GSE Solutions Announces Third Quarter 2020 Financial Results
COLUMBIA, Md.--(BUSINESS WIRE)--GSE Systems, Inc. (“GSE Solutions”, “GSE” or “the Company”) (Nasdaq: GVP), a leader in delivering and supporting end-to-end training, engineering, compliance, simulation and workforce solutions to the power industry, announced today its financial results for the three months ended September 30, 2020 (“Q3 2020”).
Q3 2020 Financial Overview
-
Revenue of
$12.9 million , compared to$20.0 million in Q3 2019 -
Gross profit of
$3.3 million , compared to$4.7 million in Q3 2019 -
Net loss of
$0.7 million or$(0.03) per basic and diluted share in Q3 2020, compared to a net loss of$1.2 million , or$(0.06) per basic and diluted share in Q3 2019 -
Adjusted net loss1 of
$ 1.0 million , or$(0.05) adjusted loss per share in Q3 2020 , compared to adjusted net income of$0.6 million or$0.03 adjusted earnings per diluted share, in Q3 2019 -
Adjusted EBITDA1 of
$(0.6) million in Q3 2020, compared to$1.4 million in Q3 2019 -
Cash flow provided by operations of
$1.6 million during the nine months ended September 30, 2020, compared to cash used during the nine months ended September 30, 2019 of$0.3 million -
New orders of
$10.9 million during Q3 2020, compared to new orders of$19.0 million in Q3 2019 -
Repaid
$9.9 million of outstanding long-term debt obligations during Q3 2020
At September 30, 2020
-
Cash and cash equivalents of
$7.7 million -
Total indebtedness of
$13.6 million -
Working capital of
$2.4 million and current ratio of 1.1x -
Backlog of
$44.6 million
1 Refer to the non-GAAP reconciliation tables at the end of this press release for a definition of "EBITDA", “adjusted EBITDA” and “adjusted net income”. |
Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said, “In the third quarter of 2020, industrywide RFP delays and project suspensions due to the COVID-19 pandemic continued to dampen our financial results. In this challenging environment, we remained focused on cost containment and debt repayment, while positioning GSE for success as industry demand for our services returns to normalized levels. Of note, during the quarter we repaid nearly
Q3 2020 FINANCIAL RESULTS
Q3 2020 revenue of
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(in thousands) |
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
||||
Revenue: |
|
|
|
|
|||||||
Performance |
$ |
7,257 |
$ |
11,417 |
$ |
25,240 |
$ |
36,617 |
|||
NITC |
|
5,665 |
|
8,614 |
|
19,727 |
|
29,066 |
|||
Total revenue |
$ |
12,922 |
$ |
20,031 |
$ |
44,967 |
$ |
65,683 |
|||
Performance revenue decreased to
NITC revenue decreased to
Q3 2020 gross profit was
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September 30, 2020 |
September 30, 2019 |
September 30, 2020 |
September 30, 2019 |
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(in thousands) |
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performance |
$ |
2,482 |
|
|
|
$ |
3,548 |
|
|
|
$ |
8,240 |
|
|
|
$ |
11,787 |
|
|
NITC |
|
837 |
|
|
1,125 |
|
|
2,756 |
|
|
3,489 |
|
|||||||
Consolidated gross profit |
$ |
3,319 |
|
$ |
4,673 |
|
$ |
10,996 |
|
$ |
15,276 |
|
|||||||
The decrease in our gross profit of
Selling, general and administrative expenses in Q3 2020 totaled
Net loss for Q3 2020 totaled
Adjusted net loss totaled
Earnings before interest, taxes, depreciation and amortization ("EBITDA") for Q3 2020 was approximately
Adjusted EBITDA ("AEBITDA") totaled
BACKLOG AND CASH POSITION
Backlog at September 30, 2020 was
Our cash position was
CONFERENCE CALL
Management will host a conference call today at 4:30 pm Eastern Time to discuss Q3 2020 results as well as other matters.
Interested parties may participate in the call by dialing:
(877) 407-9753 (Domestic)
(201) 493-6739 (International)
The conference call will also be accessible via the following link: https://78449.themediaframe.com/dataconf/productusers/gvp/mediaframe/41905/indexl.html
For those who cannot listen to the live broadcast, an online webcast replay will be available www.gses.com or the following link: https://78449.themediaframe.com/dataconf/productusers/gvp/mediaframe/41905/indexl.html.
