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Standard Parking (NASDAQ:SP)
Q4 2019 Earnings Call
Feb 19, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to quarter-four 2019 SP Plus Corporation earnings conference call. [Operator instructions] I would now like to turn the call over to Kristopher Roy, chief financial officer of SP Plus. Sir, you may begin.

Kristopher Roy -- Chief Financial Officer

Thank you, Fante, and good afternoon, everyone. As Fante just said, I'm Kristopher Roy, chief financial officer of SP Plus. Welcome to our conference call following the release of our fourth-quarter 2019 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including statements as to 2020 outlook, 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 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 in 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 in 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 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 the 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 chief executive officer.

Marc Baumann -- Chief Executive Officer

Thank you, Kris, and thank you all for joining us today to review our fourth-quarter and full-year 2019 results and to discuss our business outlook for 2020. Fourth-quarter results marked a strong finish to a year of exceptional growth for SP Plus. Our Bags acquisition performed well. Our organic programs gained traction, and we saw success from our cross-selling activities, all leading to record performance for our company.

Full-year performance was in line with or exceeded our expectations with adjusted earnings per share coming in ahead of the high end of our guidance range. Gross profit increased 24% for the year, reflecting organic growth of 5% and the benefit of the Bags acquisition. Gross profit from existing business or same operating locations increased by 4% for the full-year 2019. This growth was broad based reflecting year-over-year improvement in most key verticals.

Additionally, it represented positive year-on-year performance across the majority of geographies we serve. Adjusted EBITDA kept pace with gross profit growth increasing 20% for the full year despite higher G&A expenses, primarily due to the Bags acquisition, higher performance-based compensation and resource investments to drive and support the company's growth. These full-year 2019 financial results, recent account wins and the strength of our business development pipeline indicates that our expanded portfolio of services is resonating with clients. I want to give you an update on the progress we made in 2019 against our multipronged growth strategy.

The Bags acquisition has been transformational in terms of providing us with growth opportunities. We're in the early innings of converting those opportunities, but are pleased with the success of our cross-sell efforts to date. Most notable, our SP Plus' ability to leverage our long-standing client relationship to bring Bags' Remote Airline Check-In services to both New Orleans International Airport, where we've been providing parking and transportation services since 1995 and to Gold Key Valet passengers at the Portland International Airport in Oregon, where we've been serving travelers since 2006. These wins are noteworthy in that selling in new services at airports has a long sales cycle, and we're pleased to be able to gain these new contracts within the first year of our Bags acquisition.

And SP Plus is able to deploy its transportation capabilities at the Orlando International Airport, where Bags has enjoyed a 15-year working relationship with the Greater Orlando Aviation Authority. We're very pleased with these wins as we've been able to effectively execute on a land-and-expand strategy, which means that once we're awarded a contract for a specific service, we are often asked by our clients to provide additional or ancillary services. Additionally, Bags has been successful in building and developing a pipeline of stand-alone opportunities. In the fourth quarter of 2019, Bags was awarded a contract to provide Remote Airline Check-In services at Boston's Logan International Airport.

Bags now operates the Check & Go remote check-in at Logan Central parking garage where ride share drop-offs are now required to take place. This service enables travelers to check their luggage with the Bags' agent and receive boarding passes before taking an elevated walkway to their flights without their luggage. This service, which is complementary to passengers, helps ease curbside congestion and moves travelers between destinations as efficiently and comfortably as possible. We believe there is significant runway ahead for Bags to provide Remote Airline Check-In services at other major airports across the country.

We recently commissioned market research at one of the airports where Bags is well established in order to gain further insight into end consumer sentiment from those already using Bags' Remote Airline Check-In service. The data indicates that users are very happy with this service and would use it again. They also indicated that they were more likely to utilize the parking option at an airport where this service is provided. The data also supports our promise that Remote Airline Check-In users get to the secured area faster and generally spend more money in the airport.

This is the first of several studies we plan to undertake to better understand consumer sentiment and behaviors to demonstrate the economic benefits of Remote Airline Check-In services to potential airport sponsors. In 2019, we also made progress on growing our national accounts business and increasing penetration in higher growth verticals such as hospitality, healthcare and municipal. One recent win that reflects success of both of these initiatives was our selection as the national provider to Loews Hotels. We'll provide parking, valet and door management services for the majority of Loews Hotel locations across the United States.

This is a great example of how we've leveraged the excellent reputation that SP Plus developed over the five years that we've been at the Loews' property in Chicago and turning it into a national account comprised of 21 locations. We've already begun operations at 12 new Loews' properties and plan to roll out operations at the remaining of the properties by May of this year. Additionally, we've made progress in gaining new healthcare locations as part of the group purchasing agreement with Premier, Inc. to provide parking management, patient transport, valet, shuttle and other mobility services.

