SP Plus Corp (SP) 2018 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Q2 2018 SP Plus Corporation Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Vance Johnston, Chief Financial Officer.

Thank you, Andrew, and good morning, everybody. As Andrew just said, I'm Vance Johnston, Chief Financial Officer at SP Plus. Welcome to the conference call for the second quarter of 2018.

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

During the call, we'll make some remarks that will be considered forward-looking statements, including statements as to our 2018 outlook and 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. In addition, as we have in the past, our commentary will focus on adjusted results. A full reconciliation of all non-GAAP measures to their nearest GAAP measures was presented in tables accompanying last night's earnings release, which is incorporated by reference for purposes of this call and is available on our SP Plus website.

Also, to the extent we answer specific questions about 2018 guidance involving non-GAAP financial measures, reconciliations may be found under the Regulation G tab in the Investor Relations section of the SP Plus website.

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'll turn the call over to Marc.

Hey, thanks, Vance, and good morning, everybody. As you saw in the earnings release we issued last night, our performance in 2018 remains strong. The Airport division continues to deliver solid year-over-year growth in the second quarter as employment and parking demand increased at key airport locations. In the Commercial division, we saw a good growth in gross profit at the same locations overall and across most markets. To give you a brief update on the status of our New York operations, we continue to see incremental performance improvement, driven by our new leadership team as well as the various revenue and expense optimization programs we've put in place.

We experienced the favorable reduction in prior year casualty loss reserve estimates in the second quarter of this year, which we believe is attributable to our consistent focus on safety and risk programs to drive down the total cost of risk. While we expect overall loss reserve estimates to continue to decrease, the timing, direction, either favorable or unfavorable movements, and the magnitude of these changes are difficult to predict and certainly can fluctuate from quarter-to-quarter and year-to-year. New business activity remains strong, and we highlighted a couple of recent wins in last night's earnings release with nice additions in our targeted vertical markets as well as through expanding our existing relationships.

Generating new business remains a key focus area for us, and successful execution will help us accelerate gross profit growth and increase location counts.

In other metrics, our location retention for the 12 months ended June 30, was 90%, which is down from 92% at the end of the second quarter last year and 91% as of the first quarter of this year.

In the second quarter of 2018, we lost 2 contracts, representing almost 70 operating locations. While large in terms of location counts, the loss does not have a meaningful impact on gross profit. As we previously discussed, we do have a handful of contracts that represent the large number of locations and a loss of these contracts can cause location retention to fluctuate from time to time. Importantly, gross profit retention from same operating locations increased by almost 4% in the same -- in the second quarter of 2018.

Finally, we continue to be focused on a balanced capital allocation approach to drive shareholder value. To that end, and as previously discussed, we are now more focused on evaluating potential acquisition opportunities as one of our initiatives. As noted in our earnings release, over the last several months, we've incurred some costs related to exploring a few potential opportunities. We'll continue to keep you updated on our capital allocation plans, including acquisitions.

With that, I'll turn the call over to Vance to lead you through a more detailed discussion of our second quarter and our year-to-date 2018 financial performance.

Thanks, Marc. I'd like to spend a few minutes reviewing our financial results in more detail. Second quarter 2018 adjusted gross profit increased $2.2 million or 4% from the second quarter of 2017. As Marc discussed, we realized a larger favorable adjustment in prior year casualty loss reserve estimates in the second quarter of this year compared to last year's second quarter. In addition to casualty loss reserve, strong performance in the Airport division was the other primary driver of adjusted gross profit growth. Adjusted G&A for the second quarter of 2018 was $20.7 million, down $0.7 million or 3% from the second quarter of last year. In addition to continued cost management discipline, we also received a $1.7 million cost recovery from a vendor partner that offset a higher accrual for performance-based compensation.

Resulting adjusted EBITDA for the second quarter of 2018 increased $3.2 million or 12% over the same period of last year, driven by the factors affecting adjusted gross profit and adjusted G&A that I just discussed. Adjusted EPS was $0.73 for the second quarter of 2018 as compared to $0.53 for the second quarter of 2017.