ABOUT GSE SOLUTIONS
We are the future of operational excellence in the power industry. As a collective group, GSE Solutions leverages top skills, expertise, and technology to provide highly specialized solutions that enable customers to achieve the performance they envision. Our experts deliver and support end-to-end training, engineering, compliance, simulation, and workforce solutions that help the power industry reduce risk and optimize plant operations. GSE is a proven solution provider, with more than four decades of industry experience and more than 1,100 installations serving hundreds of customers in over 50 countries spanning the globe. www.gses.com
FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current expectations concerning future events and results. We use words such as “expect,” “intend,” “believe,” “may,” “will,” “should,” “could,” “anticipates,” and similar expressions to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to be materially different from those we project. For a full discussion of these risks, uncertainties and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
GSE SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except share and per share data) (unaudited) |
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September 30, 2020 |
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
||||||
|
|
|
|
||||||||
Revenue |
$ |
12,922 |
$ |
20,031 |
|
$ |
44,967 |
|
$ |
65,683 |
|
Cost of revenue |
9,603 |
15,358 |
|
|
33,971 |
|
|
50,407 |
|||
Gross profit |
3,319 |
4,673 |
|
|
10,996 |
|
|
15,276 |
|||
Operating expenses: |
|
|
|
|
|||||||
Selling, general and administrative |
2,878 |
3,465 |
|
12,548 |
|
12,231 |
|||||
Research and development |
137 |
130 |
|
|
526 |
|
|
526 |
|||
Restructuring charges |
185 |
740 |
|
195 |
|
742 |
|||||
Loss on impairment |
- |
- |
|
4,302 |
|
5,464 |
|||||
Depreciation |
76 |
107 |
|
254 |
|
300 |
|||||
Amortization of intangible assets |
414 |
596 |
|
|
1,528 |
|
|
1,804 |
|||
Total operating expenses |
3,690 |
5,038 |
|
|
19,353 |
|
|
21,067 |
|||
|
|
||||||||||
Operating loss |
(371) |
(365) |
|
|
(8,357) |
|
|
(5,791) |
|||
|
|
|
|
||||||||
Interest expense, net |
(128) |
(288) |
|
|
(556) |
|
|
(812) |
|||
Gain (loss) on derivative instruments, net |
31 |
(61) |
|
|
35 |
|
|
(69) |
|||
Other (expense) income, net |
(77) |
59 |
|
|
(24) |
|
|
62 |
|||
Loss before income taxes |
(545) |
(655) |
|
|
(8,902) |
|
|
(6,610) |
|||
Provision for (benefit from) income taxes |
116 |
568 |
|
|
166 |
|
|
(874) |
|||
Net loss |
$ |
(661) |
$ |
(1,223) |
|
$ |
(9,068) |
|
$ |
(5,736) |
|
|
|
|
|
||||||||
|
|
|
|
||||||||
Net loss per common share - basic and diluted |
$ |
(0.03) |
$ |
(0.06) |
|
$ |
(0.44) |
|
$ |
(0.29) |
|
|
|
||||||||||
Weighted average shares outstanding used to compute net loss per share - basic and diluted |
20,563,452 |
20,007,469 |
|
20,438,571 |
|
20,021,829 |
|||||
GSE SYSTEMS, INC AND SUBSIDIARIES Selected Balance Sheet Data (in thousands) |
||||||
|
(unaudited) |
(audited) |
||||
|
|
September 30, 2020 |
December 31, 2019 |
|||
|
|
|||||
Cash and cash equivalents |
$ |
7,660 |
$ |
11,691 |
||
|
|
|||||
Current assets |
$ |
20,520 |
$ |
30,778 |
||
Noncurrent assets |
|
21,097 |
27,731 |
|||
Total assets |
$ |
41,617 |
$ |
58,509 |
||
|
|
|
||||
Current liabilities |
$ |
18,135 |
$ |
34,434 |
||
Noncurrent liabilities |
|
12,047 |
3,956 |
|||
Stockholders' equity |
|
11,435 |
20,119 |
|||
Total liabilities and shareholders’ equity |
$ |
41,617 |
$ |
58,509 |
||
EBITDA and Adjusted EBITDA Reconciliation (in thousands)
References to “EBITDA” means Net Income (Loss), before taking into account interest income and expense, provision for income taxes, depreciation and amortization. References to Adjusted EBITDA ("AEBITDA") exclude the impact on our net loss due to any impairment of our intangibles, gain from the change in fair value of contingent consideration, restructuring charges, stock-based compensation expense, impact of the change in fair value of derivative instruments, provision for legal settlements and acquisition-related expenses. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles (GAAP). Management believes EBITDA and Adjusted EBITDA, in addition to operating profit, net income and other GAAP measures, are useful to investors to evaluate the Company’s results because it excludes certain items that are not directly related to the Company’s core operating performance that may, or could, have a disproportionate positive or negative impact on our results for any particular period. Investors should recognize that EBITDA and AEBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP EBITDA and AEBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows:
