GP Strategies Reports Second Quarter 2018 Financial Results
COLUMBIA, Md., July 31, 2018 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended June 30, 2018.
Overview:
-- Revenue of $133.7 million for second quarter of 2018 compared to $131.2
million for second quarter of 2017
-- Gross profit of $22.6 million for second quarter of 2018 compared to
22.4 million for second quarter of 2017
-- Diluted earnings per share of $0.22 for second quarter of 2018 compared
to $0.35 per share for second quarter of 2017 (includes restructuring
charges of $0.11 per share in the second quarter of 2018)
"In the second quarter of 2018, GP Strategies had higher revenue and gross profit compared to the second quarter of 2017," stated Scott N. Greenberg, Chief Executive Officer of GP Strategies. "We achieved these results with a strong contribution from our engineering and technical services practice which reported revenue growth of 11% or $3.0 million in the second quarter. We are pleased with the traction we are seeing as a result of our investment in business development efforts and the centralization of our sales organization. Our revenue and gross profit increase in the quarter was offset by a decline in UK job skills training services due to the previously discussed funding changes by the UK government for their apprenticeship programs. We are however adapting to these changes and have added new apprenticeship programs to our portfolio and expect that in 2019, our revenues in that business should return to levels more comparable to prior years. In addition, we are excited about the previously announced acquisition of IC Axon which is part of our long term strategy of growing revenues in the life sciences and pharmaceutical industry to become a major vertical of the Company."
The Company's revenue increased $2.5 million or 2% during the second quarter of 2018 compared to the same quarter in 2017. The revenue growth was primarily attributable to a $4.2 million or 5.6% increase in the Workforce Excellence segment, partially offset by a $1.7 million or 3.1% decline in the Business Transformation Services segment. Gross profit was $22.6 million, or 16.9% of revenue, second quarter of 2018 compared to $22.4 million, or 17.1% of revenue, in the second quarter of 2017.
Operating income decreased $3.4 million to $5.7 million for the second quarter of 2018 from $9.1 million for the second quarter of 2017. The decrease in operating income is primarily due to the following: (i) a $1.3 million increase in G&A expenses primarily due to an increase in bad debt expense and increased legal fees related to acquisitions; (ii) a $0.6 million increase in sales and marketing expense due to investment in business development; and (iii) $2.5 million, or $0.11 per share, of restructuring charges during the second quarter of 2018 in connection with the Company's restructuring plan initiated in the fourth quarter of 2017. The restructuring charges consisted of facility consolidation charges totaling $1.3 million and severance of $1.2 million. The decreases in operating income were offset by a $1.0 million increase in the gain on change in fair value of contingent consideration for previously completed acquisitions.
Interest expense decreased to negative $0.2 million for the second quarter of 2018 compared to $0.5 million for the second quarter of 2017 primarily due to a $1.0 million reversal of an interest accrual related to contingent interest associated with unremitted value-added tax (VAT) from prior year client billings which was favorably settled during the second quarter of 2018. Other expense increased $0.9 million during the second quarter of 2018 primarily due to an increase in foreign currency losses.
Income tax expense was $1.3 million, or a 27.1% effective tax rate, for the second quarter of 2018 compared to $2.6 million, or a 30.7% effective tax rate, for the second quarter of 2017. The decrease in the effective income tax rate in 2018 compared to 2017 is primarily due to a decrease in the U.S. statutory tax rate from 35% to 21% under the Tax Cuts and Jobs Act that was enacted on December 22, 2017.
Net income was $3.6 million, or $0.22 per share, for the second quarter of 2018 compared to $5.9 million, or $0.35 per share, for the second quarter of 2017. Excluding special items during the quarter, adjusted earnings were $0.34 per share for the second quarter of 2018 compared to $0.41 per share for the second quarter of 2017.
Balance Sheet and Cash Flow Highlights
As of June 30, 2018, the Company had cash of $14.1 million compared to $23.6 million as of December 31, 2017. The Company had $40.0 million of long-term debt outstanding as of June 30, 2018. In addition, the Company had $61.8 million of short-term borrowings outstanding and $33.0 million of available borrowings under its line of credit as of June 30, 2018.
Cash provided by operating activities was $7.1 million for the six months ended June 30, 2018 compared to $19.8 million for the same period in 2017. During the six months ended June 30, 2018 and 2017, the Company repurchased approximately 313,000 and 101,000 shares, respectively, of its common stock in the open market for a total cost of approximately $7.3 million and $2.4 million, respectively. As of June 30, 2018, there was approximately $4.5 million available for future repurchases under the buyback program.
Investor Call
The Company has scheduled an investor conference call and webcast for 10:00 a.m. Eastern Time on July 31, 2018. 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/gpx180731.html or by calling +1 (866) 777-2509 within the US, or +1 (412) 317-5413 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/10122498.
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 10122498.