In addition to higher adjusted EBITDA, a lower effective tax rate resulting from the 2017 Tax Reform Act contributed to the 38% year-over-year increase in adjusted EPS. Next, I'd like to touch briefly on the year-to-date results.

Adjusted gross profit for the first half of 2018 increased $1 million over the same period of 2017. Lower health care program cost, a larger favorable adjustment in prior year casualty loss reserve estimates as well as strong results from the Airport division were the primary drivers of growth and were partially offset by the early termination of a long-term lease contract that resulted in a $1.7 million noncash write-off of an acquired lease contract right in the first quarter of 2018, which we discussed during the first quarter call.

Adjusted G&A for the first half of 2018 decreased by $900,000 or 2% from the same period of 2017. Higher accruals for performance-based compensation were more than offset by $1.7 million vendor cost recovery and continued disciplined cost management.

Resulting adjusted EBITDA for the first half of 2018 increased $2.2 million or 5% over the same period of 2017. Adjusted EPS for the first half of 2018 was $1.12, an increase of $0.32 per share or 40% as compared to the first half of 2017.

In addition to adjusted EBITDA growth and a lower effective tax rate resulting from the 2017 Tax Reform Act, lower G&A expenses, primarily due to the burn off of certain acquisition-related intangible assets in 2017, contributed to the increase in adjusted EPS.

The company generated free cash flow of $21 million during the first half of 2018, which was somewhat lower than expected, primarily due to some unfavorable movements in working capital as well as unplanned expenditures related to evaluating potential acquisitions.

We continue to believe that much of the unfavorable movements in working capital are temporary at this point and expect free cash flow for the year will be within the previously provided guidance range. Given our year-to-date performance, we are reaffirming our previously provided full year guidance on all measures.

This concludes our formal comments. I'll turn the call back over to Andrew to begin the Q&A.

(Operator Instructions) Our first question comes from the line of Daniel Moore with CJS Securities.

I wanted to start with the strength that you're seeing in the -- on the Airport side. What's -- just maybe a little bit more color on what's changed there, stronger renewals, higher retention rate, or is it simply more business on leased contracts at existing locations?

It's really a combination of things, Dan. I would say, first and foremost, we're seeing strong growth in employments across many of our airport locations as a lot of travel going on out there [in that]. I think it bodes well for people, obviously, parking their cars at the airport. So that's a very important contributor. We've had an excellent year for renewals [and have] been doing a nice job of hanging on to the contracts that we have that have come up for renewal this year. And as you mentioned, leased contracts, certainly in a strong environment where there's a lot of demand, it gives us the ability to put up parking rates, and some of that [endures] to us, some of that will [endure] to the benefit of our airport clients in the form of higher rents. So all in all, it's a good, fairly buoyant period in the Airport space.

Very helpful. Appreciate it. And New York, obviously, continue to make good progress with the change in management in that market as well. Maybe any additional color you want to provide on the steps that you're taking. And if where we are and kind of what [I think there] -- starts -- headwinds are dissipating, or we can start to see more meaningful growth?

Well, I think we've -- as we've talked on prior calls, we're certainly seeing some improvement on a year-over-year basis in revenue. And so -- and when I talk about that, I talk about our lease locations because the issue in New York has primarily been around a number of lease locations. We have management contracts there as well that are performing well and have for many years. So our issues in New York were really around the impacts of performance at some of our lease locations. And what we have seen, and this has continued as a -- the relative performance of revenue with those lease locations has gotten better compared to prior year, and that's been going on really for the last year. And we've certainly talked on prior calls as well about our marketing efforts, expansion of our digital activities, trying to bring online channels to -- as a way to sell additional parking in New York. I think we weren't as effective in that in the past. We were doing some other things in the marketing and analytical space. But the most important change is that we brought in a new leader this year to -- a veteran of our company to come in and take a look at how we operate in New York. And there's a lot of little details. Day-to-day things, do we have the right management in place at a location, are we setting the right expectations? Are we controlling over time? Are we budgeting correctly in forecasting demand so that we can make sure that we're providing good service? Are we working collaboratively with the whole organization to provide support and take out unnecessary cost. And that -- those activities really commenced a couple of months, probably near the beginning of the second quarter. And so it's very early days. These are multi-month exercises, but I'm encouraged by the steps that have been taken already and as we move forward through the rest of this year and into 2019, I think it will start to see a noticeable difference in the performance of those leases that I was talking about.