Since mid-2019, when we executed the agreement with Premier, we've added six healthcare contracts and continued to target other opportunities in this growing vertical market. Similarly, our preferred provider agreement with Jones Lang LaSalle has resulted in the award of 12 new contracts. We've achieved these new business successes in addition to increasing the number of commercial locations we serve and expanding our Commercial division location retention rate to 93% from 88% last year. It's now at the highest rate it's been in over five years.

To sum up, 2019 was an excellent year for SP Plus, one which has laid the foundation for organic gross profit growth of 3% to 4% over the long term, the target we set last year. Now I'd like to turn the call over to Kris to provide more detail on our fourth-quarter and full-year 2019 financial performance. Kris?

Kristopher Roy -- Chief Financial Officer

Thank you, Marc. When discussing the fourth-quarter and full-year results, we will focus our comments today on adjusted results. You can find a full reconciliation of all non-GAAP measures to the nearest GAAP measure in the tables accompanying today's earnings release. Fourth-quarter 2019 adjusted gross profit increased $5.8 million or 12% to $54.3 million.

This growth was mainly attributable to the Bags acquisition we completed in December 2018, as well as to the growth from existing business and new business that outpaced the impact of contract terminations. On an organic basis, adjusted gross profit grew 1%. Adjusted G&A for the fourth-quarter 2019 was $28.2 million, an increase of $5.1 million or 22% compared to the fourth quarter of 2018. This year-on-year increase was primarily due to G&A related to the acquired Bags business and higher compensation and benefit costs, including costs related to the company's performance-based compensation programs.

Adjusted EBITDA of $25.4 million for the fourth quarter of 2019 was an increase of $800,000 or 3% from $24.6 million in the fourth quarter of 2018. Excluding amortization of intangible assets from the Bags acquisition, as well as all prior acquisitions, adjusted EPS was $0.55 for the fourth quarter of 2019, as compared to $0.65 for the same period of 2018. This performance reflected higher interest expense due to the Bags acquisition and share repurchases, as well as higher D&A from capital investments and a higher effective tax rate. The lower share count due to share repurchases added $0.03 to the fourth quarter of 2019 adjusted EPS.

Moving on to our full-year results. Adjusted gross profit in 2019 increased $44 million or 24% to $228.1 million in 2019. While the Bags acquisition was the primary driver of this growth, our organic gross profit was up 5% year over year. This was boosted by the favorable impact from the wind down of a lease.

When excluding this lease wind down, organic gross profit growth for the year would have been 4%. Adjusted G&A in 2019 was $107.7 million, $24.7 million or 30% above the 2018 level, as it included G&A related to the acquired Bags business, as well as the nonreoccurrence of a $1.7 million cost recovery that reduced last year's G&A. In addition, overall compensation, benefit costs were higher in 2019, including costs related to the company's performance-based compensation programs. Adjusted EBITDA of $117.5 million in 2019 increased $19.6 million or 20% from $97.9 million in 2018.

Full-year 2019 adjusted EPS was $2.73, up $0.18 or 7%, when compared to $2.55 per share in 2018. Share repurchases this year reduced our weighted average share count by roughly 2%, increasing adjusted EPS by $0.06. We exceeded our free cash flow guidance for 2019, generating $60.3 million of free cash flow in 2019. Thanks to our strong business performance, coupled with our working capital improvements.

This compares to $62.2 million of free cash flow generation in 2018. Finally, during the fourth quarter, we used $15.5 million for stock repurchases. During calendar year 2019, we repurchased shares totaling 47.8 million at an average price of $35.80 per share. As a result, at the end of the year in 2019, $25 million remained available under our current share repurchase authorization, which we expect to use opportunistically.

Marc will provide our guidance for 2020, but some of our underlying assumptions that informed our outlook include the following: an effective book income tax rate of approximately 27% to 28%, and a cash tax rate of approximately 22% to 24%; approximately $10 million to $15 million of capital investments for equipment, leasehold improvements and cost of contract purchases; and approximately 21.5 million weighted average diluted shares outstanding for 2020. With that, I will turn the call back over to Marc.

Marc Baumann -- Chief Executive Officer

Hey, thanks, Kris. We're looking ahead to another year of progress in 2020. We believe that SP Plus, with the addition of Bags, has the broadest portfolio of services and tools to help clients manage their congestion and mobility issues. And SP Plus' services are performed in ways that significantly improve the end consumers' experience, while being accretive to our clients' bottom lines.

We continue to invest in programs that enable us to maintain the high level of customer service that has become synonymous with the SP Plus brand, complementing a well-trained and motivated workforce, our technology solutions we brought to the industry such as Parking.com, our proprietary online distribution channel, that enables consumers to locate and purchase daily or monthly parking from their mobile devices and Insight Valet, our proprietary valet management tool. We believe tools like these, as well as the utilization of our remote management capabilities are becoming increasingly important to clients and end consumers and serve as a market differentiator for SP Plus. This value proposition, along with our greater scale and our current pipeline of business development opportunities, supports our expectation for adjusted earnings per share of $2.95 to $3.05 in 2020, representing 10% growth over 2019 at the midpoint. Approximately one half of the growth will be generated from operating performance as we expect gross profit growth to be in line with our long-term targets of 3% to 4%.

