Good afternoon, and welcome to the Mobile Infrastructure Corporation Second Quarter 2024 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Casey Kotary, Investor Relations Representative. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to review Mobile's Second Quarter 2024 Performance. With us today from Mobile are Manuel Chavez, CEO; and Stephanie Hogue, President. In a moment, we will hear management statements about the company's results of operations as of the second quarter of 2024. Before we begin, we would like to remind everyone that today's discussion includes forward-looking statements, including projections and estimates of future events, business or industry trends, or business or financial results. Actual results may vary significantly from those statements and may be affected by the risks Mobile has identified in today's press release and those identified in its filings with the SEC, including Mobile's most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q. Mobile assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Today's discussion also contains references to non-GAAP financial measures that Mobile believes provide useful information to its investors. These measures should not be considered in isolation from or as a substitute for GAAP results. Mobile's earnings release and the most recent quarterly report on Form 10-Q provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why Mobile uses these measures. I will now turn the call over to Mobile CEO, Manuel Chavez, to discuss second quarter 2024 performance. Manuel?

Thank you, Casey, and thanks to all the participants. On today's call, we will review our second quarter operating and financial performance and discuss our business outlook. This was another quarter of progress for our company. Our asset portfolio continued to show solid year-on-year improvements, highlighted by a 14% increase in net operating income, which is the key metric that we manage to. This NOI growth is particularly noteworthy considering the challenging business environment that persists in many of our markets. Our team executed effectively as evidenced by the increase in portfolio yields, while at the same time, working on initiatives that we expect will accelerate long-term growth. Our asset portfolio consists of 42 parking properties, 18 garages, and 24 surface parking lots. These assets are primarily located in the Midwest and Southwest where driving is the main mode of transportation. We have contracts with service providers who maintain our parking properties. At the beginning of this year, we converted a large portion of these contracts from leases to management contracts. This strategic shift has made a significant difference in three key ways. First, it has given us greater access to the data that we are leveraging to maximize utilization. We now have improved visibility of parking usage and demand metrics. This enables us to employ marketing techniques and pricing adjustments to increase utilization, which, over the long term, should enable us to accelerate growth. Second, management contracts provide us with greater transparency to control and manage expenses at the asset level, which has helped us deploy resources more efficiently. As of the end of the second quarter, 27 of our assets have been converted to management contracts, and we have already converted two additional assets during the third quarter. Third, the conversion to management contracts has given us improved insight into the marketplace and the flexibility to take advantage of unique opportunities as they arise. For example, if we see an increase in requests for large blocks of parking spaces, we have the ability to reorganize existing partners and shift them to other nearby locations. Taking a closer look at our second quarter business results, the conversion to management contracts allows us to drill into detailed monthly and transient performance at each asset. While the current economic environment seems to be more challenging than a year ago, specifically in transient parking, analyzing data has allowed us to focus on increasing market share and utilization of our assets through strategic redeployment and/or expanding relationships within the micro market. We believe there are opportunities throughout the portfolio for targeted rate improvement. In the second quarter, these initiatives contributed to a low single-digit rate improvement that offset marginal transient volume declines. We believe our team can continue to drive improved NOI by adjusting rates as micro markets evolve. While demand in most central business districts continues to be sluggish, our team has witnessed continued strength in monthly parking for medical and social service facilities, municipal offices, and residential locations. Geographically, the Midwest remained our strongest market. Despite near-term economic uncertainty, we are seeing early signs of a pickup in demand that we expect to begin materializing in 2025. First and foremost, there is a multiyear conversion of Class B office space into residential apartment living that is currently underway in several of our markets. The pace of these conversions has accelerated since the beginning of this year, and the developers of these new residential units are keen to offer parking as part of their sales proposition. Our expertise in micro market relationships has provided early insight into these opportunities, and we are actively engaged in discussions on pricing and the number of required spaces with developers. This is a new and important demand driver for us, as the shift from the previous commercial usage of a five-day-a-week, 8 a.m. to 5 p.m. parking access to a 24/7 parking access could result in a significant increase in utilization and revenue for our company. Additionally, the current economic uncertainty appears to be enhancing the return to office mandates in our markets. We are starting to get inbound inquiries from corporates that are anticipating more employees returning to the office, maybe not five days a week, but often enough to require a regular parking space. It is too early to call it a trend. But despite unemployment ticking higher, our contract parkers are actually up from 6,500 to 6,900, or 6%, which indicates that this long-overdue return-to-office shift may be underway. Now I will turn the call over to our President, Stephanie Hogue, who will provide a more detailed review of our second quarter operating and business results. Stephanie?

