Q3 2016 OVERVIEW
- Revenue totaled $14.4 million, compared to $14.8 million in Q3 2015.
-
Selling, general and administrative expenses decreased 20% to $3.0
million, or 21% of revenue, from $3.8 million, or 26% of revenue, in
Q3 2015. -
Adjusted EBITDA increased to approximately $605,000 from approximately
$75,000 in Q3 2015. -
Operating income rose to $0.4 million, which included restructuring
charges of approximately $85,000, from an operating loss of $3.6
million, which included including restructuring charges of $1.6
million and write-down of capitalized software development costs of
$1.5 million, in Q3 2015. -
Net income grew to $0.2 million, or $0.01 per diluted share, compared
to a net loss of $3.8 million, or $(0.21) per diluted share, in Q3
2015. -
Adjusted net income, excluding the impact of gain/loss from the change
in fair value of contingent consideration, restructuring charges,
stock-based compensation expense and consulting support for finance
restructuring, increased to $0.4 million, or $0.02 per basic and
diluted share, from an adjusted net loss of $1.7 million, or $(0.10)
per basic and diluted share, in Q3 2015. -
New orders more than doubled to $13.8 million from $5.3 million in Q3
2015, driven by two international projects to modernize nuclear
simulators in the UK and Japan.
At September 30, 2016
-
Cash and equivalents of $17.4 million, or $0.94 per diluted share,
including $3.3 million of restricted cash. - Working capital of $11.9 million and current ratio of 1.5x.
- $0 long-term debt.
-
Backlog totaled $69.3 million, up 45% compared to year-end 2015
backlog of $47.9 million. -
Year-to-date cash flow from operations increased 197% year over year
to $3.9 million.
SYKESVILLE, Md. –
GSE Systems, Inc. (“GSE” or “the Company”) (NYSE MKT:GVP), the
world leader in real-time high-fidelity simulation systems and training
solutions to the power and process industries, today announced financial
results for the third quarter (“Q3”) ended September 30, 2016.
Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said,
“We are pleased to report GSE’s fifth consecutive quarter of positive
adjusted EBITDA, which grew significantly on a year over year basis in
Q3 2016, driven by our efforts to increase our backlog, reduce costs and
streamline operations. This quarter we continued to win important new
projects, including two contracts to modernize nuclear simulators in the
UK and Japan, which demonstrate the global strength of our innovative
simulation solutions. Our backlog remains strong, we have enhanced our
leadership team and Board, and we are actively pursuing exciting organic
and inorganic growth opportunities. We are focused on generating
positive revenue growth in 2017 while continuing to generate strong cash
flow and improved profitability. Our increasingly strong balance sheet
and operational performance put us in a great position to affect our
growth strategy.”
Q3 2016 RESULTS
Q3 2016 revenue totaled $14.4 million, compared to $14.8 million in Q3
2015, reflecting a 5% increase in Performance Improvement Solutions
revenue and a 17% decrease in Nuclear Industry Training and Consulting
revenue due to a strategic shift in sales focus to higher margin
assignments. However, the slight decrease in Nuclear Industry Training
and Consulting gross profit percentage during the three months ended Q3
2016 was primarily due to $1.3 million of revenue recognized from a
large customer that had lower than normal margins of approximately 9%.
Three Months ended |
Nine Months ended |
|||||||||||||||
(in thousands) |
September 30, |
September 30, |
||||||||||||||
Revenue: |
2016 |
2015 |
2016 |
2015 |
||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Performance Improvement Solutions | $ | 10,215 | $ | 9,751 | $ | 27,382 | $ | 26,798 | ||||||||
Nuclear Industry Training and Consulting | 4,213 | 5,058 | 12,438 | 15,678 | ||||||||||||
Total Revenue | $ | 14,428 | $ | 14,809 | $ | 39,820 | $ | 42,476 | ||||||||
Performance Improvement Solutions new orders totaled $10.2 million in Q3
2016 compared to $3.8 million in Q3 2015. Nuclear Industry Training and
Consulting new orders totaled $3.6 million in Q3 2016 compared to $1.5
million in Q3 2015.
Q3 2016 gross profit was $3.7 million, or 25.8% of revenue, compared to
$2.1 million, or 13.9% of revenue, in Q3 2015.
(in thousands) |
Three Months ended |
Nine Months ended |
||||||||||||||||||||||||||
|
September 30, |
September 30, |
||||||||||||||||||||||||||
Gross Profit: |
2016 |
% |
2015 |
% |
2016 |
% |
2015 |
% | ||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||
Performance Improvement Solutions | $ | 3,233 | 31.6 | % | $ | 2,919 | 29.9 | % | $ | 9,287 | 33.9 | % | $ | 7,993 | 29.8 | % | ||||||||||||
Nuclear Industry Training and Consulting | 491 | 11.7 | % | 676 | 13.4 | % | 1,620 | 13.0 | % | 1,782 | 11.4 | % | ||||||||||||||||
Total Gross Profit | 3,724 | 25.8 | % | 3,595 | 24.3 | % | 10,907 | 27.4 | % | 9,775 | 23.0 | % | ||||||||||||||||
Less: Write-down of Capitalized Software Development Costs |
– | – | 1,538 | 10.4 | % | – | – | 1,538 | 3.6 | % | ||||||||||||||||||
Consolidated Gross Profit | $ | 3,724 | 25.8 | % | $ | 2,057 | 13.9 | % | $ | 10,907 | 27.4 | % | $ | 8,237 | 19.4 | % | ||||||||||||
Performance Improvement Solutions gross profit for Q3 2016 was $3.2
million, or 31.6% gross margin, compared to $2.9 million, or 29.9% gross
margin, in Q3 2015. Nuclear Industry Training and Consulting gross
profit for Q3 2016 was approximately $491,000, or 11.7% gross margin,
compared to approximately $676,000, or 13.4% gross margin, in Q3 2015.
