GP Strategies Reports Second Quarter 2019 Financial Results
COLUMBIA, Md., Aug. 1, 2019 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended June 30, 2019.
Overview:
-- Record revenue of $149.4 million for second quarter of 2019 compared to
$133.7 million for second quarter of 2018
-- Record gross profit of $23.0 million for second quarter of 2019 compared
to $22.6 million for second quarter of 2018
-- Diluted earnings per share of $0.19 for second quarter of 2019 compared
to $0.22 per share for second quarter of 2018
-- Backlog of $330.5 million as of June 30, 2019, a 23% increase compared
to $268.8 million as of June 30, 2018
"We are pleased to report both record revenue and gross profit in the second quarter, which enhances confidence in our outlook for the future," stated Scott N. Greenberg, Chief Executive Officer of GP Strategies. "These results were achieved despite a significant decline in foreign currency exchange rates which negatively impacted our U.S. dollar reported revenue and gross profit by $2.3 million and $0.3 million, respectively, in the second quarter of 2019. With our increased backlog and significant new opportunities, we believe the positive momentum should continue."
"Having completed six months of 2019, we continue to see our new sales structure gaining traction," commented Adam H. Stedham, President of GP Strategies. "We are pleased that we are generating higher than anticipated revenues from our TTi business. In addition, we continue to make progress on improving TTi's profitability to align with the company's gross margins. We continue to be confident that we are on track to execute throughout the remainder of 2019."
The Company's revenue increased $15.7 million, or 12%, to $149.4 million for the second quarter of 2019 from $133.7 million in the second quarter of 2018. Revenue in the Business Transformation Services segment increased $16.7 million, or 32%, largely due to the TTi Global acquisition completed in December 2018, as well as an increase in sales training services for automotive clients. This increase was partially offset by a $1.0 million, or 1%, revenue decrease in the Workforce Excellence segment. Foreign currency exchange rate changes resulted in a $2.3 million decrease in U.S. dollar reported revenue during the second quarter of 2019, which primarily impacted the Workforce Excellence segment.
Gross profit was $23.0 million, or 15.4% of revenue, for second quarter of 2019 compared to $22.6 million, or 16.9% of revenue, for second quarter of 2018. Gross profit increased $0.4 million during the second quarter due to increased revenues, but was offset by a $1.2 million decrease in gross profit from a software license sale in the Energy business in the second quarter of 2018 which did not recur in 2019.
Operating income increased $0.4 million to $6.1 million for the second quarter of 2019 from $5.7 million for the second quarter of 2018. The increase in operating income is primarily due to a $0.4 million increase in gross profit and a $2.3 million decrease in restructuring charges, partially offset by a $1.3 million increase in general and administrative expenses (primarily due to a $1.5 million increase in G&A expense in the acquired TTi business, offset by a net $0.2 million decrease in various other expenses), a $0.8 million increase in sales and marketing expenses, and a $0.3 million decrease in the gain on change in fair value of contingent consideration.
Interest expense increased to $1.7 million for the second quarter of 2019 compared to negative $0.2 million for the second quarter of 2018. The increase is due to an increase in interest rates and borrowings under the Company's credit agreement, as well as a $1.0 million non-recurring reversal of an interest accrual associated with unremitted value-added tax during the second quarter of 2018. Other income increased $1.1 million during the second quarter of 2019 primarily due to a decrease in foreign currency losses during the second quarter. Income tax expense was $1.3 million, or a 28.8% effective tax rate, for the second quarter of 2019 compared to $1.3 million, or a 27.1% effective tax rate, for the second quarter of 2018. Net income was $3.2 million, or $0.19 per share, for the second quarter of 2019 compared to $3.6 million, or $0.22 per share, for the second quarter of 2018.
Balance Sheet and Cash Flow Highlights
As of June 30, 2019, the Company had cash of $6.1 million compared to $13.4 million as of December 31, 2018. The Company had $119.7 million of long-term debt outstanding and $14.2 million of available borrowings as of June 30, 2019 under its $200 million revolving credit facility. As of July 29, 2019, the Company had cash of $15.7 million.
Cash used in operating activities was $6.3 million for the six months ended June 30, 2019 compared to cash provided by operating activities of $7.1 million for the same period in 2018. The decrease in cash flow from operations is primarily due to lower net income and a decrease in working capital compared to the prior year.
Investor Call
The Company has scheduled an investor conference call and webcast for 10:00 a.m. Eastern Time on August 1, 2019. 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/gpx190801.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/10133987.
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 10133987.