Thank you, Manuel, and good afternoon, everyone. I am pleased to provide additional details on our second quarter 2024 financial performance. Before I dive into the quarter, I want to note that today we are disclosing an important financial metric to help you evaluate our business, our internal NAV calculation, which we have included in our earnings press release. Our NAV was calculated to be $7.25 per share. This NAV was based on our trailing 12-month net operating income, assuming a weighted average capitalization rate of our portfolio that is consistent with national industry cap rates and BEEP's divestiture history. The valuation was then adjusted for the fair value of outstanding debt, working capital, and preferred equity on the balance sheet. We plan to update this metric periodically in an effort to provide investors with an additional method to track our financial progress. We believe that our stock price materially undervalues our assets in Mobile today. This results from a few factors influencing the stock. First and foremost, we are a small publicly traded company and have spent this year positioning the company for growth through operational improvements and debt refinancing. In addition, we are only now starting to see the benefits of a post-pandemic normalization of return to office and redevelopment of commercial real estate to alternative uses. This has taken time and temporarily disrupted the recurring nature of parking demand in many of our markets. Finally, while our results and performance will help garner additional attention for our company and its inherent value, we believe that one of the greatest issues facing the company, which may have created an overhang on our stock, is the preferred equity conversion to common stock over the prior 12 months. While these conversions of preferred equity into common stock have created additional float in the market, they have also created selling pressure on the stock, as many of these preferred shareholders have promptly sold their newly acquired shares of common stock. At our current trading price, the conversions are highly dilutive. As such, management and our Board are moving to address the preferred stock, and we look forward to discussing further details in the near term. Now turning to the quarter. Second quarter revenue of $9.3 million increased 28% year-over-year from $7.2 million in the second quarter of 2023. We benefited from the conversion of 27 of our assets to management contracts from leases, including one additional during the second quarter, which results in higher revenue as we recognize revenue based on volumes and transient or contracted rates rather than cash collections from operators, which don't always correlate directly to parking traffic. The revenue recognition from management contracts is accrual based and, in our view, is a better indication of underlying business trends. As a reminder, we have been working to convert more of our facilities to management contracts and have converted two more in the third quarter, with the remainder to be completed as leases rollover in 2026 and 2027. Property operating expenses were $1.8 million compared to $0.5 million in last year's second quarter. The increase primarily resulted from the shift to management contracts and the related accounting treatment. By shifting to management contracts, we have the ability to more readily control discretionary expenses and to reprioritize expense items in real-time to enhance the parking experience without sacrificing the overall quality of our assets. We have been successful in timing these expenses more readily to revenue recognition as we shift toward management contracts. Property taxes were $1.8 million, up slightly from $1.7 million a year ago. Net operating income, or NOI, was $5.6 million, up 14.1% from $4.9 million in last year's second quarter. Importantly, the bulk of the NOI growth came from managed locations, underscoring our shift in the business model. NOI represented 60% of second quarter 2024 revenue. General and administrative expenses of $2.9 million were up from $2.4 million in last year's second quarter. This reflected public company costs, additional headcount and technology expenses as well as non-cash compensation of $1.6 million in the current year quarter compared to $1.4 million of non-cash compensation in the prior year quarter. As we grow our business, we do not expect significant G&A growth, as we have built the infrastructure to support a larger revenue base, and our business model scales well. Said another way, we would expect to find significant operating leverage via margin contributions as revenue growth both organically and inorganically. Adjusted EBITDA was $4.2 million, up 16.3% from $3.6 million last year, and the adjusted EBITDA margin was 45.4%. Looking at our balance sheet, Mobile Infrastructure had $13.3 million in cash and restricted cash at the end of the second quarter. Total debt outstanding was $192 million, down modestly from year-end 2023. We continue to actively work with our lenders on refinancing upcoming debt maturities and expect to have more to say on this over the next few months. As a reminder, we extended our revolving credit facility earlier this year and have flexibility on that line currently through June 2025. We continue to evaluate a variety of refinancing options and are working to balance upcoming maturities with the best solutions for BEEP's balance sheet. Given our strong year-to-date performance, we are reaffirming our prior 2024 guidance and continue to expect revenue in the range of $38 million to $40 million, which implies mid-single-digit organic growth as well as the benefit of the shift from leases to management contracts. NOI is our operational North Star, and we continue to expect NOI of $22.5 million to $23.25 million. Assuming the midpoint, this implies growth of 8.3% from 2023. While we continue to build on the pipeline of potential acquisitions, we currently plan to stay on the sidelines regarding acquisitions until more favorable market conditions prevail. And with that, I will turn the call back over to Manuel for closing remarks.