Great. Very helpful. And one more if I may, on the G&A front. You called out $1.6 million, I think, in merger restructuring, merger and restructuring. Is that entirely or primarily related to exploring M&A? And if it is, are those opportunities that you're exploring still in the pipeline, and would you say you're closer today than perhaps 3 or 6 months ago?

Dan, this is Vance. So just -- I'll start by answering -- trying to answer the first part of your question. So the vast majority of items of restructuring-related and merger and acquisition-related costs that we're adjusting out are related to exploring potential acquisition opportunities. The -- as it relates to kind of how we're going forward in thinking about it, I think, as we've alluded to on recent calls, one, we want to have a focus on a balanced capital allocation approach and so as part of that, we're also spending more time focused on evaluating acquisition opportunities than maybe we had over the last couple of years as we went through the integration with Central and then kind of immediately post that exercise. So I think we really now turned our attention to capital allocation in general and as part of that evaluating acquisition opportunity. So I think that's probably the way to think about it.

Our next question comes from the line of Tim Mulrooney with William Blair.

Could you guys talk a little bit -- a little more about your M&A pipeline, what it actually looks like today? I mean, with labor costs rising and the pressures from ridesharing, I imagine some of your competitors might be getting squeezed more so than in the past and most don't have the balance sheet that you guys have. Has the pipeline changed at all over the last year? Are you having more active discussions?

I think we could say is -- with our concept is -- that we've talked about in the past, and that is that we are eager to explore opportunities to acquire other parking companies. People in our industry, people that we know well and have relationships with through the National Parking Association. But those are opportunistic things. Someone had to decide it's time to sell my business, and that time might be now, that time might be later, or that time might be never. So my goal is -- for us is to make sure that the owners of those businesses are aware of our interest and speaking with them about possible acquisition by us. And so we're actively pursuing and looking at any opportunities of those that come along. At the same time, we do a lot of things that are ancillary to parking, whether it's ground transportation or other facility maintenance and other services that we currently do or others that we might potentially do that have a similar client base to our client base. We're putting feelers out to companies in those spaces so we can get to know what's going on there, understand the dynamics of those industries and look for opportunities to potentially acquire somebody and scale up any ancillary service. One of the things we've learned over many years is that when we can offer our client more than one service, that's received very, very positively. And we've done that for many years, particularly with parking and ground transportation. And it simplifies -- like for the client, it gives them one kind of point of contact. It's generally a lot more cost effective because you don't have duplicative management and all of those sort of things. And so as we look out to the future, one of the things that we want to do is say, "What could we add to the portfolio of things that we do that draw on the expertise that we already have as a company in managing people in desperate location that are providing services to our existing client base?" So we're very, very actively looking at those things. And I think the fact that we've disclosed to you that we're spending money means that we're spending a lot of time doing that, and we're obviously using some outsiders to help us, too. I think the thing to remember is what Vance said and that is that we have a disciplined approach to this. And so that doesn't mean that everything that we look at or everything that we spend money on is going to actually result in a transaction. It's quite important to us to -- from the point of view of our investors that we are -- if we do acquisitions, that we're delivering real value to shareholders, and that requires the discipline to walk away from things that we might have liked conceptually, but if we can't get them at the right price or there some other issues that come out in the review process, we're not going to just go forward because we want to buy companies.

