we could go out and take, particularly because what we are hearing from airport clients that are choosing us is that our digital marketing programs, our technology under the Sphere brand of technology are really offering something that's unique and differentiated in the marketplace, and that's why they're making those decisions to switch to SP Plus from their current operator.

Okay. That's good to hear. So you also mentioned in your comments that through Parking.com, you're seeing a really nice growth in the number of transactions there, and you're capturing some fees that might have otherwise gone to third parties in the past. What do you view is kind of the role of the third-party aggregators in your business model going forward? I mean, is that continue to be a piece of your toolkit? Or are you going to just continue to displace that model? Or just any thoughts on what that looks like longer term?

Sure. Well, before I go to that, let me clarify one thing. So when we talk about lower fees, it's really not lower fees to those type of players. We're talking about technology partners that we have relied on to build out our platform of capabilities that supported Parking.com. And what we have identified are opportunities for us to bring some of those capabilities in-house to enter into new arrangements with new third parties that maybe can provide a better service or more cost-effective service. And in the case of transactions on Parking.com that are through -- the what does Sphere give and Sphere gave us solutions to assess a transaction fee to the parking person, the customer.

And so those fee -- so we are generating both revenue, new revenue streams from the monetization of those capabilities, but also reducing the cost of providing the operating those platforms by making some changes in the third parties or, in some cases, bringing it in-house. That's a key focus for us as we invest in technology is to capture costs that would have been going to others or capture an additional income stream from people parking their vehicles if we can do so. And that's not unique to us. Other people are doing the same thing.

So I think people parking recognize it paying a modest convenience fee to have some technology enabling their low friction transaction is a worthwhile trade-off. As far as aggregators, we have built out our own capabilities to identify all of the places that we are selling parking. And so at given facility, we are selling parking, obviously, on the ramp, we're selling parking to monthly parkers. We are selling parking through our Parking.com mobile app, and we're selling parking in many cases through aggregators. And those are all useful channels.

Now like anybody who looks at channel management would realize some channels are more profitable than others. Some are -- some can have higher costs and some have lower costs. And so our digital tools that we've built enable us to allocate inventory with the view that we will optimize revenue. And if we're going to optimize revenue at least, that's for our benefit if we're optimizing revenue at a management location, that's for the client's benefit.

And so if allocating some inventory to an aggregator is part of the equation of optimizing revenue for a facility, then we will be doing that. If not allocating inventory to an aggregator, it doesn't -- if that doesn't make sense, then we're not going to do that. And that's not a change but we've -- our digital analytics team has really put in place the tools to enable us to make those decisions using data and analytics, and we share that with our clients so that they can see the decisions and recommendations that need to be made around those sorts of allocation to various channels.

Okay. Okay. Got it. Just lastly, obviously, the pandemic has just changed a lot of things recently and kind of thrown a wrench in your growth trajectory temporarily. Obviously, things bouncing back now. But when we think about the business longer term, I don't know if you had a chance to revisit or rethink your longer-term targets. You had -- prepandemic you've been talking about the 3% to 4% long-term gross profit target. I mean is that something we should still think of is valid longer term or is it kind of too early for you to think about that as you just kind of are managing what's going on with the pandemic here?

Yes. Well, I think my view on this has been fairly consistent through the pandemic. When we -- when I went out with -- and I think it was 3% to 5% was sort of our long-term growth objective for gross profit. We talked about that prepandemic. And in fact, then in 2019, we actually exceeded the top of that range. And some people are saying to me, well, maybe now is the time you raise it up, and I'm like, well, it's a long-term objective in some years, we will be above that range, in other years, we'll be in that range.

Now clearly, right now, we're in a recovery to get back to where we were in 2019, which was a record year for the company on virtually all financial measures. So that's our -- that we should be able to grow faster than that until we get back to that level. But ultimately, for the long term, my view hasn't changed at all. I think that's sustainable. That means growing faster than the CPI. It means -- and to do that, we need to increase our penetration of services with our existing client base. We need to get our existing clients to give us new locations as they become more and more comfortable with us and they see the benefits of our technology offerings, and we need to capture market share from other players and continue to roll out new services through our technology umbrella that enable us to capture income streams like what I was speaking about a few minutes ago.

So I don't see why we couldn't hit -- why that is a unrealistic expectation. And I don't think the pandemic has really changed anything. Prepandemic people that are going from A to B, whether it's in a car or bus or at an airport, they want to reduce friction. They don't like congestion. They don't like to interact with other people to get a transaction done. They want to use their mobile device for everything. And we have put technology at the center of our entire ecosystem as a company, and we've accelerated that by continuing to invest in these things during the pandemic. And I think when some of the concerns and fears around social distancing go away, ultimately, people are still back to I want a low friction experience when I am going from A to B. And so I think we're well poised to take advantage of that, and there's no reason why we can't grow at those sort of levels over the long haul.

And I am not showing any further questions in the queue. I'd like to turn the call over to Marc Baumann for any closing remarks.

Thank you, Victor, and thanks to all of you for joining us today. Obviously, we're thrilled about how the year is panning out for us. Things are certainly a lot better and looking brighter than they did early in the year when we set out on the journey of 2021. So anyway, thank you again for being here today and your interest in us, and we'll look forward to talking to you next time.

This concludes today's conference call. Thank you for participating. You may now disconnect.