GP Strategies Reports Third Quarter 2020 Financial Results
COLUMBIA, Md., Nov. 5, 2020 /PRNewswire/ -- Global workforce transformation solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended September 30, 2020.
Overview:
-- Revenue of $115.6 million for third quarter of 2020 compared to $139.0
million for third quarter of 2019 and compared to $106.1 million for the
second quarter of 2020
-- Gross profit of $20.7 million, or 17.9% of revenue, for third quarter of
2020 compared to $21.7 million, or 15.6%, for third quarter of 2019 and
compared to $15.9 million, or 15.0% of revenue for the second quarter of
2020
-- Diluted earnings per share of $0.03 for third quarter of 2020 compared
to $0.13 per share for third quarter of 2019 and compared to diluted
loss per share of $0.04 for the second quarter of 2020. (Adjusted EPS of
$0.24 for the third quarters of 2020 and 2019, respectively, and
compared to $0.12 for the second quarter of 2020, after adjusting for
special items)
-- Cash flow from operations of $12.6 million for third quarter of 2020
compared to $10.9 million for third quarter of 2019 and compared to
$22.9 million for the second quarter of 2020
-- Reduced long term-debt balance by $39.1 million to $43.8 million as of
September 30, 2020 compared to $82.9 million as of December 31, 2019
-- Divested IC Axon business on October 1, 2020 for approximately $28.0
million, less an escrow of $1.5 million, that will further reduce our
debt during the fourth quarter of 2020
"In a tough environment, we are pleased with our third quarter of 2020 results that demonstrate the Company is effectively managing the business through the macroeconomic disruption caused by the COVID-19 pandemic. During the third quarter the Company delivered a sequential increase in revenue, gross margin, adjusted earnings per share and adjusted EBITDA compared to the second quarter of 2020." stated Adam Stedham, Chief Executive Officer and President of GP Strategies.
"We successfully reduced our long-term debt and took actions to generate positive cash flow. The Company has reduced its long-term debt by $75.9 million, or 63%, in just 15 months. In addition, the sale of IC Axon further reduced debt in the fourth quarter of 2020. GP Strategies is in a position of strength with the flexibility to capitalize on opportunities as they develop in the marketplace." concluded Mr. Stedham.
The Company's revenue decreased $23.4 million, or 16.8%, to $115.6 million for the third quarter of 2020 from $139.0 million in the third quarter of 2019. Revenue in the North America segment decreased $14.9 million, or 16.1%, revenue in the EMEA segment decreased $4.1 million, or 14.0% and revenue in the Emerging Markets segment decreased $4.4 million, or 25.7%.
The Company's revenue decline was primarily due to circumstances related to the macroeconomic impact of COVID-19, specifically the postponement of certain training events and other delays in client projects. In addition, our revenue decreased $4.6 million during the third quarter of 2020 due to discontinued revenue streams from the sale of our alternative fuels division on January 1, 2020 and the sale of our tuition program management business on October 1, 2019. Foreign currency exchange rate changes also resulted in a total $1.0 million increase in U.S. dollar reported revenue during the third quarter of 2020.
The Company had operating income of $1.3 million for the third quarter of 2020, a $3.2 million decrease compared to operating income of $4.5 million for the third quarter of 2019. The decline in operating income is primarily due to a gross profit decrease of $1.0 million, or 4.6%, and a $2.4 million increase in general and administrative expenses. For the quarter, the company incurred severance expense, that was partially offset by a change in our Paid Time Off Policy, that in net totaled $4.8 million. Of this amount, $1.9 million is reflected in cost of revenue and the remaining $2.9 million is in general and administrative expenses on the condensed consolidated statement of operations.
Net income was $0.5 million, or $0.03 per share, for the third quarter of 2020 compared to net income of $2.1 million, or $0.13 per share, for the third quarter of 2019. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $0.24 for both the third quarter of 2020 and 2019 respectively.
Balance Sheet and Cash Flow Highlights
As of September 30, 2020, the Company had cash of $13.2 million compared to $8.2 million as of December 31, 2019. The Company had $43.8 million of long-term debt outstanding as of September 30, 2020 under its revolving credit facility compared to $82.9 million outstanding as of December 31, 2019. Cash provided by operating activities was $45.4 million for the nine months ended September 30, 2020 compared to $4.6 million for the same period in 2019.
In October 2020, the Company sold its IC Axon business division for $28.0 million subject to certain adjustments and $1.5 million was held in escrow. In addition there is a potential earnout of up to $2.0 million based on the business's revenue for calendar year 2020. The company used the net proceeds to further reduce its debt.
Investor Call
The Company has scheduled an investor conference call and webcast for 12:00 p.m. Eastern Time on Thursday, November 5, 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/gpx201105.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 https://dpregister.com/sreg/10149048/db1754fc58.
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 10149048.
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), 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 U.S. GAAP equivalents, see the Non-GAAP Reconciliations, along with related footnotes, below.
About GP Strategies
GP Strategies Corporation (NYSE: GPX) is a global workforce transformation solutions provider of 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, automotive, financial services, technology, and other commercial and government customers.