Thanks, Stephanie. Before I turn the call over to Q&A, I want to take a minute to share a few observations about our stock price. We understand these stocks have performed poorly over the last two years, and Mobile is no exception. Considering our confidence in Mobile's long-term strategy and opportunities to drive material shareholder value creation through actively managing our existing assets and delivering accretive M&A, we believe our stock price is materially undervalued. As Stephanie shared, Mobile's recent stock price is trading at an approximate 60% discount and we believe to be an even greater discount to replacement value. Mobile owns a portfolio of extremely valuable central business district real estate assets with significant captive opportunities for growth and margin improvement. Stephanie also touched on the outstanding convertible preferred stock, which we believe has resulted in outsized pressure on Mobile stock. While we have nothing to share today, our Board is actively focused on addressing this convert overhang. To sum up, we are pleased with our year-to-date performance as it puts us on track to reach full year 2024 guidance and demonstrate the team's ability to operate effectively and create value in a challenging demand environment. As you know, our long-term vision is to become the acquirer of choice in a fragmented parking industry. While we have a sizable pipeline of potential acquisitions, we intend to remain patient and disciplined until we see more favorable financial conditions. Operator, please open the call to questions.

Our first question will come from Bryan Maher with B. Riley.

Just a few for me today. We really didn't have much time to look at the information coming out after the market closed on the call at 4:30. Maybe going forward, we can push it back a little bit, so we have time to dig into the numbers a little bit. But can we start off with maybe talking a little bit about actual property utilization? Are you guys going to be sort of a supplemental of some kind where we can see trailing year or two worth of data on parking spots sold per day or per month or per quarter, per lot to help us model it? And kind of the second part of that question, do you have data since you changed the structure from leases to management contracts as to what the actual revenue was per lot that you owned over the past two years?

Yes, that is a really good question. So I will get to two things here. Number one would be because there are a myriad of different revenue control systems and the different ways that people hit pay-per-parking on assets across our portfolio, consolidating for the real-time utilization is still sort of an effort in progress. But what we have come up with as a placeholder is a concept of revenue per available space, or RevPar. This provides a blended average; now granted the two inputs into that are both rate and utilization. But it gives you an economic utilization, so to speak. We cannot go back on that, and that is certainly something that we'll be continuing to share.

Yes, look, I feel you are paying for where your stock price is to your calculated NAV, but having been doing this for 25 years, I can tell you that I think once the Street starts to see those types of numbers and we can model out based upon a year or two at a minimum of historical data model out into the future relative to what trends we are hearing and seeing, I think that is imperative to get out to us in the investment community to get the stock to work, is just kind of my view on that. Moving on, are you guys seeing out in the marketplace? I know you are not active in the transaction market at the moment, but are you starting to see assets trade? And if so, kind of in what markets and at what cap rates?