Okay. Okay. Shifting gears a little bit. Could you give -- just give us an update, and I apologize if you said this in your prepared remarks, but I was curious to hear about your revenue management program. I know it was a pilot program. You were thinking about, I think. pushing it out to a few more locations. Can you talk about the progress, where the scope of the project is today, and what your plans are?

Sure. I mean, I think within the umbrella of revenue management, there are a number of activities that we're doing. One of which is to get data from a facility and to try to use that data to understand the different types of customers that are parking there and when they -- and what they are paying in revenue for parking, and that might be different types of monthly parkers because there's monthly parkers that don't affect storing your vehicles, and there's others that are commuters from the suburbs and so forth. And there's, of course, people that are coming for evening activities, daytime activities. So we're trying to build some models around customer behavior at facilities using that data. And the question that we're looking to answer is, can we influence that behavior by changes to pricing using that data? And this is a long-term project. We're doing it in one geographic market. It will -- there'll be many iterations before we have something that we could roll out generally for transient customers, the people that are driving up to the facility. We have learned a lot about how to influence people that are going online to choose parking. And one of our focal points over the past year is to enable more of our locations to sell inventory online so that we have the ability to reach those people. And I think, just like people who are planning a trip at an airline or planning a stay at the hotel, the online people are planning ahead. And so the ability to influence them with pricing models and alternatives is a little bit easier than the people that are just driving up to the facility. So we're starting to expand what we do more in online. I think other things under the revenue management umbrella really involve channel management. We talked before about the fact that people in the past, and I'm going to say people, I mean, parking operators like us, we basically make sure we were running a really clean, well-lit, safe, well-trained employees kind of environment. And we just try to get those locations, and we waited for people to show up. I think in the marketplace and the world we live in today, people are being guided to a location with their smartphone or their [in dash] activities, or they may be planning ahead before they even leave on their journey. There's lots of different channels and, of course, we have aggregators out there as well who are also acquiring customers and wanting to sell them inventory. So an expertise that we've developed in our business over the past 18 months is really to try to optimize the allocation across channels of our inventory, as otherwise, we are not necessarily extracting the maximum revenue out of a customer for the benefit of our clients [if it's] management location or at a leased location, if it's our location. We're doing systems and other IT development so that we can automate more and more of that and manage that more seamlessly. But I think the fact that we are focusing on that puts us in a position that only 1 or 2 of our competitors are doing it. They're doing it at all. So I think this is really the future in our industry. It's partly about optimizing price, but it's also optimizing the allocation of inventory to customers who bring with them different profiles of gross profit opportunity.

(Operator Instructions) Your next question comes from the line of Kevin Steinke with Barrington Research.

So you talked about new business activity being strong, and can you just update us on your efforts there in terms of maybe adding new development, new business development people? You talked about your efforts in the hotel and hospitality market before, do you continue to target new markets with new people? Are you adding people to address municipal, university and hospitals, the markets you talked about targeting more this year. So any update on the new business development efforts would be helpful.