The remainder is the result of a lower diluted share count resulting from the share repurchases that we've already made in 2019. This guidance takes into account continued investments in people and technology to support expansion, but does not consider potential acquisitions or additional share buybacks in 2020. We continue to focus our efforts on driving increased free cash flow. In 2019, we exceeded our internal expectations by generating just over $60 million in free cash flow.

In 2020, we expect free cash flow to increase at a double-digit rate to be in the range of $65 million to $70 million. In terms of capital allocation, we'll continue to prioritize organic growth projects, acquisitions and returning capital to stockholders in the form of share buybacks. Finally, I want to acknowledge the total dedication and commitment of our 23,000-plus employees for what we've been able to achieve thus far. Thanks to their continued hard work, we can look forward to another successful year at SP Plus.

I'd now like to turn the call over to the operator for the Q&A session.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Mr. Daniel Moore from CJS Securities. Your line is open, sir.

Daniel Moore -- CJS Securities -- Analyst

Thank you. Marc, Kris, good afternoon. Congrats on the strongest finish to the year.

Marc Baumann -- Chief Executive Officer

Thank you. Hi, Dan.

Kristopher Roy -- Chief Financial Officer

Thank you.

Daniel Moore -- CJS Securities -- Analyst

You gave good color, Marc, but I'm always hungry for more. On the national accounts, you mentioned both Premier and LaSalle. You gave some pretty good stats in terms of some of the wins you've had since signing those, I would say, contracts, but those agreements or relationships. Is that a run rate that was in line with your expectations? How should we think about the cadence for potential contract wins as we look out into 2020? And just any additional color on both of those agreements would be really helpful.

Marc Baumann -- Chief Executive Officer

Sure, I'll be glad to do that. I think with regard to the agreement we have with Jones Lang LaSalle, it's a little bit easier because a lot of the properties that they manage and that we get the opportunities to look at our commercial office buildings and the decision-making process around a parking management provider or some of the other services that we provide is fairly simple to evaluate. When you move over to healthcare, these are complex decisions. They often involve a multitude of services.

Many times, they have shuttle bus operations alongside parking. And of course, you often will be doing valet at the front door or like we're doing it at Moffitt Cancer Center, which is one of our newer operations where we're valeting over 2,000 cars a day. So these are complex. And so the decision-making process takes a bit longer.

So I would say, we're really pleased with the progress. And in some ways, I was probably surprised as the numbers were that big so quickly. But I think it's like anything. It will ebb and flow.

Both of these are really opening the door to give us opportunities, and it's still incumbent upon us to go convince someone at a local level that we have the right solution for them. So I expect we'll be announcing more wins, but whether we could sort of say, well, in the time period that's a lapse, we'll just extrapolate that and that's a run rate, I think it's probably premature. The other thing I should mention is that we continuously look for other opportunities to become preferred providers, both with people that are like Jones Lang LaSalle or other group purchasing organizations that serve healthcare and other industries. So we're not sort of saying we've got these two.

So now we'll just focus on them. Our goal is to try to exploit the opportunity that these arrangements give us, but at the same time, we try to find other opportunities to do something similar with other organizations.

Daniel Moore -- CJS Securities -- Analyst

Very helpful. And switching gears a little in terms of capital allocation, you laid out some of your priorities once again. On the M&A front, are you seeing opportunities that are realistic? Or given current trading multiples, is debt pay down and more share repurchases, they'll likely default, at least based on how you see the world today?

Marc Baumann -- Chief Executive Officer

Yeah. As you might imagine, there's a number of things that we look at when we're looking at a potential acquisition. And it probably makes sense just to highlight those a little bit. First of all and foremost, we're looking at the services that our clients are buying in the marketplace.

And obviously, with the acquisition of Bags, we have a new array of clients. We serve 17 airlines now. SP never had any airline clients. So we're trying to look at the services that those clients buy that might fall within the expertise that we have.

And so first and foremost, our net is broad, so that includes parking companies, but it could include companies that provide other types of services that we might consider ancillary in our business like shuttle bus operations and other things like that. Then we're also looking to say that their company have a talent pool and maybe an additional client base that can help SP Plus grow at a faster rate. We're not interested in just being a larger version of ourselves that doesn't grow. We're looking at acquisitions that can help us accelerate our growth.

And finally, as the one that you mentioned, which is really, can you buy something at the right price? And clearly, we know what the value creation is for our shareholders if we buy back our own stock. When we explain a potential acquisition to investors, we want them to look at what we've done and the price that we've paid and say, yes, that was really a good thing you do. So when you add all this together, I'd say, we've kept the net wide. We're looking at a lot of things continuously because we haven't announced anything, at least at this point means that we haven't found something yet that meets all those criteria.

But we're very actively looking at things all the time and trying to make sure that we're not leaving any stone in turn for the opportunity to grow in that way. In the absence of that, we've talked before, it's important that we're always looking at ways to create value for shareholders. And at this time, we feel that buying back our stock has been the best way to do that.