Yes. So you are not seeing a lot of assets trade yet. You are starting to see assets that are tied to office towers, and you are starting to see those be turned back to lenders. You are starting to see some opportunities around that. So we are actually not seeing a lot of deals get done. The pipeline continues to build and expand on what is potentially out there.

Okay. And then in your prepared ... in your earnings release, you talked in your prepared comments about this kind of office to residential. And you have a statement in here; we already are engaged with several developers in our markets to determine pricing and access. Can you kind of further define what it is you are getting at there?

Yes. So when you sell in contractual parking, there are different product types out there. There is 24/7 access, reserved parking, unreserved, Monday through Friday, six-to-six parking. When you are bringing a residential component, you are pricing those products differently. What we are doing is sitting down to understand what the developer thinks regarding the array of options that they need. We are tailor-fitting a menu of options for them so that they can provide those to their prospective tenants.

Okay. And just last for me. I think Stephanie, you talked about the preferred conversion to common and then subsequent sales. Can you tell us how far along that process is? Is there a lot more to go? What steps could you take to slow that pain?

Yes, Bryan, it is a good question. So we are working on that right now. I think in my remarks we have talked about working through that with our Board. So nothing definitive to share today, but we will be commenting on it going forward. I think it is about 25% of the preferred equity that is converted to date. And so as Manuel noted at the end of the prepared remarks, it is just when they choose to sell is when they are converting. So there is still about $33 million of preferred equity outstanding today. There was about $43 million when we listed a year ago. So it is roughly 20% to 25%.

Our next question will come from Marc Riddick with Sidoti.

So I just wonder if you could go back to the return to office commentary. I was wondering if you could talk a little bit about what it is you are seeing there to date? Maybe you can talk a little bit about what that mix looks like? And is it a matter of certain days picking up certain days of the week and then maybe how that might play into pricing dynamics involved?

So certainly, we are seeing Tuesday, Wednesday, and Thursday are like a different week than Monday and Friday, and that is really across markets in the U.S. We are also seeing that holidays are still extended, whereas people used to just take Monday off on the three-day weekend; we are seeing them take four and five days off. That has remained pretty consistent for us. What we are starting to see, though, is that for the first time really since the pandemic, we are beginning to see people actually switching course and starting to bring people back downtown, and it is not five days a week. It is in packages of two and three days a week. So we are creating options for them so that they can utilize our assets during that time that they need. Around industries, I would say we are still seeing a lot of demand from hospitality employees, and municipal employees are starting to come back. Courthouses are coming back online, which we have several assets around courthouses. We are also seeing some movement still of tenants that are upgrading to more amenitized properties. We are keenly watching that and trying to take advantage of that when our assets are positioned more readily to those Class A amenitized office towers.

Okay, great. And then commentary about the offerings that kind of fit with what you are seeing and the changes in return to office traffic. Can you talk a little bit about the rate of those packages that you are sort of customizing now and how that might compare as far as year-over-year rate? And is it similar, or is it better pricing for you, better margins? How should we think about how you are packaging the pricing to the end consumer to fit that return to office flow?

Right. So it is a two-step process for us because in parking, to facilitate or to provoke trials, we oftentimes have to discount our rate. But it is after they have tried us and it has been a good experience that we have pricing power. So right now, we are in the phase of trying to drive volumes in our contract parking. We are discounting our rate for those groups of partners out there, with the goal of getting to a point where utilization reaches a level where we can start to get back into revenue management, which historically is what you did, which is, in our industry, moving rates up and down depending on the day of the week and maybe even the time of day. But we are definitely in the first phase of that where we are driving volume and using discounted rates to help that.

One from me. I just wanted to sort of shift over to the little bit about, I guess, being part of the early stages of that and discussions with all of that. Can you sort of maybe walk us through the sort of timeframe that you see when that might end up being a benefit to you?

Yes. No, we are going to see some benefit in the latter part of this year, and it will really pick up steam into 2025. We have visibility extending beyond that as well.

It appears there are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Manuel Chavez for any closing remarks.

Thank you all for your participation in today's call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.