GP Strategies Reports Improved Fourth Quarter and Full Year 2019 Financial Results
COLUMBIA, Md., March 10, 2020 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended December 31, 2019.
Overview:
-- Revenue of $155.4 million for fourth quarter of 2019 compared to $132.9
million for fourth quarter of 2018, and annual revenue of $583.3 million
for full year 2019 compared to $515.2 million in 2018
-- Gross profit of $23.3 million, or 15.0% of revenue, for fourth quarter
of 2019 compared to $18.3 million, or 13.8%, for fourth quarter of 2018
-- Diluted earnings per share of $0.56 for fourth quarter of 2019 compared
to $0.02 per share for fourth quarter of 2018 (Adjusted EPS of $0.23 for
fourth quarter of 2019 compared to $0.11 for fourth quarter of 2018
after adjusting for special items)
-- Cash flow from operations of $8.8 million for fourth quarter of 2019
compared to $7.7 million for fourth quarter of 2018
-- Backlog of $349.8 million as of December 31, 2019, a 10.0% increase
compared to $318.0 million as of December 31, 2018
"In the fourth quarter of 2019, the Company achieved revenue growth of 17%, of which 12% was organic growth, compared to the fourth quarter of 2018," stated Scott N. Greenberg, Chief Executive Officer of GP Strategies. "In addition, our Adjusted EBITDA increased by 46% for the fourth quarter of 2019 compared to the corresponding period of 2018. The progress that we've made in our business development efforts has translated into positive results for the quarter. We continued to improve our balance sheet and generated approximately $8.8 million of operating cash flow for the quarter. We were able to reduce our net debt position, after subtracting cash, to $74.7 million at December 31, 2019 compared to $103.1 million as of December 31, 2018. The improvement in our balance sheet gives us increased flexibility going forward."
"We are seeing significant traction with our business development efforts which contributed to organic growth of 5% for 2019," stated Adam Stedham, President of GP Strategies. "Both the TTi acquisition and our existing automotive services within our Business Transformation Services segment had strong 2019 revenue growth, exceeding the Company's overall organic growth rate. This trend reinforces our confidence in the opportunities for GP Strategies within the global automotive industry. In addition, our work has ramped up on many of the previously announced managed services awards, resulting in increased revenue in our Workforce Excellence segment. Our backlog has increased from $318.0 million as of December 31, 2018 to $349.8 million as of December 31, 2019."
The Company's revenue increased $22.5 million, or 17.0%, to $155.4 million for the fourth quarter of 2019 from $132.9 million in the fourth quarter of 2018. Revenue in the Workforce Excellence segment increased $9.0 million, or 11.6%, primarily due to growth in managed learning services due to new outsourcing and content development contracts. Revenue in the Business Transformation Services segment increased $13.5 million, or 24.5%, due to revenue from the TTi Global acquisition completed in December 2018, as well as an increase in sales training services for automotive clients. Revenue for the fiscal year ended December 31, 2019 was $583.3 million, up $68.1 million or 13.2% from 2018 revenue of $515.2 million. Foreign currency exchange rate changes resulted in decreases in U.S. dollar reported revenue of $0.3 million during the fourth quarter of 2019 and $7.5 million for the year ended December 31, 2019.
Operating income increased $12.9 million to $15.3 million for the fourth quarter of 2019 from $2.4 million for the fourth quarter of 2018 primarily due to a $12.1 million pre-tax gain on the sale of the Company's tuition program management business in the fourth quarter of 2019. In addition, gross profit increased $5.0 million, or 27.4%, due to increased revenues, offset by a $3.1 million increase in general and administrative expenses.
Net income was $9.5 million, or $0.56 per share, for the fourth quarter of 2019 compared to $0.4 million, or $0.02 per share, for the fourth quarter of 2018. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $0.23 for the fourth quarter of 2019 compared to $0.11 for the fourth quarter of 2018. Net income for the fiscal year ended December 31, 2019 was $15.2 million, or $0.90 diluted earnings per share compared to $9.8 million, or $0.59 diluted earnings per share for the fiscal year ended December 31, 2018.