Yes, happy to do that, Kevin. Now I would say, we're still in a building phase. We have talked before, as you indicate, about our interest in hospitality and growing in that space, and we have added some resources there. We've also added, in general, some new business development resources that can work across multiple verticals. And we've also added more marketing resources because one of the things that we're learning is that when we talk about what we're doing with marketing programs, websites, digital platforms, we have a client-facing dashboard now, which we're calling, under the umbrella of SP Plus, inside analytics that we can offer to clients. It's helpful to have people that have expertise and knowledge in that to help our organization present that to clients and show them the value of going with SP Plus as an operator as compared to some of our competitors. So all of that is underway. I think the other kind of major thing that has happened is that we've recognized that consulting is often the way into a client relationship. And not just consulting around our SP Plus Gameday business, which is primarily a consulting business, helping clients manage large sporting events, but that the -- we've had some -- added some additional resources in that space because we see the way into relationships with university clients in particular, it's through a consulting relationship to help them deal with an acute problem that might have to do with particular situation that they have, and then that leads to a broader discussion around parking relationship. And we have several of those where we have started out with a consulting relationship. We're now expanding into a broader parking management relationship with them. And to that end, we've added some additional resources with our consulting group, and we'll be adding some more as we go forward over the next few months. The other kind of major financial accounts -- and I think, historically, we've operated and still do, to a large extent, as a geographically-based business. And so we cultivate relationships, relationships in local cities and sometimes we'll have an executive over multiple cities in the same part of the country, and they'll cultivate relationships with the same companies in multiple cities. But we haven't focused as much as we are now in the past on trying to cultivate national relationships. And so we identified about 30 organizations that are national in reach, that we have relationships with already in certain cities or maybe in more than one city. And we've developed national planning and a national approach to these clients so that we can try to leverage the success we've had with them in 1 or 2 cities and get locations from them in other cities. And that's starting to now bear fruit. And I think I was just talking with our commercial division Chief Business Development Officer yesterday about some of his upcoming plans and meetings and things that are scheduled. And I think as we look forward over the next 6 to 12 months, we'll start to be able to talk about situations where we had a local relationship with a national company in market A, and that's now leading our ability to add in market B, in market C and market D. And these national companies are increasingly receptive to the message that we're giving because given our size and scale, we can serve them everywhere that they operate. And in some cases, they may have multiple operators or a local operator in a certain part of the country that doesn't have national reach. And then we talked about some of the things that we're doing, that I mentioned, with revenue management, with the analytics dashboards and the ability to bring data to their desktop that brings across all of their locations. These are the kind of things that they're really seeking. So I think that, that will continue to be a major thrust. We've added some resources to support that effort and as we look to move forward, we started our planning for the balance of the year for our plans for '19. I think you'll see us add additional resources in some of these areas as we move into the coming year.

Okay. That's great. So -- and you called out also the favorable casualty loss reserve estimates in the quarter, and you tied that to your safety and risk management initiatives. How much more room do you think there is to go on this -- the safety and risk front in terms of improving gross profit, just any update on the safety and risk management initiative overall.

Well, I would say, if we have even one incident that involves an injury to a person, whether it's a customer, a client or an employee, we can prevent those. We don't subscribe to the view that we'll have accidents, and that's just part of our business. We look to try to understand every accident, and if there are patterns or preventative measures or things that we can change, then we are going to do those things, and then other companies that have made this one of their top 2 or 3 or 4 priorities, they have seen sustained reduction in accidents over many, many years. And so I would say, we are always re-examining whether there is -- are additional steps we should take. We're doing an awful lot of safety audits when we started down this path a couple of years ago. We only had 1 or 2 people doing safety audits. And now we've expanded that team with more than double the size. We'll probably expand it further as we look forward. So I think, in terms of the focus and safety and eliminating -- preventing incidents that can lead to accidents and injuries, it's well worth it. And it's one of those things that has a double benefit. It's good for the bottom line, but it also prevents a serious tragedy in the lives of individuals. So it's a good thing for our organization to embrace. As far as loss reserve adjustments, as I indicated in my remarks, you never know what's going to happen in a given quarter. You've been following us a long time, and you've seen the long-term trend. But I think we try very hard to set expectations so that we don't have large unpleasant surprises. We don't want to have those. And so my hope would be that with our continued efforts as we go forward, we'll continue to see positive adjustments, but I would say, $2 million in 1 quarter is an awfully big number. If you go back and look at the last 5 or 6 years, it's a bit larger than normal, and no doubt, some of what we might have expected to see later this year has come through now. So I think -- you can't -- I wouldn't be living off of these kinds of magnitudes, but our efforts should result in continued, favorable, on a long-term basis movement.

Okay. That's helpful. And you had -- you called out, again, one particular contract that you didn't renew with a fair number of locations but not a lot of profitability associated with it. As you look across the whole contract portfolio, what's the state of it right now in terms of -- how many contracts are still out there, or maybe you're not generating acceptable profitability in terms of lease portfolio or any other management contracts, and is that something we should continue to expect from time to time going forward, that maybe you don't renew some of these and just because the profitability isn't there?

