GP Strategies Reports First Quarter 2020 Financial Results
COLUMBIA, Md., May 11, 2020 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended March 31, 2020.
Overview:
-- Cash flow from operations of $9.8 million for first quarter of 2020
compared to cash used in operations of $2.6 million for first quarter of
2019
-- Reduced long term-debt balance by $8.0 million to $74.8 million as of
March 31, 2020 compared to $82.9 million as of December 31, 2019
-- Revenue of $128.3 million for first quarter of 2020 compared to $139.5
million for first quarter of 2019 (revenue from divested businesses in
2019 was $3.9 million in first quarter of 2019)
-- Gross profit of $17.6 million, or 13.7% of revenue, for first quarter of
2020 compared to $21.3 million, or 15.3%, for first quarter of 2019
-- Diluted loss per share of $(0.08) for first quarter of 2020 compared to
earnings of $0.02 per share for first quarter of 2019
-- Backlog of $341.2 million as of March 31, 2020 compared to $334.7
million as of March 31, 2019
"During the first quarter, we addressed the challenge of COVID-19 by supporting our customers, generating free cash flow, reducing leverage and lowering expenses," stated Scott N. Greenberg, Chief Executive Officer of GP Strategies. "The Company reduced its debt outstanding to approximately $74.8 million at March 31, 2020 from $82.9 million at December 31, 2019. In addition, the Company has reduced costs in all areas as it deals with the ongoing impact of reduced revenue, with further reductions to come in the second quarter. We have prioritized maintaining liquidity and supporting our customer base during these trying times."
"Because of the global scale and variability of the impacts of COVID-19, there is uncertainty in forecasting the impact on our business," stated Adam H. Stedham, President of GP Strategies. "That said, I remain confident that the progress we made last year in terms of our client relationships, the capabilities of our sales force and operations, and improving our balance sheet, position us to weather this storm. Although we expect our revenues will decline more significantly in the second quarter compared to the first quarter, due to significant cost scaling and cost cutting measures enacted beginning in mid-March 2020, we expect second quarter 2020 Adjusted EBITDA to be consistent with or greater than the first quarter of 2020. Looking to a post COVID-19 world, while there are many uncertainties, we do expect to benefit from our position as one of the largest and most capable custom eLearning content development companies."
The Company's revenue decreased $11.2 million, or 8.0%, to $128.3 million for the first quarter of 2020 from $139.5 million in the first quarter of 2019. Revenue in the Workforce Excellence segment decreased $7.1 million, or 8.7%, and revenue in the Business Transformation Services segment decreased $4.1 million, or 7.1%. The Company estimates that COVID-19 negatively impacted revenue by approximately $11.5 million in the first quarter of 2020. In addition, the Company expects COVID-19 to negatively impact its revenues more significantly in the second quarter of 2020 as compared to the first quarter of 2020. The Company also expects to continue to experience year over year revenue declines in the second half of 2020. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.
The Company had an operating loss of $0.4 million for the first quarter of 2020, a $2.5 million decrease compared to operating income of $2.1 million for the first quarter of 2019 primarily due to a gross profit decrease of $3.7 million, or 17.2%, due to the decreased revenues and a $1.2 million increase in general and administrative expenses, partially offset by a $1.1 million pre-tax gain on the sale of the Company's Alternative Fuels Division in the first quarter of 2020 and $1.1 million of restructuring charges in the first quarter of 2019 that did not recur in 2020.
Net loss was $1.3 million, or $(0.08) per share, for the first quarter of 2020 compared to net income of $0.3 million, or $0.02 per share, for the first quarter of 2019. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $(0.03) for the first quarter of 2020 compared to $0.16 for the first quarter of 2019.
Balance Sheet and Cash Flow Highlights
As of March 31, 2020, the Company had cash of $9.0 million compared to $8.2 million as of December 31, 2019. The Company had $74.8 million of long-term debt outstanding as of March 31, 2020 under its $200 million revolving credit facility compared to $82.9 million outstanding as of December 31, 2019. Cash provided by operating activities was $9.8 million for the quarter ended March 31, 2020 compared to cash used in operating activities of $2.6 million for the same period in 2019.
Investor Call
The Company has scheduled an investor conference call and webcast for 8:30 a.m. Eastern Time on Tuesday, May 12, 2020. Prepared remarks regarding the company's financial and operational results will be followed by a question and answer period with GP Strategies' executive management team. The conference call may be accessed via webcast at: https://services.choruscall.com/links/gpx200512.html or by calling +1 (833) 535-2204 within the US, or +(412) 902-6747 internationally, and requesting the "GP Strategies Conference." The presentation slides broadcast via the webcast will also be available on the Investors section of GP Strategies' website the morning of the call. Participants must be logged in via telephone to submit a question to management during the call. Participants may optionally pre-register for the webcast at http://dpregister.com/10143923.