Daniel Moore -- CJS Securities -- Analyst

Got it. Lastly for me, and I'll hand it over. I think I can back into this, but the 3% to 4% adjusted gross profit growth guide and given the tax rate, etc., implies somewhere in the mid-single-digit adjusted EBITDA growth. Does that sound right, Kris?

Kristopher Roy -- Chief Financial Officer

In terms for '19 compared to '18?

Daniel Moore -- CJS Securities -- Analyst

For '20 compared to '19, correct? Yeah.

Kristopher Roy -- Chief Financial Officer

Yeah, I think you're in the ballpark in terms of what we would expect from a growth perspective.

Daniel Moore -- CJS Securities -- Analyst

Very good. Any follow-up, I'll circle back. Thank you.

Marc Baumann -- Chief Executive Officer

Thanks, Dan.

Operator

Your next question comes from the line of Mr. Tim Mulrooney from William Blair. Your line is open, sir.

Tim Mulrooney -- William Blair and Company -- Analyst

Good afternoon, Marc and Kris. So gross profit growth in the fourth quarter was 1%, I believe, but how would that look like if you excluded the impact from prior-year insurance loss reserves? If I remember correctly, I think, fourth quarter of 2018 had some favorable insurance reserve adjustments.

Kristopher Roy -- Chief Financial Officer

Yeah, I would say, Tim, that that number would be larger if you were to think about it on a year-over-year basis or I guess a quarter-over-quarter basis. We did have some favorable insurance reserve adjustments in Q4 of '18. So certainly, it would be larger than the 1%.

Tim Mulrooney -- William Blair and Company -- Analyst

Significantly larger, Kris, or a point or two? Just directionally.

Kristopher Roy -- Chief Financial Officer

Yeah. I'd say, it's not more than 2 points. I'd probably say, closer to one.

Tim Mulrooney -- William Blair and Company -- Analyst

OK. And it sounds like you expect 3% to 4% gross profit growth in 2020. Is this inclusive of any expected impacts from insurance loss reserves? And does your guidance contemplate loss reserve adjustments being a headwind or a tailwind in 2020?

Marc Baumann -- Chief Executive Officer

Yeah. If only we had a real crystal ball to answer all of this. What I would say is that we have a long track record of managing our insurance programs the way that we do. And so it gives us some ability to anticipate what we think might happen.

And so we've clearly build that into our numbers because as we've talked many times over the long time period about these programs, we try to set our rates at levels that make it more likely than not. That we will have favorable adjustments as opposed to unfavorable adjustments. So our expectation is that we'll have some favorable ones and that's factored into our -- when we gave our target, I gave our target last year of 3% to 4%. We're anticipating some of that in our 3% to 4%.

Now what will really happen in 2020 is anybody's guess, that will be a function of our continued vigilance on our safety programs, and we believe we're very, very good at that. But we have 2 million transactions a day and thousands and thousands of people out there in various weather conditions and various scenarios. So we'll just have to see how it plays out. But I would say, if 2020 is like most years, it should be something that we don't have to talk about too much and we aren't going to be calling out a big surprising adjustment one way or the other.

Tim Mulrooney -- William Blair and Company -- Analyst

OK. All right. That's helpful. Thanks.

Shifting gears, your net locations, I noticed, I think you're up 27 facilities for the full year of 2019, that's the first time since the Central merger, I think, that you've seen positive net locations for a full year, I think. I know you don't have a crystal ball, Marc, but based on the operating environments you're in, the recent partnerships you're developing, the cross-sells of Bags, how do you think about your location count in 2020? Or asked another way, what do you have baked into your guidance?

Marc Baumann -- Chief Executive Officer

Right. Well, you're absolutely right in what you're saying. And it's been something that's come up on a number of our calls over the past few years is how can you grow on a sustained basis if your location count on your commercial business is declining. And obviously, as you know, we don't give location counting following our aviation vertical because it's not really a meaningful way to look at that business.

So we were really pleased. I was especially pleased to see a tick up at the end of the year. And I can tell you that I've provided a lot of pressure to the organization to find ways to add locations because the kind we want to add or the kind of where we go into a location and we provide a service and we can land and expand, to use a term, we use that as a way to build a business relationship with a client over time. And so it's been a major focus in 2019 to go get more locations.

And maybe not necessarily be as concerned about how much are we going to make at the beginning and look at it as a long-term value-building proposition. So I'm really happy about that. It's obviously very pleasing also to see that our Commercial division location retention rate was 93%, which, as we said in the comments that it's the highest in five years, it's really the highest since prior to the merger with Central. So it's a huge accomplishment.

And again, our operating leadership team is focused very, very hard on ensuring that we deliver for clients, that we're keeping them happy, that we understand their expectations, that we're introducing innovative new ideas and technologies and keeping them happy. And so I'm hoping that we can keep that retention rate up and, obviously, with the new business in the pipeline, my expectation for 2020 is that we'll continue to see a net add in locations. And when we're talking a year from now, the location count will be up once again. Now whether it's up another 35 or 40 or more, I don't know.