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September 30, 2020 |
September 30, 2019 |
|
September 30, 2020 |
September 30, 2019 |
|||||||
Net loss |
$ |
(661) |
$ |
(1,223) |
|
$ |
(9,068) |
$ |
(5,736) |
||
Interest expense, net |
128 |
288 |
|
556 |
812 |
||||||
Provision for (benefit from) income taxes |
116 |
568 |
|
166 |
(874) |
||||||
Depreciation and amortization |
579 |
768 |
|
|
2,030 |
|
2,397 |
||||
EBITDA |
162 |
401 |
|
(6,316) |
(3,401) |
||||||
Gain on legal settlement, net |
(952) |
- |
|
(91) |
- |
||||||
Loss on impairment |
- |
- |
|
4,302 |
5,464 |
||||||
Impact of the change in fair value of contingent consideration |
- |
- |
|
- |
(1,200) |
||||||
Restructuring charges |
185 |
740 |
|
195 |
742 |
||||||
Stock-based compensation expense |
33 |
114 |
|
357 |
1,150 |
||||||
(Gain) loss on derivative instruments |
(31) |
61 |
|
(35) |
69 |
||||||
Acquisition-related expenses |
3 |
116 |
|
191 |
744 |
||||||
Adjusted EBITDA |
$ |
(600) |
$ |
1,432 |
|
$ |
(1,397) |
$ |
3,568 |
||
Adjusted Net (Loss) Income and Adjusted EPS Reconciliation (in thousands, except per share amounts)
References to Adjusted Net (Loss) Income exclude the impact of gain from the change in fair value of contingent consideration, loss on impairment of our intangibles, restructuring charges, stock-based compensation expense, change in fair value of derivative instruments, acquisition-related expense, acquisition-related legal settlement, amortization of intangible assets and the income tax expense impact of any such adjustments. Adjusted Net Income and adjusted earnings per share (adjusted EPS) are not measures of financial performance under generally accepted accounting principles (GAAP). Management believes adjusted net income and adjusted EPS, in addition to other GAAP measures, are useful to investors to evaluate the Company’s results because they exclude certain items that are not directly related to the Company’s core operating performance and non-cash items that may, or could, have a disproportionate positive or negative impact on our results for any particular period. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP adjusted net income and adjusted EPS to GAAP net income, the most directly comparable GAAP financial measure, is as follows:
(in thousands) |
Three months ended |
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September 30, 2020 |
September 30, 2019 |
September 30, 2020 |
|
September 30, 2019 |
|||||||
Net loss |
$ |
(661) |
$ |
(1,223) |
$ |
(9,068) |
$ |
(5,736) |
|||
Gain legal settlement, net |
(952) |
- |
(91) |
- |
|||||||
Loss on impairment |
- |
- |
4,302 |
5,464 |
|||||||
Impact of the change in fair value of contingent consideration |
- |
- |
- |
(1,200) |
|||||||
Restructuring charges |
185 |
740 |
195 |
742 |
|||||||
Stock-based compensation expense |
33 |
114 |
357 |
1,150 |
|||||||
(Gain) loss on derivative instruments, net |
(31) |
61 |
(35) |
69 |
|||||||
Acquisition-related expense |
3 |
116 |
191 |
744 |
|||||||
Amortization of intangible assets |
414 |
596 |
1,528 |
1,804 |
|||||||
Income tax expense impact of adjustments |
- |
186 |
- |
(1,761) |
|||||||
Adjusted net (loss) income |
$ |
(1,009) |
$ |
590 |
$ |
(2,621) |
$ |
1,276 |
|||
Adjusted (loss) earnings per common share – diluted |
$ |
(0.05) |
$ |
0.03 |
$ |
(0.13) |
$ |
0.06 |
|||
Weighted average shares outstanding - diluted(1) |
20,563,452 |
20,586,145 |
|
20,438,571 |
|
20,418,960 |
|||||
(1) During the three and nine months ended September 30, 2020, we reported a GAAP net loss and an adjusted net loss. Accordingly, there were 66,261 and 12,172 dilutive shares from RSUs that were excluded from the adjusted net loss per common share. |
|
(1) During the three and nine months ended September 30, 2019, we reported a GAAP net loss and an adjusted net income. Accordingly, there were 578,676 and 397,131 dilutive shares from RSUs included in the adjusted earnings per share calculation that were considered anti-dilutive when calculating the net loss per share. |
Contacts
Company Contact
Kyle Loudermilk
Chief Executive Officer
GSE Systems, Inc.
(410) 970-7800
The Equity Group Inc.
Kalle Ahl, CFA
(212) 836-9614
kahl@equityny.com
