SP Plus Corp (SP) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the SP Plus Corporation fourth-quarter 2015 earnings conference call. (Operator Instructions) As a reminder, today's call is being recorded. I would now like to turn the conference over to Vance Johnston, Chief Financial Officer. Sir, you may begin.

Thank you, Shannon, and good morning, everybody. As Shannon just said, I'm Vance Johnston, Chief Financial Officer at SP Plus. Welcome to the conference call for the fourth quarter of 2015.

I hope all of you have had a chance to review our earnings announcement that was released last evening. We will begin our call today with a brief overview by Marc Baumann, our President and Chief Executive Officer. Then I will discuss our financial performance in a little more detail. After that, we will open up the call for a Q&A session.

During the call we will make some remarks that will be considered forward-looking statements, including statements as to our 2016 financial guidance 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 in or implied by these forward-looking statements due to a variety of risks, uncertainties or other factors, including those described in our earnings release issued yesterday, which is incorporated by reference for purposes of this call and is available on our SP Plus website.

I would also like to refer you to the risk factor disclosures made in the Company's filings with the Securities and Exchange Commission.

Finally, before we get started I want to mention that this call is being broadcast live over the Internet and that a replay will be available on our SP Plus website for 30 days from now.

With that, I will turn the call over to Mark.

Thanks Vance, and good morning, everyone. About this time last year, we communicated our goals for 2015 and beyond, which were to improve operating results by increasing gross profit at existing locations, adding new business and further reducing costs. I'm very pleased with our results in 2015 and the fact that we were able to grow adjusted EBITDA by 7%, adjusted earnings per share by 31% and generate strong free cash flow.

Looking back in 2015, we've really accomplished a lot. Most notably, we wrote more new business in 2015 than ever before, and that's the third year in a row that we have written record new business. We also successfully refinanced our senior credit facility, significantly reducing our interest expense. We realigned our organization to improve productivity and reduce costs, and rolled out a number of new safety and risk programs that further reduce our total cost of risk. We also made significant progress toward reducing our accounts receivables, which contributed to our strong free cash flow.

We achieved this 2015 performance despite a softer than planned fourth quarter. Just to give you a little more color on the Q4 and our results in the New York market, we saw reduced parking volumes at some lease locations due to required elevator repair work. As we have mentioned in the past, structural repairs were needed at certain leased garages that were acquired in the central parking merger. In some of these locations, we had to shut down car elevators or restrict access to the garages for an extended period of time, which had an impact on parking volumes and revenues. While difficult to precisely quantify, we estimate that the loss revenue due to this could be as much $0.5 million for the fourth quarter and $1.2 million for the full year. As the repair work is now largely complete, we expect to recover the vast majority of this revenue going forward.

We also saw fewer events than usual in the fourth quarter in the New York market. And Vance, of course, will provide more detail on Q4 in a few minutes.

Touching briefly on new business, we had a very active fourth quarter with continued growth in our hotel vertical market and renewals of several municipal contracts. In addition, we have been awarded a couple of nice transportation deals, one serving California State University at Fresno and another at Dallas-Fort Worth International Airport. We've highlighted some of these deals in last night's earnings release.

Looking forward to 2016, we expect to be able to grow adjusted EBITDA in high single-digit range. Our proven ability to control costs and drive cost improvement initiatives, coupled with continued growth in organic gross profit, should enable us to grow EBITDA at this level. Our focus in 2016 and beyond is to continue to grow the business organically by improving same-location gross profit and location retention while continuing to drive new business growth.

We are also turning more of our attention to longer-term priorities and are starting to evaluate other growth opportunities and capital structure initiatives. These may include strategic acquisitions or partnerships, stock repurchases or dividends, all with an eye toward driving overall growth in shareholder value.

With that, I will turn the call over to Vance to lead you through a more detailed discussion of our financial performance in 2015 and guidance for 2016.

Thanks, Marc, and hello, everybody. I would like to spend a few minutes reviewing our financial results in more detail.

Fourth-quarter 2015 adjusted gross profit decreased $4.2 million, or 9%, over the same period of 2014, largely due to the factors affecting the New York market, as Marc discussed. In addition, increased health benefit costs as well as the non-recurrence of the Q4 2014 Hurricane Sandy settlement and the timing of a few large rent adjustments and other timing-related items impacted the year-over-year results for the fourth quarter. I want to clarify that these timing items did not impact the full-year year-over-year results.