But it's a major focus for us, and I think we're confident that we have the ability to grow our location count on an ongoing basis over the years ahead.

Tim Mulrooney -- William Blair and Company -- Analyst

That's great to hear, Marc. How much that 93% number is very good? How much do you think that your technology-enabled solutions inside analytics or remote management capabilities, how much do you think that that has contributed to that improvement in retention rate?

Marc Baumann -- Chief Executive Officer

I think it's contributing a lot. But I think one of the things that we didn't talk about on this call, but it's an important thing that we do with major clients where we operate in multiple locations is that we have a whole suite of client dashboards where we can give the client visibility into what's going on, whether it's on revenue or the elements of revenue, monthly parking, transient parking, online sales or the cost structure at the location, labor costs and scheduling or volumes of activity. All of this is available with beautiful graphs and charts in an online environment, and what we say to a portfolio client is, look, we'll give you this tool, and not only can you look and have visibility into individual locations that we operate on your behalf, but you can see it rolled up in any way that you want, including aggregated across all your locations. And we conduct quarterly business reviews with some of our national account relationships and we show them this tool.

And sometimes, we're showing it to more senior people at the first time and they're like, well, I want to see the rest of my business. I don't want to just see what SP does. And we're like, well, that's no problem. Give us some additional locations.

So I think those are the kind of things that we've been investing in, and there are some other technology companies out there that are trying to penetrate our industry and they pitch our clients with their own sort of dashboards and tools, but those tools aren't as comprehensive as the things that we can provide because we have all of the information that comes out of the parking equipment that we can present to a client, but we have all the stuff that comes out of our back-office systems, like the costs that we're incurring on behalf of the client to pay for things like uniforms and the like payroll costs and payroll labor hours and how much over time is being run. So we can give a comprehensive picture. And this is a tool that we really only started introducing the clients in the last 12 to 18 months. So I do think that things like that are really critical.

And of course, in a world where you have ride sharing, congestion, increased complexity, clients are saying, hey, I need somebody to help me figure all of this out. And I think that plays to the strength of a company like us because there really is no situation that we haven't seen many, many times. And so we don't have to look at a client's opportunity for improvement and try to figure out what to do. We can apply proven technologies and proven management techniques to a situation that we've applied many times for other clients.

And I think that helps us compete very effectively, especially against smaller operators who can't do all of that.

Tim Mulrooney -- William Blair and Company -- Analyst

Gotcha. OK. Thank you very much.

Marc Baumann -- Chief Executive Officer

Thanks, Tim.

Operator

[Operator instructions] Your next question comes from the line of Mr. Kevin Steinke from Barrington Research. Your line is open, sir.

Kevin Steinke -- Barrington Research -- Analyst

Hey, good afternoon.

Marc Baumann -- Chief Executive Officer

Yeah, Kevin.

Kristopher Roy -- Chief Financial Officer

Good afternoon.

Kevin Steinke -- Barrington Research -- Analyst

So you said that gross profit growth target of 3% to 4%. I think, end of July 2019, and here you achieved that in 2019, and now you're guiding to that in 2020. So obviously, that's clearly a favorable development and I guess reflective of the momentum you're seeing in the business. But is that something getting to that growth rate happening even faster than you expected? Or is it kind of in line with how you thought things might play out? I know you've talked about the fact that a lot of your growth opportunities are multiyear pursuit.

So maybe just kind of the speed and how things are coming together relative to your expectations.

Marc Baumann -- Chief Executive Officer

Yeah. I would say, you have to distinguish between the short term and the long term. And the goal of 3% to 4% is a long-term goal. And the idea there is that we could grow on sort of as far out as we can see, which is a multiyear view at that kind of sustained rate.

And we're trying to put in place the talent, the technology, the business practices, the focus on certain verticals that can enable that. And in setting that target, I really was aiming to say to investors and to our own organization, we need to grow on a sustained basis at that rate. Now in any one year, we can do better than that as we did in 2019, and we might not be in that range because there are a lot of variables. And so obviously, when we gave that target, we were growing at the top end of that range in the first half of the year in '19, we knew that.

But I don't want to get myself too excited about six-month growth at a faster rate when in the prior years, we've been in the sort of 2% range for, I think, four years in a row. So I would say, I certainly felt pretty confident that we would get in the 3% to 4% range for 2019, given that we were halfway through the year and we were at the top end. But I think the idea that we would then be able to be pretty confident of being in that range and creating that expectation for all of you for 2020 is something that it didn't really have a good perspective on until we started to pull together our growth plans and our focus areas for 2020. So I'm pleased that on top of having stronger growth in '19 that we have confidence, we're going to continue that in 2020.

Kevin Steinke -- Barrington Research -- Analyst

OK, that's great. And I think you mentioned in your prepared comments that your guidance includes continued investments in people and technology. Can you maybe just talk about some of the areas where you're looking to invest and maybe the impact that has on the 2020 guidance?