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. 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. 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,
2019 2018 2019 2018
---
Revenue $
149,413 $
133,691 $
288,886 $
258,723
Cost of revenue 126,454 111,118 244,649 218,471
Gross profit 22,959 22,573 44,237 40,252
General and administrative expenses 15,402 14,121 31,529 27,980
Sales and marketing expenses 1,906 1,106 3,895 1,831
Restructuring charges 182 2,495 1,301 2,930
Gain on change in fair value of 627 894 677 3,446
contingent consideration, net
Operating income 6,096 5,745 8,189 10,957
Interest expense 1,679 (150) 3,277 536
Other income (expense) 102 (988) 88 (1,152)
Income before income tax expense 4,519 4,907 5,000 9,269
Income tax expense 1,300 1,332 1,447 3,062
Net income $
3,219 $
3,575 $
3,553 $
6,207
Basic weighted average shares outstanding 16,747 16,510 16,710 16,565
Diluted weighted average shares outstanding 16,780 16,601 16,741 16,657
Per common share data:
Basic earnings per share $
0.19 $
0.22 $
0.21 $
0.37
Diluted earnings per share $
0.19 $
0.22 $
0.21 $
0.37
Other data:
Adjusted EBITDA(1) $
10,435 $
12,072 $
19,206 $
20,214
Adjusted EPS (1) $
0.22 $
0.35 $
0.37 $
0.50
(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 Reconciliation, 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,
--- ---
2019 2018 2019 2018
---
Revenue by segment (2):
Workforce Excellence $
81,059 $
82,082 $
160,509 $
158,528
Business Transformation
Services 68,354 51,609 128,377 100,195
Total revenue $
149,413 $
133,691 $
288,886 $
258,723
Gross profit by
segment (2):
Workforce
Excellence $
13,393 $
14,927 $
26,802 $
26,282
Business
Transformation
Services 9,566 7,646 17,435 13,970
Total gross
profit $
22,959 $
22,573 $
44,237 $
40,252
Supplemental Cash Flow Information:
Net cash (used in) provided by operating $
(3,698) $
(2,281) $
(6,303) 7,125
activities
Capital expenditures (485) (1,144) (1,027) (1,514)
Free cash flow $
(4,183) $
(3,425) $
(7,330) 5,611
(2) As of June 30, 2019, we operated
through two reportable business
segments: (i) Workforce Excellence
and (ii) Business Transformation
Services. Effective July 1, 2018, we
transferred the management
responsibility of certain business
units between the two operating
segments primarily to consolidate
our non-technical content design
and development businesses into one
global digital learning strategies
and solutions service line. 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)
Six months ended
Quarters ended
June 30,
June 30,
--- ---
2019 2018 2019 2018
---
Net income $
3,219 $
3,575 $
3,553 $
6,207
Interest expense 1,679 (150) 3,277 536
Income tax expense 1,300 1,332 1,447 3,062
Depreciation and amortization 2,316 1,919 4,657 3,761
EBITDA 8,514 6,676 12,934 13,566
Adjustments:
---
Non-cash stock compensation expense 1,330 1,125 2,419 $
2,534
Restructuring charges 182 2,495 1,301 $
2,930
Severance expense - 1,011
Gain on change in fair value of contingent (627) (894) (677) (3,446)
consideration, net
ERP implementation costs 464 1,206 1,148 $
2,610
Foreign currency transaction losses 207 1,160 552 $
1,417
Legal acquisition and transaction costs 365 304 518 603
Adjusted EBITDA $
10,435 $
12,072 $
19,206 $
20,214
(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 and
legal acquisition costs. We added
legal acquisition costs as an
adjustment in the Adjusted EBITDA
calculation during the third quarter
of 2018 as these costs became
significant based on increased
acquisition activity during 2018 and
we believe it will assist investors
in better understanding our results
as these acquisition-related
expenses are likely to vary
significantly from period-to-
period based on the size, number and
complexity and timing of our
acquisitions. 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)
Six months ended
Quarter ended
June 30,
June 30,
2019 2018 2019 2018
---
Diluted earnings per share $
0.19 $
0.22 $
0.21 $
0.37
Restructuring charges 0.01 0.11 0.06 0.13
Severance expense - 0.04
Gain on change in fair value of contingent (0.03) (0.04) (0.03) (0.15)
consideration, net
ERP implementation costs 0.02 0.05 0.05 0.11
Foreign currency transaction losses 0.01 0.05 0.02 0.06
Legal acquisition and transaction costs 0.02 0.01 0.02 0.03
Reversal of contingent interest - (0.05) (0.05)
Adjusted EPS $
0.22 $
0.35 $
0.37 $
0.50
(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 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,
2019 2018
(Unaudited)
Current assets:
Cash and cash equivalents $
6,111 $
13,417
Accounts and other receivables 119,008 107,673
Unbilled revenue 72,376 80,764
Prepaid expenses and other current
assets 21,042 19,048
Total current assets 218,537 220,902
Property, plant and equipment, net 5,720 5,859
Operating lease right-of-use assets 28,867
Goodwill and other intangible assets,
net 196,010 197,057
Other assets 12,121 10,920
Total assets $
461,255 $
434,738
Current liabilities:
Accounts payable and accrued expenses 80,117 93,254
Deferred revenue 23,812 23,704
Current portion of operating lease
liabilities 9,078
Total current liabilities 113,007 116,958
Long-term debt 119,650 116,500
Long-term portion of operating lease
liabilities 23,415
Other noncurrent liabilities 11,419 14,711
Total liabilities 267,491 248,169
Total stockholders' equity 193,764 186,569
Total liabilities and stockholders'
equity $
461,255 $
434,738
© 2019 GP Strategies Corporation. All rights reserved. GP Strategies and the GP Strategies logo design are trademarks of GP Strategies Corporation.
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