Balance Sheet and Cash Flow Highlights
As of December 31, 2019, the Company had cash of $8.2 million compared to $13.4 million as of December 31, 2018. The Company had $82.9 million of long-term debt outstanding as of December 31, 2019 under its $200 million revolving credit facility compared to $116.5 million outstanding as of December 31, 2018. Cash provided by operating activities was $13.4 million for the year ended December 31, 2019 compared to $11.2 million for the same period in 2018.
Investor Call
The Company has scheduled an investor conference call and webcast for 10:00 a.m. Eastern Time on March 10, 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/gpx200310.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/10139861.
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 10139861.
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, free cash flow (cash flow from operating activities less capital expenditures), and organic revenue growth. 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
Years ended
December 31,
December 31,
2019 2018 2019 2018
---
Revenue $
155,399 $
132,871 $
583,290 $
515,160
Cost of revenue 132,090 114,579 494,077 437,417
Gross profit 23,309 18,292 89,213 77,743
General and administrative expenses 17,723 14,641 64,492 54,848
Sales and marketing expenses 2,150 1,670 7,875 4,798
Restructuring charges 234 1,639 2,930
Gain on change in fair value of - 466 677 4,438
contingent consideration, net
Gain on sale of business 12,126 12,126
Operating income 15,328 2,447 28,010 19,605
Interest expense 1,206 1,314 6,058 2,945
Other income (expense) 145 15 417 (1,897)
Income before income tax expense 14,267 1,148 22,369 14,763
Income tax expense 4,772 763 7,180 4,927
Net income $
9,495 $
385 $
15,189 $
9,836
Basic weighted average shares outstanding 16,983 16,579 16,827 16,608
Diluted weighted average shares outstanding 17,020 16,652 16,861 16,696
Per common share data:
Basic earnings per share $
0.56 $
0.02 $
0.90 $
0.59
Diluted earnings per share $
0.56 $
0.02 $
0.90 $
0.59
Other data:
Adjusted EBITDA(1) $
10,959 $
7,495 $
40,923 $
37,917
Adjusted EPS (1) $
0.23 $
0.11 $
0.84 $
0.90
(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
Years ended
December 31,
December 31,
2019 2018 2019 2018
---
Revenue by segment:
Workforce Excellence $
86,796 $
77,770 $
329,795 $
316,814
Business Transformation Services 68,603 55,101 253,495 198,346
Total revenue $
155,399 $
132,871 $
583,290 $
515,160
Gross profit by segment:
Workforce Excellence $
14,763 $
11,193 $
55,855 $
50,875
Business Transformation Services 8,546 7,099 33,358 26,868
Total gross profit $
23,309 $
18,292 $
89,213 $
77,743
Supplemental Cash Flow Information:
Net cash provided by operating activities $
8,849 $
7,700 $
13,400 $
11,210
Capital expenditures (410) (567) (2,315) (2,834)
Free cash flow $
8,439 $
7,133 $
11,085 $
8,376
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliation - Adjusted EBITDA
(2)
(In thousands)
(Unaudited)
Quarters ended
Years ended
December 31,
December 31,
2019 2018 2019 2018
---
Net income $
9,495 $
385 $
15,189 $
9,836
Interest expense 1,206 1,314 6,058 2,945
Income tax expense 4,772 763 7,180 4,927
Depreciation and amortization 2,490 2,251 9,482 7,921
EBITDA 17,963 4,713 37,909 25,629
Adjustments:
---
Non-cash stock compensation expense 1,656 809 5,595 4,310
Restructuring charges 234 1,639 2,930
Severance expense 206 515 2,232 515
Gain on change in fair value of contingent - (466) (677) (4,438)
consideration, net
ERP implementation costs 585 1,081 2,188 4,037
Foreign currency transaction (gains) losses (334) 274 718 2,298
Legal acquisition and transaction costs 621 569 1,291 1,680
(Gain) loss on divested business (12,126) (12,126) 956