Marc Baumann -- Chief Executive Officer

Well, I think if you go -- I'll take the second part first. I think Kris was asked on an earlier question, what's sort of the implied EBITDA growth for '20? And that's clearly illustrating that G&A is going to grow in '20 at about the same rate as gross profit, at least that's our expectation. And clearly, on a long-term basis, we believe that we can grow gross profit at a faster rate than G&A. And the fact that we're indicating by our remarks that we're expecting them to both grow about the same rate this year is a sign that we are making an increased investment.

So I think if you wanted to say, well, you could probably throttle that growth rate in G&A back a little bit, and that's sort of the value of the investment that we're making. But what I would say is that we're adding more people in 2020 than in any one year that we've added before, and they're really focused around either business development activity, supporting growth in our organization, trying to position ourselves to take advantage of some of the growth opportunities that we're identifying or people on the technology side, because we're looking to try to work with data, create increasing data analytics capabilities. We were doing a lot of stuff with pricing and revenue management now and we want to be able to continue to grow and expand what we do there. I think our internal kind of technology strategy is that we discuss all the time is that we want to have a demonstrated set of capabilities that are superior to anybody else in the marketplace.

And of course, other people are always trying to catch up and do new things. So even if we reach that point, we have to continue to look for ways to be better. And so that only happens if we invest in talent and, in some cases, tools to enable us to be able to do that.

Kevin Steinke -- Barrington Research -- Analyst

OK, got it. You mentioned the revenue management there, I know that's been a focus for you the last couple of years here at least, I mean, and you had done a piler or two. I mean what's kind of the -- maybe an update on the state of that effort and expanding it more broadly across your location portfolio?

Marc Baumann -- Chief Executive Officer

I did talk about that. I think when we talk about revenue management, we're really talking about one of the many services that we provide and that's parking and the question is, can you optimize revenue at a parking facility by using data to identify pricing options for consumers and then put those options in front of the consumer at a point where they can make a decision as to whether they're going to park there or not? And so if you then say, well, OK, we have different types of decision-making that takes place. There is decision-making where somebody plans ahead and then there's decision-making where somebody doesn't plan ahead. And the planning-ahead decision-making might be, I want to arrange for monthly parking.

And I want to find a good offering and a convenient place to go and that's well run and all those sort of things. And the other type of plan ahead is not for monthly parking, but I don't want to just drive around. I want to know where I'm going and I want to potentially have an electronic credential that I can use to access the facility, and I don't have to wait in line, at a pay station and all of that. Well, as you might imagine, if you look at the airline industry or the hotel industry, most of their business is plan-ahead business.

And so the tools of revenue management that have been developed over decades in those industries are really geared at the plan-ahead customer. And in parking, up until a couple of years ago, maybe 1% of the total revenue was plan-ahead revenue. I mean especially if you're talking about the transient drive-up driver. And that's growing now.

And what we're finding is there are more and more people want to plan ahead. They want to have a frictionless experience when they're traveling. And so they want to know where they're going, they want to be routed there and they want to have a very easy ingress and egress to the facility. So our pilot in our tests have shown us that we need to have certain tools, and we need to have certain data analytics capabilities in place, we need to be able to put recommendations for pricing in front of people who are, in effect, shopping online and are planning ahead.

And what we have learned is that we can influence their decision-making. And that is like a huge useful thing to know because the question we had when we started all this a couple of years ago was, would the plan-ahead market for parking really be that large? I mean in airports and hotels, it's probably 98% in parking, even in our company now, it's probably 5% at most. Although at certain facilities, it's now growing to maybe 20% or more. So people are planning ahead more and more.

We think they will plan ahead more and more. And the tools that we've developed, we are able to use those anywhere really in the country for the plan-ahead customer. The part that is proving to be difficult is to influence the person who doesn't plan ahead because it's how do you get that information to them. And so the person is driving around, they're in traffic, they shouldn't be looking at their phone.

And so we're having more challenges in trying to use data and to get that information to a nonplan-ahead customer. And I just don't know whether or not we'll be able to do that effectively. We haven't seen anyone else do it effectively as well. But I think given that most of these tools and techniques have been designed for the online environment and the opportunity to influence people is proven in our industry now and the fact that more and more people want to plan ahead, I think, bodes very, very well for these techniques.

And this is another sort of differentiator for us because a smaller player, regional, maybe or a local player, they can't make the kind of investments in talent and technology to be able to do those sort of things.

Kevin Steinke -- Barrington Research -- Analyst

OK. That's a great update. Thanks. Very helpful.

And if I could ask also about -- you mentioned in your prepared comments, you're doing some studies on the benefits of remote check-in. Can you talk about just the motivation behind that? Is that something you feel is necessary to maybe convert some other airports to clients or they want to see data? Or is that just maybe what's -- obviously I guess that would be one of the benefits of doing those studies? But maybe just expand on your efforts there and what do you hope to gain.