We did a good job managing G&A costs in the fourth quarter. And, as a result, adjusted G&A for the fourth quarter decreased by $3.5 million, or 15% over the fourth quarter of 2014. The decrease was largely due to comp and benefit decreases as a result of organizational restructuring and tighter cost controls. Q4 2015 G&A also benefited by $1.2 million due to the -- due to adjusting the Company's performance-based compensation payout expectations.

As Mark mentioned earlier, we continue to be encouraged by our ability to control costs and drive cost improvement initiatives to reduce overall G&A without negatively impacting the business.

Resulting adjusted EBITDA for the fourth quarter of 2015 was $20.8 million, a slight decrease over the same period of 2014. Despite the year-over-year decrease in adjusted EBITDA, fourth-quarter 2015 adjusted EPS increased by $0.06 compared to the fourth quarter of 2015, as increased depreciation and amortization expense was more than offset by lower interest expense and a lower normalized effective tax rate for the quarter. Even if the normalized effective tax rate were the same in both years, Q4 2015 adjusted EPS would still have increased a penny over the fourth quarter of 2014.

Looking at the full-year results, 2015 adjusted gross profit increased by $3.6 million, or 2%, over full-year 2014. If you exclude the New York market, we grew same operating location gross profit by 2%. Net new business and favorable changes in casualty loss reserve estimates also contributed to the year-over-year increase. Moderating the year-over-year growth was increased overall health benefit costs, with most of the increase in costs coming in the fourth quarter, as I just mentioned.

Adjusted G&A for the fiscal 2015 -- for fiscal 2015 decreased $1.4 million, or 2%, over 2014 primarily due to tighter cost controls, overall cost reductions and organizational restructuring initiatives. We expect to see the full-year benefit of many of the 2015 cost reductions in 2016, and we have new initiatives underway to drive up additional cost savings. I want to emphasize that we are driving costs out by improving and optimizing processes, and are not making cuts that will jeopardize our ability to serve our clients and to support the growth of the business.

As a result, adjusted EBITDA increased by $5.6 million, or 7%, in fiscal 2015 as compared to fiscal 2014.

Fiscal 2015 adjusted EPS was $0.98, an increase of $0.23 or 31% as compared to fiscal 2014 adjusted EPS of $0.75. Low interest rates resulting from the amended senior credit agreement that was put in place at the beginning of 2015 more than offset increases in depreciation and amortization expense to contribute significantly to the increase in EPS.

Both 2015 and 2014 had significant tax benefits resulting from certain reversals of valuation allowances, deferred tax assets, as well as other nonroutine items which have been excluded from the adjusted results for both years. While there were some fluctuations in the quarterly effective tax rate, the overall effective tax rates for 2015 and fiscal 2014, after adjusting for the nonroutine tax items, were substantially similar.

The Company generated adjusted free cash flow of $36.9 million during fiscal 2015, which was greater than the expected range of $30 million to $36 million. While it was lower than $37.4 million of adjusted free cash flow generated in fiscal 2014, we expected a lower level of free cash flow due to a significantly increased level of cash tax payments in 2015. In fact, cash tax payments were $18.1 million in 2015 as compared to $1.3 million in 2014. When you normalize for cash tax payments, we were able to increase adjusted free cash flow by 79%. Generating strong free cash flow will continue to be an area of focus.

Finally, I want to cover our outlook for 2016. Our expectation for 2016 is for adjusted EBITDA to be in the range of $88 million to $93 million, an increase of 10% over adjusted 2015 at the midpoint. For the sake of clarity, I think it's important to point out that we have adjusted -- we have defined EBITDA and adjusted EBITDA to be after deducting from minority interest expense. A full reconciliation of GAAP net income to EBITDA and adjusted EBITDA was presented in our earnings release that was issued last night. Adjusted earnings per share is expected to be in the range of $1.16 to $1.26, an increase of 23% over adjusted 2015 at the midpoint.

Adjusted EBITDA and adjusted earnings per share will continue to exclude nonroutine items such as, but not limited to, restructuring costs, asset sales, changes in valuation allowances for deferred tax assets and other nonroutine items. Adjusted guidance will also exclude any gains or losses resulting from our equity interests in the Parkmobile joint venture, which will continue to be presented below operating income on the income statement.

2016 adjusted EPS anticipates a normalized effective tax rate of 41%. However, the Company's tax rate could vary based on a number of factors. In addition, while our management contract's heavy portfolio provides us some measure of protection in economic downturns, our guidance does not contemplate a material change in economic conditions. Adjusted free cash flow before cash used for nonroutine structural and other repairs is expected to be in the range of $40 million to $46 million, an increase of 17% over adjusted 2015 at the midpoint.