Presentation of Non-GAAP Information
This press release contains non-GAAP financial measures, including EBITDA (earnings before interest, income taxes, depreciation and amortization), Adjusted EPS 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. 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 these non-GAAP financial measures 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. 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. 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 Six months ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
Revenue $133,691 $131,161 $258,723 $253,608
Cost of revenue 111,118 108,726 218,471 211,785
------- ------- ------- -------
Gross profit 22,573 22,435 40,252 41,823
General and administrative expenses 14,121 12,777 27,980 25,376
Sales and marketing expenses 1,106 461 1,831 856
Restructuring charges 2,495 - 2,930 -
Gain (loss) on change in fair value of 894 (96) 3,446 101
contingent consideration, net
Operating income 5,745 9,101 10,957 15,692
Interest expense (150) 534 536 972
Other expense 988 107 1,152 182
Income before income tax expense 4,907 8,460 9,269 14,538
Income tax expense 1,332 2,597 3,062 4,589
Net income $3,575 $5,863 $6,207 $9,949
====== ====== ====== ======
Basic weighted average shares outstanding 16,510 16,717 16,565 16,729
Diluted weighted average shares outstanding 16,601 16,833 16,657 16,837
Per common share data:
Basic earnings per share $0.22 $0.35 $0.37 $0.59
Diluted earnings per share $0.22 $0.35 $0.37 $0.59
Other data:
Adjusted EBITDA(1) $11,768 $13,908 $19,611 $23,663
Adjusted EPS (1) $0.34 $0.41 $0.47 $0.67
(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 equivalents,
see the Non-GAAP Reconciliations,
along with related footnotes, below.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)
Quarters ended Six months ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
Revenue by segment (2):
Workforce Excellence $80,256 $76,032 $154,687 $147,575
Business Transformation Services 53,435 55,129 104,036 106,033
Total revenue $133,691 $131,161 $258,723 $253,608
======== ======== ======== ========
Gross profit by segment (2):
Workforce Excellence $15,009 $14,035 $26,118 $27,042
Business Transformation Services 7,564 8,400 14,134 14,781
Total gross profit $22,573 $22,435 $40,252 $41,823
======= ======= ======= =======
Supplemental Cash Flow Information:
Net cash provided by (used in) operating $(2,281) $15,640 $7,125 19,758
activities
Capital expenditures (1,144) (1,244) (1,514) (1,769)
------ ------ ------ ------
Free cash flow $(3,425) $14,396 $5,611 17,989
======= ======= ====== ======
(2) As of June 30, 2018, we operated
through two reportable business
segments: (i) Workforce Excellence
and (ii) Business Transformation
Services. In December 2017, we
announced a new organizational
structure and plan to improve
operating results by increasing
organic growth and reducing operating
costs. Effective January 1, 2018, we
re-organized into two operating
segments aligned by complementary
service lines and supported by a new
business development organization
aligned by industry sector. The
Workforce Excellence segment includes
the majority of the former Learning
Solutions and Professional &
Technical Services segments. The
Business Transformation Services
segment includes the majority of the
former Performance Readiness
Solutions and Sandy Training &
Marketing segments. Certain business
units transferred between the former
operating segments to better align
with the service offerings of the two
new segments. We have reclassified
the segment financial information
herein for the prior year periods to
reflect the changes in our segments
and conform to the current year's
presentation.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliation - Adjusted EBITDA (3)
(In thousands)
(Unaudited)
Quarters ended Six months ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
Net income $3,575 $5,863 $6,207 $9,949
Interest expense (150) 534 536 972
Income tax expense 1,332 2,597 3,062 4,589
Depreciation and amortization 1,919 1,763 3,761 3,206
----- ----- ----- -----
EBITDA 6,676 10,757 13,566 18,716
Adjustments:
------------
Non-cash stock compensation expense 1,125 1,734 2,534 $3,192
Restructuring charges 2,495 - 2,930 $ -
(Gain) loss on change in fair value of contingent (894) 96 (3,446) (101)
consideration, net
ERP implementation costs 1,206 1,150 2,610 $1,692
Foreign currency transaction losses 1,160 171 1,417 $164
===== === ===== ====
Adjusted EBITDA $11,768 $13,908 $19,611 $23,663
======= ======= ======= =======
(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 such as restructuring
charges. 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 Six months ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
Diluted earnings per share $0.22 $0.35 $0.37 $0.59
Restructuring charges 0.11 - 0.13 -
(Gain) loss on change in fair value of (0.04) - (0.15) -
contingent consideration, net
ERP implementation costs 0.05 0.05 0.11 0.07
Foreign currency transaction losses 0.05 0.01 0.06 0.01
Reversal of contingent interest accrual on (0.05) - (0.05) -
unremitted VAT payments
Adjusted EPS $0.34 $0.41 $0.47 $0.67
===== ===== ===== =====
(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, system implementation
costs, 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 or loss on
the 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)
June 30, December 31,
2018 2017
---- ----
(Unaudited)
Current assets:
Cash and cash equivalents $14,134 $23,612
Accounts and other receivables 110,122 119,335
Unbilled revenue 45,527 42,958
Prepaid expenses and other current
assets 14,664 14,212
------ ------
Total current assets 184,447 200,117
Property, plant and equipment, net 5,501 5,123
Goodwill and other intangible assets,
net 190,897 153,198
Other assets 8,250 6,569
----- -----
Total assets $389,095 $365,007
======== ========
Current liabilities:
Short-term borrowings $61,823 $37,696
Current portion of long-term debt 12,000 12,000
Accounts payable and accrued expenses 72,893 78,280
Deferred revenue 18,694 22,356
------ ------
Total current liabilities 165,410 150,332
Long-term debt 28,000 16,000
Other noncurrent liabilities 9,601 10,621
----- ------
Total liabilities 203,011 176,953
Total stockholders' equity 186,084 188,054
------- -------
Total liabilities and stockholders'
equity $389,095 $365,007
======== ========
© 2018 GP Strategies Corporation. All rights reserved. GP Strategies and the GP Strategies logo design are trademarks of GP Strategies Corporation.
View original content with multimedia:http://www.prnewswire.com/news-releases/gp-strategies-reports-second-quarter-2018-financial-results-300688802.html
SOURCE GP Strategies Corporation