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
Nine Months Ended
September 30,
September 30,
--- ---
2020 2019 2020 2019
---
Revenue $
115,594 $
139,005 $
350,019 $
427,891
Cost of revenue 94,929 117,338 295,843 361,987
---
Gross profit 20,665 21,667 54,176 65,904
General and administrative expenses 17,642 15,240 49,106 46,769
Sales and marketing expenses 1,685 1,830 5,381 5,725
Restructuring charges - 104 855 1,405
Gain on change in fair value of
contingent consideration, net - 677
Gain on sale of business - 1,064
Operating income (loss) 1,338 4,493 (102) 12,682
Interest expense 440 1,575 2,025 4,852
Other income (expense) 196 184 (493) 272
Income (loss) before income tax
expense 1,094 3,102 (2,620) 8,102
Income tax expense (benefit) 573 961 (1,241) 2,408
---
Net income (loss) $
521 $
2,141 $
(1,379) $
5,694
Basic weighted average shares
outstanding 17,094 16,901 17,082 16,773
Diluted weighted average shares
outstanding 17,507 16,939 17,252 16,807
Per common share data:
Basic earnings (loss) per share $
0.03 $
0.13 $
(0.08) $
0.34
Diluted earnings (loss) per share $
0.03 $
0.13 $
(0.08) $
0.34
Other data:
Adjusted EBITDA(1) $
10,114 $
10,758 $
19,522 $
29,964
Adjusted EPS (1) $
0.24 $
0.24 $
0.33 $
0.61
(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 U.S. 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
Nine Months Ended
September 30,
September 30,
--- ---
2020 2019 2020 2019
---
Revenue by segment (2):
North America $
77,436 $
92,302 $
237,654 $
292,122
EMEA 25,437 29,577 78,647 91,373
Emerging Markets 12,721 17,126 33,718 44,396
Total revenue $
115,594 $
139,005 $
350,019 $
427,891
Gross profit by segment (2):
North America $
15,335 $
15,461 $
42,405 $
49,240
EMEA 2,845 3,046 7,530 10,282
Emerging Markets 2,485 3,160 4,241 6,382
Total gross profit $
20,665 $
21,667 $
54,176 $
65,904
Supplemental Cash Flow Information:
Net cash provided by
operating activities $
12,604 $
10,854 $
45,369 $
4,551
Capital expenditures (238) (878) (1,284) (1,905)
Free cash flow $
12,366 $
9,976 $
44,085 $
2,646
(2) Effective July 1, 2020, we began
managing our business under a new
organizational structure on a
regional basis through our three
geographic markets, North America,
EMEA (Europe Middle East Africa)
and Emerging Markets. 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
Nine Months Ended
September 30,
September 30,
--- ---
2020 2019 2020 2019
---
Net income (loss) $
521 $
2,141 $
(1,379) $
5,694
Interest expense 440 1,575 2,025 4,852
Income tax expense
(benefit) 573 961 (1,241) 2,408
Depreciation and
amortization 1,950 2,335 6,204 6,992
EBITDA 3,484 7,012 5,609 19,946
Adjustments:
---
Non-cash stock
compensation expense 1,618 1,520 4,410 3,939
Stock compensation
related to severance 1,721 1,721
Restructuring charges - 104 855 1,405
Severance expense 4,937 1,015 7,502 2,026
Change in paid time off
policy (1,894) (1,894)
Gain on change in fair
value of contingent
consideration, net - (677)
ERP implementation costs - 455 1,603
Foreign currency
transaction (gains)
losses (120) 500 722 1,052
Legal acquisition and
transaction costs 368 152 1,406 670
Impairment of operating
lease right-of-use
asset - 255
Gain on sale of business - (1,064)
Adjusted EBITDA $
10,114 $
10,758 $
19,522 $
29,964
(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 (benefit),
depreciation and amortization, non-
cash stock compensation expense, and
other unusual or infrequently
occurring items. For the periods
presented, these other items are
stock compensation related to
severance, restructuring charges,
severance expense, change in paid
time off policy, gain on change in
fair value of contingent
consideration, net, ERP
implementation costs, foreign
currency transaction (gains) 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)
Nine Months Ended
Quarters ended
September 30,
September 30,
--- ---
2020 2019 2020 2019
---
Diluted earnings per
share $
0.03 $
0.13 $
(0.08) $
0.34
Stock compensation
severance expense 0.07 0.07
Restructuring charges - 0.04 0.06
Severance expense 0.21 0.04 0.32 0.08
Change in paid time off
policy (0.08) (0.08)
Gain on change in fair
value of contingent
consideration, net - (0.03)
ERP implementation costs - 0.02 0.07
Foreign currency
transaction (gain)
losses (0.01) 0.02 0.02 0.04
Legal acquisition and
transaction costs 0.01 0.01 0.05 0.03
Impairment of operating
lease right-of-use
asset - 0.01
Settlement of contingent
consideration in shares 0.01 0.02 0.02 0.02
Gain on sale of business - (0.04)
Adjusted EPS $
0.24 $
0.24 $
0.33 $
0.61
(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 U.S. 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)
September 30, December 31,
2020 2019
(Unaudited)
Current assets:
Cash $
13,206 $
8,159
Accounts and other receivables 91,169 131,852
Unbilled revenue 39,256 57,229
Prepaid expenses and other current
assets 21,690 19,115
Assets held for sale 25,128
Total current assets 190,449 216,355
Property, plant and equipment, net 4,933 5,803
Operating lease right-of-use assets 22,637 27,251
Goodwill and intangible assets, net 160,243 187,907
Other assets 11,023 11,586
Total assets $
389,285 $
448,902
Current liabilities:
Accounts payable and accrued expenses $
73,227 $
92,332
Deferred revenue 21,669 23,234
Current portion of operating lease
liabilities 6,073 7,871
Liabilities held for sale 2,898
Total current liabilities 103,867 123,437
Long-term debt 43,750 82,870
Long-term portion of operating lease
liabilities 19,325 22,159
Other noncurrent liabilities 13,353 10,522
Total liabilities 180,295 238,988
Total stockholders' equity 208,990 209,914
Total liabilities and stockholders'
equity $
389,285 $
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-third-quarter-2020-financial-results-301166932.html
SOURCE GP Strategies Corporation