The webcast will be archived on the Investors section of GP Strategies' website and will remain available for 90 days. Alternatively, a telephonic replay of the conference call will be available for one week and may be accessed by dialing +1 (877) 344-7529 in the US, or +1 (412) 317-0088 internationally, and requesting conference number 10143923.
Presentation of Non-GAAP Information
This press release contains non-GAAP financial measures, including Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization), Adjusted Earnings per Diluted Share (Adjusted EPS), backlog, and free cash flow (cash flow from operating activities less capital expenditures). The Company believes these non-GAAP financial measures are useful to investors in evaluating the Company's results. In particular, with regard to our comparison of our first quarter 2020 Adjusted EBITDA to our currently anticipated second quarter 2020 Adjusted EBITDA, we believe that certain gains and charges in the first quarter and certain anticipated gains and charges in the second quarter, such as the gain on sale of business, legal acquisition and transaction costs, restructuring charges and severance expense, while difficult to predict in the current environment, will vary significantly and make a quarter to quarter comparison of net income less useful to investors than a comparison of Adjusted EBITDA in understanding the impact of COVID-19 and related effects on our results of operations. The Company is unable without unreasonable efforts to estimate specific line items in Adjusted EBITDA which are necessary to a quantitative reconciliation for the forward-looking information above, due to factors including the COVID-19 pandemic and its rapidly-changing effects. Without the availability of this significant information, the Company is unable to provide such a reconciliation. These measures should be considered in addition to, and not as a replacement for, or superior to, either net income, as an indicator of the Company's operating performance, or cash flow, as a measure of the Company's liquidity. In addition, because these measures may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. For a reconciliation of Adjusted EBITDA and Adjusted EPS to the most comparable GAAP equivalents, see the Non-GAAP Reconciliations, along with related footnotes, below.
About GP Strategies
GP Strategies Corporation (NYSE: GPX) is a global performance improvement solutions provider of sales and technical training, digital learning solutions, management consulting and engineering services. GP Strategies' solutions improve the effectiveness of organizations by delivering innovative and superior training, consulting and business improvement services, customized to meet the specific needs of its clients. Clients include Fortune 500 companies, manufacturing, process and energy industries, and other commercial and government customers. Additional information may be found at www.gpstrategies.com.
Forward-Looking Statements
We make statements in this press release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934, including statements about the anticipated effects of the COVID-19 pandemic and related events on our business and results of operations. 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, including the impact of the COVID-19 pandemic and related events that are beyond our control. 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. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
TABLES FOLLOW
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Quarters ended
March 31,
2020 2019
Revenue $
128,281 $
139,473
Cost of revenue 110,667 118,195
Gross profit 17,614 21,278
General and administrative expenses 17,284 16,127
Sales and marketing expenses 1,839 1,989
Restructuring charges 1,119
Gain on change in fair value of 50
contingent consideration, net
Gain on sale of business 1,064 -
Operating income (loss) (445) 2,093
Interest expense 978 1,598
Other expense 500 14
Income (loss) before income tax expense (1,923) 481
Income tax expense (benefit) (629) 147
Net income (loss) $
(1,294) $
334
Basic weighted average shares outstanding 17,082 16,672
Diluted weighted average shares outstanding 17,117 16,703
Per common share data:
Basic earnings (loss) per share $
(0.08) $
0.02
Diluted earnings (loss) per share $
(0.08) $
0.02
Other data:
Adjusted EBITDA(1) $
3,424 $
8,771
Adjusted EPS (1) $
(0.03) $
0.16
(1) The terms Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures
that the
Company believes are useful to investors in evaluating its results. For a
reconciliation of these
non-GAAP financial measures to the most comparable GAAP equivalent, see the
Non-GAAP
Reconciliations, along with related footnotes, below.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)
Quarters ended
March 31,
2020 2019
Revenue by segment (2):
Workforce Excellence $
74,378 $
81,478
Business Transformation
Services 53,903 57,995
Total revenue $
128,281 $
139,473
===
Gross profit by segment (2):
Workforce Excellence $
11,493 $
13,455
Business Transformation
Services 6,121 7,823
Total gross profit $
17,614 $
21,278
===
Supplemental Cash Flow Information:
Net cash provided by (used
in) operating $
9,847 $
(2,605)
activities
Capital expenditures (467) (542)
Free cash flow $
9,380 $
(3,147)
===
(2) Effective January 1, 2020, we
transferred the management
responsibility of certain business
units between the two operating
segments, primarily the management
of the Company's UK apprenticeship
training business to the Business
Transformation Services segment, and
the management of the platform
adoption services business to the
Workforce Excellence segment. We
have reclassified the segment
financial information herein for the
prior year periods to reflect the
changes in our segment reporting and
conform to the current year's
presentation.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliation - Adjusted EBITDA
(3)
(In thousands)
(Unaudited)
Quarters ended
March 31,
2020 2019
Net income (loss) $
(1,294) $
334
Interest expense 978 1,598
Income tax expense
(benefit) (629) 147
Depreciation and
amortization 2,177 2,341
EBITDA 1,232 4,420
Adjustments:
---
Non-cash stock
compensation expense 1,256 1,089
Restructuring charges 1,119
Severance expense 211 1,011
Gain on change in fair
value of contingent
consideration, net (50)
ERP implementation costs 684
Foreign currency
transaction losses 496 345
Legal acquisition and
transaction costs 1,038 153
Impairment of operating
lease right-of-use
asset 255 -
Gain on sale of business (1,064) -
Adjusted EBITDA $
3,424 $
8,771
===
(3) Adjusted
earnings
before
interest,
income taxes,
depreciation
and
amortization
(Adjusted
EBITDA) is a
widely used
non-GAAP
financial
measure of
operating
performance.