As a reminder, there is some seasonality to our business as reduced air travel and hotel occupancy levels, as well as increased snow removal costs in the first quarter of calendar -- in the first calendar quarter of the year results in Q1 being our weakest quarter historically. That being said, our results for January were in line with expectations despite the severe-weather winter that was experienced in parts of the country. While we cannot draw any conclusions based on one month, we are pleased that this year is off to a good start.

That concludes our formal comments. I will turn the back -- the call back over to Shannon to begin the Q&A.

(Operator Instructions) David Gold, Sidoti.

Just wanted to follow up a little bit on two things first. The G&A site -- presumably some impressive headway there, but presumably some goes-ins and goes-outs in the fourth quarter, I would guess. Just curious if -- how we should think about it on a run rate basis. Were there any givebacks there as you adjusted comp for the year, or is this a new good level to trend off of?

Yes, David, this is Vance. I think as we mentioned in our prepared remarks, we had about $1.2 million of comp adjustments, if you will. So that's basically related decline of our performance bonus compensation. And so that would've been a year-over-year -- quarter-over-quarter difference for the fourth quarter of 2015 relative to the fourth quarter of 2014.

Outside of that, the rest of the reductions in G&A, we really believe, are real. We are starting to gain a lot of traction on G&A reductions. And so, notwithstanding that, what we would suggest is that the rest of it is very real, and we would expect not necessarily the magnitude of $19 million per quarter going forward of G&A, but we would expect something not that much higher than that as we contemplate what's headed into 2016. And as we noted also, we expect to be able to get a good run rate from the G&A reductions that we made in 2015. Now we'll have a full-year cycle of that in 2016. And in addition, we are also making good progress on a number of other initiatives in 2016 as well.

So, once again, we expect absolute G&A costs to come down in 2016 relative to 2015.

Got you. Just to clarify, the $1.2 million variance, is that a reversal or was that just comps not paid?

Yes, what we do is that we -- on a quarterly basis, we true up our accruals for performance-based compensation. And so the way to think about it is that we had -- we reduced our accrual more in 2015 relative to 2014, so that's kind of why there's a difference. So, not all of the change year over year is just pure cost reduction. There is some related to the fact that we had to reverse some performance-based accruals -- performance-based compensation accruals, and that's just due to where we are netting out on certain targets for the year.

Great. (inaudible) makes good sense. And can you give a sense, though, for how much of it was truly a reversal?

Yes, once again, one point -- well, the --

The $1.2 million was a reversal or -- I'm sorry, I thought you just said part of it was.

No, no, no. The $1.2 million -- so if you take the whole difference in G&A from the fourth quarter of 2015 relative to the fourth quarter of 2014, $1.2 million of that relates to performance-based compensation accrual adjustments. The rest of that is pure cost reductions which we expect (multiple speakers).

Got you. All right. One second because I'm not sure -- maybe we are using different words. What I'm trying to get at is there are two ways that comp -- or bonus accruals go down. One way is we just don't accrue this period. And another is earlier in the year we have accrued some, and we realize at the end of the year we are not quite going to get there, so we reverse that accrual.

What I'm trying to get to or to understand is on the $1.2 million, are you calling all of that out as a reversal, or is that a combination? And if it's a combination of the two -- if you can give a sense for -- basically I want to know how much of that was giveback from earlier in the year. That's the important question I'm trying to get at.

It's effectively -- it's a reversal.

It is a reversal. Okay, got it. Perfect. And then one other minor -- as to the step up in health care claims, any sense of -- obviously these things are impossible to time, I guess, from your side of things. But any sense to -- if that's kind of back to normalized levels?

Yes, I would say the reason we called it out is because we felt that what happened in the fourth quarter was unusual in terms of its size. We obviously, as you know, operate a self-insured up to some limit health plan. And the important thing for us is that we have lots of participation and that we are -- we are doing what we can to control claim costs, although, unlike casualty, it's a little bit more difficult in the health area.

So they tend to be what they are. Claims do tend to come in throughout the year. They build a little bit, so they are a little lower earlier and they get a little higher later in the year. We did have some unusual claims -- we are aware of that -- that happened late in the year and make us think that that is not going to be a continuing issue for us as we go into 2016.

Got you. Perfect. That's helpful. Thank you both.

Nate Brochmann, William Blair.

Good morning. This is Kyle [Bickey] on for Nate Brochmann.