Marc Baumann -- Chief Executive Officer

Yeah. Well, and of course, as you know, we've talked about this. Bags' Remote Airline Check-In tool has a proprietary capability. It's the only tool that can check you in for any one of seven airlines, which represent 90% of the domestic employments in the United States.

So it is a unique differentiator. And the people in the cruise industry, when I say that the cruise lines themselves, ports, large resorts, where there are leisure travelers, they have all embraced this tool and it's got a lot of penetration, and they see the economic benefit along with the qualitative benefit of just a better consumer travel experience. So everybody is vying for people to choose to travel there and do business with them versus the competitor. And if you can offer a qualitative, better experience and that's a huge, that's going to generate more revenue for you in a quantitative sense.

But if you can also potentially free people up from the burden of dealing with their luggage, they're free to spend money. And that, again, has been proven in those other industries. In the airport space, we've spent the first year after the acquisition, essentially introducing this capability to all of SP's 70-plus airport clients. And I went on a number of these meetings myself, and the enthusiasm for it as a way of reducing friction for the traveler, reducing congestion at the curb, reducing the dwell time for buses, loading and unloading, getting the less congestion in the check-in areas, in the lobby and getting people through security and able to spend money in restaurants and stores, it's kind of intuitive that, those would all be the benefits.

And so certainly, on a conceptual level, the airports really like it. The airlines really like it too because it makes things more efficient for them, and they maybe don't have to staff as heavily in certain areas for handling baggage. And of course, the traveling public likes it because it just makes their quality of life so much easier when they're traveling. Well, one of these things you have in life is if there's like three different parties that benefit from something, and it has a cost who pays.

It always comes down to that. And what we wanted to do with the survey research is to say, aside from the intuitive qualitative benefit that you've got to believe is going to be there by adopting this tool in your remote parking garage or other places to reduce that congestion, if we can demonstrate real value in terms of the quantitative benefit and the people that don't have their luggage, they're going to spend more money in the terminal and the airports are generally on some sort of percentage of revenue arrangements with the restaurants and the stores, then it gives you a quantitative argument to go along with the qualitative to embrace it. And so while we had some wins already and we have others in the pipeline that are moving in the direction of adopting this, I really do believe because we've shown this research now to a few of the people that have expressed the most interest, and I think it's going to accelerate the pace of adoption over the next couple of years of this tool.

Kevin Steinke -- Barrington Research -- Analyst

OK. That's fantastic. And then lastly, can you just, Kris, talk maybe about it, if you have the numbers, just the impact of performance compensation? You said, I think, it was higher in the fourth quarter, maybe in full year, just how much of an impact it was in terms of G&A fourth quarter or full year, if you have those numbers?

Kristopher Roy -- Chief Financial Officer

Yeah, I think I kind of touched on it briefly as it relates to Q4, which should maybe be 1 point or so. In terms of full-year impact, we don't typically give that level of detail, but it was probably fairly meaningful in terms of the overall impact from '19 compared to '18.

Kevin Steinke -- Barrington Research -- Analyst

OK. So it's maybe like a percentage point higher in terms of G&A expense as a percent of gross profit in the fourth quarter?

Kristopher Roy -- Chief Financial Officer

I don't know if I would say that. Yeah, I mean, it was meaningful for '19 in terms of kind of the increase over '18. Certainly, this year was a high-performance year. But we don't typically give those types of details on performance-based comp.

Marc Baumann -- Chief Executive Officer

I mean the one thing to remember, too, Kevin, is that we have two types of performance-based compensation. So we have our annual bonus program, which is driven off of the companies that came in of its budgeted EBITDA for the year. And we try to estimate as best we can during the year, how the year is going to turn out. And we then make the cost of that along the way.

And when we again get to the end of the year, we find out how the year really ended up and if it ended up exactly like we forecast, then that's not going to be a meaningful number in Q4, other than it'll be the similar to the other quarters. If we end up the year doing a little better than we thought, then it'll be higher in Q4 because we have to true up for the year. Our other compensation plan are performance shares. And there, we're on a three-year free cash flow cycle.

And so we have to project out three years what we think the free cash flow of the company is going to be. And that's challenging, to say the least. And so we do the best we can. And of course, over the three years, we are making estimates of where the free cash flow will end up.

And sometimes, our view becomes more optimistic, and we increase the cost; sometimes our view is less optimistic, and we reduce the cost and then when we get to the end of the three years, which happens in Q4 every year, we then go, OK, how do we do? And I think, as Kris said in his prepared remarks, we actually did better on free cash flow than we expected. In fact, if you recall, a year ago, when we gave out our guidance for free cash flow, we said it would actually be lower in 2019 because we had some adverse timing issues around the end of '18 and into '19 that affected us. And so '18's free cash flow of $62 million was actually better than you might think because of that, and '19 was going to be worse. And so we were guiding people to like $40 million to $50 million or something like that for 2019.