Loss on settlement with foreign oil & gas client 2,154 2,154
Adjusted EBITDA $
10,959 $
7,495 $
40,923 $
37,917
(2) 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 (gains) losses,
legal acquisition and transaction
costs, (gain) loss on divested
business and loss on settlement with
foreign oil & gas client. 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
(3)
(Unaudited)
Quarter ended
Years ended
December 31,
December 31,
2019 2018 2019 2018
---
Diluted earnings per share $
0.56 $
0.02 $
0.90 $
0.59
Restructuring charges 0.01 0.07 0.13
Severance expense 0.01 0.02 0.09 0.02
Gain on change in fair value of contingent - (0.02) (0.03) (0.20)
consideration, net
U.S. Tax Cuts and Jobs Act of 2017 - 0.02
ERP implementation costs 0.02 0.05 0.09 0.18
Foreign currency transaction (gains) losses (0.01) 0.01 0.03 0.10
Legal acquisition and transaction costs 0.02 0.03 0.05 0.07
Settlement of contingent consideration in shares 0.01 0.03
(Gain) loss on divested business (0.48) (0.48) 0.04
Loss on settlement with foreign oil & gas client 0.09 0.09
Reversal of contingent interest - (0.05)
Adjusted EPS $
0.23 $
0.11 $
0.84 $
0.90
(3) 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
Non-GAAP Reconciliation - Organic Revenue Growth
(4)
(In thousands)
(Unaudited)
Quarters ended
Years ended
December 31,
December 31,
2019 2018 2019 2018
---
GAAP revenue $
155,399 $
132,871 $
583,290 $
515,160
GAAP revenue growth 17.0 13.2
%
%
Less: Acquisition and divestiture revenue (7,001) (48,020)
Add: Foreign currency impact on revenue 303 7,505
Non-GAAP revenue on constant currency basis $
148,701 $
542,775
Organic revenue growth on constant 11.9 5.4
%
%
currency basis
(4) The terms organic revenue and
organic revenue growth are
non-GAAP financial measures
that the Company believes are
useful to investors in
evaluating its results. The
Company calculates organic
revenue growth by excluding
incremental acquisition-
related revenue based on the
budgeted pro forma revenue at
the time of acquisition, and
adding back revenue associated
with divested businesses in
prior periods, that is
attributable to companies
acquired or divested during
the prior twelve-month
comparative period. To
determine non-GAAP organic
revenue growth on a constant
currency basis, the foreign
currency impact is calculated
by translating the prior year
revenues from entities
reporting in foreign
currencies to U.S. Dollars
using the current period's
weighted average foreign
currency exchange rates.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, December 31,
2019 2018
(Unaudited)
Current assets:
Cash and cash equivalents $
8,159 $
13,417
Accounts and other receivables 131,852 107,673
Unbilled revenue 57,229 80,764
Prepaid expenses and other current assets 19,115 19,048
Total current assets 216,355 220,902
Property, plant and equipment, net 5,803 5,859
Operating lease right-of-use assets 27,251
Goodwill and other intangible assets, net 187,907 197,057
Deferred tax assets 1,121 1,077
Other assets 10,465 9,843
Total assets $
448,902 $
434,738
Current liabilities:
Accounts payable and accrued expenses $
92,332 $
93,254
Deferred revenue 23,234 23,704
Current portion of operating lease liabilities 7,871
Total current liabilities 123,437 116,958
Long-term debt 82,870 116,500
Long-term portion of operating lease liabilities 22,159
Deferred tax liabilities 7,439 8,817
Other noncurrent liabilities 3,083 5,894
Total liabilities 238,988 248,169
Total stockholders' equity 209,914 186,569
Total liabilities and stockholders' equity $
448,902 $
434,738
© 2020 GP Strategies Corporation. All rights reserved. GP Strategies and GP Strategies with logo design are registered trademarks of GP Strategies Corporation.
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