Good morning.

Good morning.

Just wanted to talk about the pipeline on some of your new business. I know you guys had some nice wins recently, so just trying to get a feel for what that looks like going forward.

Yes, I think we are -- the verticals that we've called out for you in our results are really the verticals where we are seeing the most interest for new business development, and that's our municipal space, our large venue and event space, and our hospitality space. I think those are the areas where there is certainly a big interest by people who own facilities in those spaces to outsource, and many times for the first time, or to make changes in their operators. And so I think we will continue to see good growth in those areas over the next several months.

I think, generally speaking, people are more open to making change in operators or to bring in new ideas and new creativity, and we think we are very good at doing that, and that's why we are running record new business. But we are also seeing that some of our existing locations are going out to bid in ways that maybe haven't in the past.

And so I think if you look at our location count in our underlying business, you will see that, while we are writing record new business, we are also losing some business along the way as well.

Okay, great. And then in terms of that bidding operating environment, are you guys seeing additional pricing pressure there or more competition on some of those bids, or is it pretty consistent over the past few quarters?

I don't think there's any new competitors; it's the same array of folks. But we've talked many times before -- in the municipal space, which is maybe 20% of our portfolio, those contracts are going to come up on a regular basis for renewal and rebidding. And so we definitely see that happen all the time, and that's not any different than before. And we are typically bidding against the same people who tend to use the same thought processes as they have in the past.

In the non-municipal space, obviously things there don't ever need to go out to bid. And if we are doing our jobs, we are convincing our clients that we are delivering value for them all the time and there is really no need for them to put a property out to bid. What we are seeing, I just think, and this may be the economic backdrop that we operating in now, properties are starting to flip again. We have recovered now completely from the big recession.

New owners come in, new property managers come in. They say, gee, someone has been there for a long time. It's time to put -- have a fresh pair of eyes, look at it and make proposals. And so I think what we are seeing is -- and not just us but all of the operators are seeing an uptick in locations going out to bid that maybe they hadn't gone out to bid before.

Now, we think for ourselves that's a net positive because we're going to be offering up new and creative solutions that enables us to win new properties, and that's why we have written record new business the last three years. We look at what competitors take away from us and what we take away from them, and I would say generally speaking we are pleased with how that's going.

That being said, we do feel that in any time you are in an environment where more things are going out to bid, there's a chance that somebody is going to make a decision based on who is offering the lowest price for a service. We don't try to be the low-cost provider of service because we think we are generating a lot of value add. We are helping our clients optimize the revenue at their facility and generate more profit. We are bringing new technologies and all the things that are going on out in our world in terms of how people choose where to park and how they choose to pay. We are at the cutting edge of those things.

We are bringing a lot of value to our client, so we don't think we have to price our property of the lowest possible price. Now, sometimes when a property changes hands, a new owner comes in or a new property manager who is not aware of all of that. And they just think, well, they're all the same; I will just go for the low-price option. So that's the battle that we have to fight all the time to make sure that we are educating our current clients and our prospective clients around the array of things we do and why there is value add in hiring us to provide the service.

Okay, great. Thanks for that color. That's all for me.

(Operator Instructions) Daniel Moore, CJS Securities.

If you gave a range and I missed it, I apologize, Mark and Vance, is there an organic gross profit growth range embedded in your 2016 guidance range?

There is. We didn't actually give that range, and it's not something we normally guide on. What I would say given our comments is that clearly we were running at I think 6% gross profit growth through the third quarter of last year, and then, given Q4, came in at 2% for the year, which I would say for us is disappointing and certainly not where we want to be.

So as we look to 2016, our desire and our expectation is that we are going to grow faster than that. Whether we can get back to where we were let's just call it in the first three quarters of 2015 remains to be seen. But our desire is to grow our gross profit at a faster rate organically than the 2% that we delivered for 2015.

We will of course do all the things that Vance talked about on the cost side of our business to ensure that if we aren't able to drive our gross profit growth up at a faster clip, that we are continuing to drive our EBITDA and our bottom-line results in the way that we have guided.

Very helpful. And clearly gross profit growth is more critical than number of locations. That said, you continue to exit less profitable contracts, and the declines in the number of locations has increased the last couple of quarters. Do we expect that trend to continue in 2016? When do we think we can get to a point where we are actually growing the number of locations again?

It's certainly a prime objective for us, Dan. As we keep pouring new stuff into the top of the bucket, old stuff drops out the bottom now. One of our focuses has always been looking at the array of business development opportunities that can generate the most gross profit per location. And these tend to be larger and more complex operations where our whole array of services are required.