It is
presented as
supplemental
information
that the
Company
believes is
useful to
investors to
evaluate its
results
because it
excludes
certain items
that are not
directly
related to the
Company's core
operating
performance.
Adjusted
EBITDA is
calculated by
adding back to
net
income interest
expense,
income tax
expense,
depreciation
and
amortization,
non-cash
stock
compensation
expense, gain
or loss on the
change in fair
value of
contingent
consideration
and
other unusual
or
infrequently
occurring
items. For the
periods
presented,
these other
items are
restructuring
charges,
severance
expense, ERP
implementation
costs, foreign
currency
transaction
losses, legal
acquisition
and
transaction
costs,
impairment of
operating
lease right-
of-use asset,
and gain on
sale of
business.
Adjusted
EBITDA should
not be
considered as
a
substitute
either for net
income, as an
indicator of
the Company's
operating
performance,
or
for cash flow,
as a measure
of the
Company's
liquidity. In
addition,
because
Adjusted
EBITDA
may not be
calculated
identically by
all companies,
the
presentation
here may not
be
comparable to
other
similarly
titled
measures of
other
companies.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliation - Adjusted EPS
(4)
(Unaudited)
Quarters ended
March 31,
2020 2019
Diluted
earnings
per
share $
(0.08) $
0.02
Restructuring
charges 0.05
Severance
expense 0.01 0.04
ERP
implementation
costs 0.03
Foreign
currency
transaction
losses 0.02 0.01
Legal
acquisition
and
transaction
costs 0.04 0.01
Impairment
of
operating
lease
right-
of-use
asset 0.01 -
Settlement
of
contingent
consideration
in
shares 0.01 -
Gain on
sale of
business (0.04) -
Adjusted
EPS $
(0.03) $
0.16
===
(4) Adjusted
Earnings per
Diluted Share
("Adjusted
EPS"), which
is a non-
GAAP
financial
measure, is
defined as
earnings per
diluted share
excluding the
gain or loss
on the change
in
fair value of
acquisition-
related
contingent
consideration
and special
charges, such
as
restructuring,
and other
unusual or
infrequently
occurring
items of
income or
expense.
Management
uses Adjusted
EPS to assess
total Company
operating
performance
on a
consistent
basis. We
believe that
this non-
GAAP
financial
measure,
which
excludes the
gain
on change in
fair value of
acquisition-
related
contingent
consideration
and other
special
charges, when
considered
together with
our GAAP
financial
results,
provides
management
and investors
with an
additional
understanding
of our
business
operating
results,
including
underlying
trends.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
2020 2019
(Unaudited)
Current assets:
Cash and cash equivalents $
9,025 $
8,159
Accounts and other receivables 104,195 131,852
Unbilled revenue 60,655 57,229
Prepaid expenses and other current
assets 21,306 19,115
Total current assets 195,181 216,355
Property, plant and equipment, net 5,508 5,803
Operating lease right-of-use assets 25,036 27,251
Goodwill and other intangible assets,
net 179,395 187,907
Other assets 11,474 11,586
Total assets $
416,594 $
448,902
Current liabilities:
Accounts payable and accrued expenses $
75,328 $
92,332
Deferred revenue 25,560 23,234
Current portion of operating lease
liabilities 7,739 7,871
Total current liabilities 108,627 123,437
Long-term debt 74,837 82,870
Long-term portion of operating lease
liabilities 20,776 22,159
Other noncurrent liabilities 9,862 10,522
Total liabilities 214,102 238,988
Total stockholders' equity 202,492 209,914
Total liabilities and stockholders'
equity $
416,594 $
448,902
© 2020 GP Strategies Corporation. All rights reserved. GP Strategies and GP Strategies with logo design are registered trademarks of GP Strategies Corporation.
View original content to download multimedia:http://www.prnewswire.com/news-releases/gp-strategies-reports-first-quarter-2020-financial-results-301056698.html
SOURCE GP Strategies Corporation