Well, in the end, we came in at a little over $60 million. And so how did that happen? Well, that happened because we worked really hard on the performance of the company, which did well. But we also worked hard on a lot of other things on the balance sheet that affect free cash flow. And so consequently, you got to imagine that when we got to Q4, our calculation for how we did on that three-year free cash flow came in quite a bit better than we might have thought a year earlier or six months earlier.

And so then when we get to Q4 and we have to close it, we got to true all that up. So that is a fairly big number. So I know neither Kris or I have [Inaudible] 1% of gross profit, but we ticked up a lot in Q4 because we trued up, because we generated an amazingly good amount of free cash flow for the year and way more than what we had guided everybody to expect.

Kevin Steinke -- Barrington Research -- Analyst

I see. OK, that's helpful explanation. Great. Thanks for taking my questions.

Marc Baumann -- Chief Executive Officer

All right, Kevin. Thank you.

Operator

Your next question comes from the line of Marc Riddick from Sidoti. Your line is open, sir.

Marc Riddick -- Sidoti and Company LLC -- Analyst

Hi, good afternoon. So first of all, thanks for all the color that you've given because you've already answered a lot of the questions that I had. So one of the things I did want to just sort of clarify on the Premier and the JLL numbers that were given, was that as of year-end or to date?

Marc Baumann -- Chief Executive Officer

No, this is of year-end. We're talking about what happened. Yeah, I mean, [Inaudible] to be just to have full disclosure on the Loews. We took over all those properties at noon on New Year's eve.

So the effect of the 12 Loews and the rest of the Loews that are going to come along are all going to be 2020 effects.

Marc Riddick -- Sidoti and Company LLC -- Analyst

OK, that's helpful. And then one of the things I did want to touch on a little bit, just to sort of clarify on one of your earlier comments around the locations, which I guess I was one of the ones to ask about locations a lot these last few years. I just wanted to get a sense of whether or not this kind of implies that maybe you're kind of through the process of having renewals come up of ones where you have a lot of locations that aren't as profitable as you would like, right? I mean that we've seen kind of those over the years. I mean given some of the comments that you made on the potential of having location growth going forward, is that a fair way to think about it and characterize it that you're kind of largely through -- not completely through that part of the process at this point?

Marc Baumann -- Chief Executive Officer

Yeah. I mean, obviously, I can't keep everything in my head. I'm certainly not aware of any sort of contracts where we have a large number of locations and we make a low amount of profit. So I would say, it's probably largely true what you're saying.

But I think the important thing is if you look at the location count that's in the release, what you see is that we still are seeing a downward drift in lease location counts. And that's for a couple of reasons. One is that, in our industry, there's a long-term trend away from leases. And so that wouldn't surprise me to see that, in and of itself continue, but we still have a fair number of loser leases in our portfolio that we acquired as part of the Central acquisition seven years ago.

And clearly, when those leases come up for renewal, we're either going to get a new lease on better terms so that we can make money or we're going to walk away. And so that will continue for a while, but those are generally one for one. So to your more specific question, I don't imagine that there's anything like that, but the reality is, is that there could be sometimes a municipal deal or a large airport might have multiple locations. But generally, they're fairly profitable deals.

And so if we were to lose one of those, we might see a loss of more locations than we'd like. But I don't think it will be the same kind of scenarios that one you described.

Marc Riddick -- Sidoti and Company LLC -- Analyst

OK. That's great. Thank you very much for all the color.

Marc Baumann -- Chief Executive Officer

Thanks.

Operator

Your next question comes from the line of Daniel Moore from CJS Securities. Your line is open.

Daniel Moore -- CJS Securities -- Analyst

Yeah, thank you again. Just a quick follow-up. Just as far as cadence is concerned of gross profit growth, remind us any material items that might have occurred in Q1 last year, Q1 '19 that might push gross profit growth this Q1, either above or below that kind of 3% to 4% range.

Marc Baumann -- Chief Executive Officer

Well, we did in Q1 last year. We have a fairly, I think we talked about casualty insurance reserve adjustments and it was fairly big in Q1 last year, which is why we wouldn't normally expect that. I mean it could happen. But I would say, we kind of got the bulk of the favorable reserve adjustment that we expected for the year in Q1.

Daniel Moore -- CJS Securities -- Analyst

Got it. Helpful. I appreciate it. That's it for me.

Thanks again.

Marc Baumann -- Chief Executive Officer

All right, Dan. Thanks.

Operator

That concludes the Q&A session. I will now turn the call over to Mr. Marc Baumann for closing remarks.

Marc Baumann -- Chief Executive Officer

Great. Thank you. And thanks for everyone for participating today in our call. I want to thank you for your interest in SP Plus, and we look forward to seeing you at upcoming conferences and meetings or speaking with you next time at the end of Q1.

Have a good day now.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Kristopher Roy -- Chief Financial Officer

Marc Baumann -- Chief Executive Officer

Daniel Moore -- CJS Securities -- Analyst

Tim Mulrooney -- William Blair and Company -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Marc Riddick -- Sidoti and Company LLC -- Analyst

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