Well, I would say, first of all, in terms of the -- when we talked about -- I wouldn't say that it was an insignificant profit in aggregate. I think that the point that we would make is that on a per location basis, the profit's very low. That doesn't mean we didn't want to keep that contract, but [we're not] to a competitive bidding process, and we were unable, unsuccessful on retaining, which is unfortunate. But I think, just like we can lose a contact that has many locations, and the profit per location is not really significant, we can also win contracts that have multiple locations as well. And so I think it's not always a -- it's not a one-way street here. One of the focal points that we have as our -- in our business development efforts is to try to acquire locations, we've done a fantastic job of driving up same location performance, and you see that in our results. But in order to have sustaining growth over the long haul, we also have to drive up our location count. And so we don't like to ever lose anything. But I think our efforts are focused on winning a contract and winning it and making an adequate amount of money to make it a worthwhile thing for us to pursue. And when that happens, if it's one location, then that will be great, but if it's multiple locations, then that will help our allocation count as well. So I think our focus remains on getting growth, and to have sustained growth, we need to have locations.

Okay. In terms of the adjusted G&A expense in the quarter, you had that $1.7 million cost recovery. So if you factor that out, your G&A on an adjusted basis was -- would have been $22.4 million. Is that kind of level we should expect over the next couple of quarters? Or is that just driven higher by the performance-based compensation and just any thoughts on the G&A as we move forward, I mean, I guess if you continue to perform at a good level, we see more of those performance accruals, or how are you thinking about the G&A?

Kevin, this is Vance. Good question. So you're correct in assuming that there was some increased performance-based compensation accruals that impacted -- [the recruit] further impacted the second quarter G&A. And you're right, they're paying on kind of -- we true that up on a quarterly basis. So depending on how we perform throughout the rest of the year, or we could either increase or decrease our G&A based on those accruals. And that's one element of it. I think the -- you alluded to the other element, which was the cost recovery. Having said all that, we typically don't provide specific guidance on G&A, as you know, but I think we feel quite comfortable with kind of the current trend line for G&A that we've seen over the last couple of quarters, and we would expect it to be kind of a -- at a similar rate moving through the rest of the year.

Your next question comes from the line of Marc Riddick with Sidoti.

I really appreciate all the color given on the opportunities that you're pursuing. I was curious as to whether or not there is some areas that you're looking at potentially de-emphasizing, whether it's any particular verticals or regional markets or anything that you think maybe -- would sort of be put on the back burner?

No, not really Marc because one of the nice things about our business because we are fundamentally operating in many geographies, if we are there, and we decide that, that's a good city for us to be in our metropolitan area, then the people on the ground are going to be actively pursuing all the opportunities that they can in that market. And so to sort of tell them, "Well, don't concentrate on this vertical or that vertical," wouldn't be all that useful. I think that when I talked earlier about the national account approach, a lot of that is geared towards large commercial property owners or property managers, which is our -- sort of our traditional business, if you will. So I think the way for us to fundamentally get growth in the -- in our traditional sort of office building, commercial property kind of space, it's through the cultivation of this national account approach that we're doing with our national business development leadership along with our local people in the various cities. I think some of these other verticals that we've talked about, whether it's the municipal vertical, which is primarily on street or the university vertical or the health care vertical or the hospitality vertical, we want to augment with the local people and the geography -- are doing with additional resources, people who are subject matter experts, potentially came out of those verticals, talk the same language as those clients, some of the sales cycles particularly in the municipal space and the university space are longer than for a commercial office building. So we're augmenting and trying to grow in those other verticals, but I don't -- because in many ways, it's different people that are focusing, I don't think it requires us to pull back from anything in order to accomplish that.

Okay. I was wondering on the -- you've had some comments earlier regarding the opportunities and the growth that you're seeing in the Airport space. I was wondering if you could sort of give a little more detail on what you're seeing there with the benefits of the growth of travel. Was there any particular connecting feature? Was it regional or kind of across the board? So if you can just give a little more detail on some of that airport growth that you're seeing, sustainability that might take place from there.