So on one level, we don't concern ourselves too much with location count. That being said, we still don't like to see our location count go down. We are turning out some stuff that is still legacy from the pre-merger days. That will probably continue during 2016. As you guys know, we also have loser leases that we inherited in our portfolio when we did the merger between Central and Standard. Some of those we can convert into proper profitable deals when they renew, and others we just have to walk away from.

So I would say 2016 is going to be another year where it's a little bit unclear whether we will show positive location comp growth. But I'm trying very hard with my operating team to bring the decline to a stop and to show positive growth because I do believe over the long haul if we are going to generate sustained gross profit growth, we are going to need to grow our location count as well.

Okay. And then just wanted to touch on New York a little bit more; if $500,000 give or take, was kind the impact of the structural repairs. Can you talk about what else went on in the market? You mentioned fewer events. What gives you confidence that it was more of a temporary slowdown as opposed to more -- a -- more structural changes in the market, if you will?

Yes. I think -- obviously the impact on New York for the quarter was bigger than the $500,000. That was the amount that was just related to the structural work that we indicated in our comments. I think New York, obviously very vibrant right now. There's a lot of construction going on. To date, that construction is working to our advantage because some surface parking lots are going away and being replaced by buildings. But we did see weaker demand, whether it was in the hotel sector or with events in Times Square, Broadway and some of the other event things that occur in the fourth quarter that led to a bit of a disappointing Q4 in terms of level of activity.

We are constantly looking at our parking rates both for transient and monthly parking in New York, and in our belief that we have the right staffing levels. I think we were a little slow to react when we saw a downturn in revenue in Q4 and, as a consequence, probably had too much staffing at some of our lease locations in particular.

And so I think who knows whether -- events are out of our control obviously, but I think we certainly saw signs that there are things that we can do, both with our parking rates and with our control of our staffing levels and overtime at our facilities, to try to generate the profitability out of New York that we think it can generate. And by that, I mean drive positive gross profit growth in that market in 2016 compared to 2015.

Got it, helpful. Free cash: strong, continues to get stronger. How much of a difference do you expect there to be between adjusted free cash flow and the actual free cash flow as far as 2016 is concerned?

Yes Dan, let me just answer that. We would expect actually as we go forward into 2016 for that difference to be rather minimal, certainly as you kind of -- relative to what occurred in 2015 and 2014. So we would expect our adjusted free cash flow -- and once again, just as a reminder to everyone, in the case of free cash flow when we adjust for that, we are just adjusting for cash outflows related to structural repairs. And so we would expect there to be much more minimal amount of structural repairs into 2016 than there was in 2015, for example.

Would that be sub $5 million, or don't want to go there?

I think that's -- we would expect it to be less than $5 million. I think that's a fair statement. We don't have a specific amount obviously for the few remaining items that we are doing. We are still in the process of going through that process, but I think that's a fair way to think about it.

Okay. And lastly, you mentioned in your prepared remarks, Marc, turning your attention to capital structure and growth opportunities. Did you perhaps do the rank order in the order of priority or likelihood -- acquisitions, buybacks, dividends, et cetera?

Well, certainly as we -- and this is not really anything new, Dan, we always look at are there acquisition opportunities out there for us. Because if we can acquire people that have relationships that we don't have that can enable us to grow faster than we can grow on an organic basis, that's a desirable thing to do. But our ability to complete acquisitions is a function both of people willing -- wanting to sell their business and also of having a realistic perspective on the value of their business. And of course a lot of the companies that come up for sale in our marketplace are simply people who want to retire and maybe their children aren't interested in the company, and those have not been too appealing to us.

So I'm hoping that we have some people that we are watching now and talking to all the time -- I'm hoping that we could find some candidates and get some deals done in 2016 and 2017. But it's a little bit out of our hands.

Now, that being said, as you see if you run the numbers, we are continuing to de-lever our business. And I think we've now dropped below 3 times leverage for 2015. And there is no need for us to go below our 2 to 3 range that we've talked about before. And so clearly in the absence of the need for cash for an acquisition or to invest in our own business, we are going to be looking at either stock buybacks or dividends. That's obviously a decision for our Board of Directors, but we are not going to just delever down to levels that don't make sense.

Thank you very much.

Kevin Steinke, Barrington Research.

Good morning. Just getting quickly back to the puts and takes on the G&A expense here -- in the press release, you talked about a binding decision related to the Central Parking dispute that resulted in a -- an expense of $1.6 million in the fourth quarter on administrative. So I guess if you think about the core G&A being even lower than the $19 million, excluding that $1.6 million expense?

No, I think the way to think about it would be is that that $1.6 million doesn't really play a role in the significant decline that we saw in G&A in the fourth quarter of 2015 relative to 2014. So the way to think about it is that, as we discussed, we had about -- the decline was about $3.4 million for the fourth quarter of 2014 to 2015. We had -- $1.2 million of that was related to PBC, or performance-based compensation, accrual adjustments, so we had a benefit of that. The rest of the decline from 2015 to 2014 in the fourth quarter was really what we view as good traction on tighter cost controls and cost reduction initiatives, and we expect that to continue going forward into 2016.

Right, right. But I guess what I'm asking is that the decline would have been even greater if you exclude that $1.6 million expense that apparently was recognized in the fourth quarter. So if you take that out, you're more like $17.4 million instead of $19 million. Is that not the right way to think about it?

It was actually -- it was an add-back. So when we go from reported to adjusted, it was an add-back. So like I said, it really doesn't figure into that calculation, Kevin.

All right. Fair enough. It looks like to me the EPS guidance for 2016, you are assuming a pretty significant reduction in interest expense and also maybe depreciation and amortization expense planning out or maybe even declining in 2016 relative to 2015. So could you just address those two areas as they factor into your 2016 guidance, both the interest expense and the depreciation and amortization?

Yes, and, Kevin, we don't -- as you know, we don't give guidance on the specific elements of interest expense and depreciation expense. What I would say is that, in the case of depreciation expense, we had some increased depreciation and amortization expense in 2015 due to projects that we had related to the integration of other IT-related projects. We would expect that to be somewhat similar, not materially different as we head into 2016 per se; and once again, without giving you any specific numbers or guidance.

On interest expense, like what we saw in 2015, we would expect interest expense to continue to go down into 2016. And the reasons for that is that, one, obviously our interest expense is paid based off of LIBOR (inaudible) is familiar with where that stands these days. We are not seeing any significant uptrends per se. In addition to that, our interest expense is also pegged to the level of our debt outstanding. And as Marc just alluded to, we've been able to use the excess free cash flow to pay down debt, and so that has helped us there. It's just not debt outstanding is lower.

And then the third thing is that our interest rates are actually not only pegged to a LIBOR, but it's -- there are certain thresholds. And so as we reduced leverage, which we continued to do in 2015 and we expect to do in 2016, that will also have an impact because we will -- our interest rates that we're paying in accordance with our -- with the credit agreement will come down as well related to what our leverage is. And so a long way of saying that we would expect interest expense to continue to decline in 2016 relative to 2015.

Okay. So it sounds like one of the main uses of free cash flow in 2016 is going to be continued debt repayment.

Well, yes, I think the way to describe it, and I think Marc was talking about this earlier, is that as we think about 2016 really in our guidance, we haven't contemplated for example the use of free cash flow to do something that may be at the capital structure type initiative or to fund an acquisition or something like that. Because, although we are clearly in the process -- per our remarks earlier, in the process of evaluating those type of opportunities, we don't have anything specific at this point that we could really dedicate that cash to. So for purposes of giving guidance, which I think would be normal for most companies, what we've done is we have assumed that at this point that we would use excess cash to pay down debt, and that would effectively lower our interest rate expense costs.

Okay. Perfect. And then just lastly, as you look to 2017, is there anything in your 2016 outlook that makes you more or less confident in your ability to reach that $100 million adjusted EBITDA goal in 2017?

Well, I would say it is still our goal. And we performed well relative to the guidance that we gave for 2016, and that's a goal that is attainable for 2017. No doubt because our growth was slowing in Q4 and we landed at the end of 2015 a little lower than where we would've liked, that means that we have to perform even better to get to that goal still. But I don't think it's an unrealistic goal for us as a Company. And certainly we are going to be focusing, as I mentioned in the -- in my earlier comments, increasing our rate of organic growth and gross profit.

Okay. Fair enough. Thanks for taking my questions.

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

Thank you, Shannon. And I just want to thank all of you for joining us today and taking the time to listen to us talk about our Company and what we are doing as we go forward. I think you're going to see we will have some exciting announcements about new business and other things going on in our Company as we move into 2016. As Vance indicated, I think we are confident that we are off to a good start for the year, and look forward to talking to you next time. Thank you.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation and have a wonderful day.