Yes, I'm not sure there's a lot to add to what I had said already, I mean, I think, clearly, the one thing about Airport is that they're all government operated. And so they have a regular process of coming out to bid, that's something that we track. And so, we -- there won't be an airport that comes out the bid that would be of a size and scale that would be of use to us from acquiring it for our operations that we aren't aware of. And so I can honestly say that, for the most part, we're going after everything that comes out the bid. Now there will be a few exceptions where we've decided that there's -- the dynamics of that situation aren't going to make it worth our while. So we're pursuing everything. We're bidding on everything. And then I think when it comes to the structures, a lot of these, a lot of our contracts are management contracts. And so robust growth in employments or utilization of the [party] facility doesn't necessarily endure to us directly. But in others, we do operate as leases and therefore, when we do operate as a lease, it gives us the opportunity to look at demand for parking and potentially make adjustments in rates to try to drive up cost or to introduce automation to try to drive up revenue and then to introduce automation or other techniques to help us manage those locations as efficiently as we can. And then some of these revenues management techniques that we're talking about can also apply and do apply in the airport space. And so I think our goal is to also be looking both at leases and at managements on behalf of our clients for ways to bring the online channel into those and to try to drive parking demand.

Okay. Great. Oh, one last thing, I was wondering if you could give a CapEx update as far as expectations for the remainder of the year?

Marc, this is Vance. We don't give, as you know, we don't give specific guidance on CapEx, but it is -- our assumptions around CapEx are kind of contained within our guidance as it relates to free cash flow. But with that said, we don't expect [any] abnormal amount of activity, certainly CapEx being significantly -- going up significantly in the back end of the year, we would expect it to kind of be -- we spent a little bit more in 2017. So we wouldn't necessarily expect it to be at elevated levels like that. As elevated levels as 2017.

Our next question comes from the line of Daniel Moore with CJS Securities.

Maybe just one last one. Generally, Marc, with some of these headwinds dissipating in New York and new business wins strong, do you see an opportunity to maybe sustain or reaccelerate gross profit growth relative to where we were a year ago, or is the landscape really relatively unchanged from your view?

Well, I think there -- one thing about the future, I think it's been steady for [it's uncertain]. So what's going to really happen, nobody really knows. I think there are some positives that are starting to happen. And it's the flip side of the congestion, a problem has been created by explosion in the use of ridesharing. A number of cities, elected officials, and their planners are starting to say, "You know what, this is not sustainable." We want to expand mass transit, they've put in bus and bike lanes. There's gridlock in a lot of major cities now that it's detrimental to the sort of objectives of the city to have a clean environment and people getting around. And we are trying to work with our municipal clients where we have them or in general, the municipality that we operate in to talk about how we can be part of the solution to that. And we now are placed where ridesharing vehicles or other mobility electric bikes or the kind that you still pedal can be staged, or obviously, car sharing vehicles are staged at parking facilities or held at parking facilities. And I think that's part of the solution to the congestion problem. But I think, also, we're starting to see, and New York is one that's getting a lot of press right now, proposals by the Mayor there to limit the number of for-hire vehicles that are in certain parts of the city as a way of addressing congestion. So I think -- I feel like, at worse, the situation has stabilized and not just in New York but in other places, too. And I think that what we're going to see now is maybe some policy changes at the local level that are going to try to alleviate some of the congestion. And the goal for us, obviously, is to be a part of those solutions and to demonstrate how parking operators can help eliminate congestion in the marketplace, and that's one of the things that we're actively worked on -- working on.

There are no further questions at this time. I'll now turn the call back over to Marc Baumann for closing remarks.

Really, all I want to say is thank you for joining us. Appreciate your interest in our business. We're excited about our initiatives and the things that we're going to try to make happen to end the year on a good note. And so thank you for spending time with us today, and we look forward to talking to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a wonderful day. You may now disconnect.