Gross profit in Q3 2015 included a write-down of capitalized software
development costs totaling $1.5 million; no such charges were recorded
in Q3 2016.
Selling, general and administrative expenses in Q3 2016 decreased 20% to
$3.0 million, or 21.1% of revenue, from $3.8 million, or 25.7% of
revenue, in Q3 2015.
Operating income for Q3 2016 was approximately $433,000 compared to an
operating loss of $3.6 million in Q3 2015.
Net income for Q3 2016 was approximately $168,000, or $0.01 per basic
and diluted share, compared to a net loss of $3.8 million, or $(0.21)
per basic and diluted share, in Q3 2015.
Adjusted net income, excluding the impact of gain/loss from the change
in fair value of contingent consideration, restructuring charges,
stock-based compensation expense and consulting support for finance
restructuring, increased to $0.4 million, or $0.02 per basic and diluted
share, from an adjusted net loss of $1.7 million, or $(0.10) per basic
and diluted share, in Q3 2015.
Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) for Q3 2016 was approximately $400,000 compared to an EBITDA
loss of $3.5 million in Q3 2015.
Adjusted EBITDA, which excludes the impact of restructuring charges,
write-down of capitalized software development costs, gain/loss from the
change in fair value of contingent consideration, consulting support for
finance restructuring and stock-based compensation expense, increased to
approximately $605,000 in Q3 2016 from approximately $75,000 in Q3 2015.
Backlog at September 30, 2016, increased 45% to $69.3 million from $47.9
million at December 31, 2015. Backlog at September 30, 2016, included
$63.5 million of Performance Improvement Solutions backlog and $5.8
million of Nuclear Industry Training and Consulting backlog.
GSE’s cash position at September 30, 2016, was $17.4 million, including
$3.3 million of restricted cash, as compared to $14.6 million, including
$3.6 million of restricted cash, at December 31, 2015.
CONFERENCE CALL
Management will host a conference call today at 4:30 pm Eastern Time to
discuss Q3 results and other matters.
Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
The conference call will also be accessible via the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=175387
For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through February 14, 2017 at the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=175387
ABOUT GSE SYSTEMS, INC.
GSE Systems, Inc. is a world leader in real-time high-fidelity
simulation, providing a wide range of simulation, training and
engineering solutions to the power and process industries. Its
comprehensive and modular solutions help customers achieve performance
excellence in design, training and operations. GSE’s products and
services are tailored to meet specific client requirements such as
scope, budget and timeline. The Company has over four decades of
experience, more than 1,100 installations, and hundreds of customers in
over 50 countries spanning the globe. GSE Systems is headquartered in
Sykesville (Baltimore), Maryland, with offices in Huntsville, Alabama;
Chennai, India; Nyköping, Sweden; Stockton-on-Tees, UK; and Beijing,
China. Information about GSE Systems is available at www.gses.com.
FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934. These statements reflect our current expectations
concerning future events and results. We use words such as “expect,”
“intend,” “believe,” “may,” “will,” “should,” “could,” “anticipates,”
and similar expressions to identify forward-looking statements, but
their absence does not mean a statement is not forward-looking. 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. We do not intend to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
GSE SYSTEMS, INC. AND SUBSIDIARIES |
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(in thousands, except share and per share data) |
||||||||||||||||
Three Months ended | Nine Months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenue | $ | 14,428 | $ | 14,809 | $ | 39,820 | $ | 42,476 | ||||||||
Cost of revenue | 10,704 | 11,214 | 28,913 | 32,701 | ||||||||||||
Write-down of capitalized software dev. costs | – | 1,538 | – | 1,538 | ||||||||||||
Gross profit | 3,724 | 2,057 | 10,907 | 8,237 | ||||||||||||
Selling, general and administrative | 3,043 | 3,811 | 9,032 | 11,031 | ||||||||||||
Restructuring charges | 85 | 1,600 | 487 | 1,746 | ||||||||||||
Depreciation | 91 | 119 | 294 | 383 | ||||||||||||
Amortization of definite-lived intangible assets | 72 | 123 | 219 | 370 | ||||||||||||
Operating expenses | 3,291 | 5,653 | 10,032 | 13,530 | ||||||||||||
Operating income (loss) | 433 | (3,596 | ) | 875 | (5,293 | ) | ||||||||||
Interest income, net | 11 | 19 | 52 | 67 | ||||||||||||
Loss on derivative instruments, net | (211 | ) | 20 | (346 | ) | (59 | ) | |||||||||
Other income (expense), net | 15 | (156 | ) | 112 | (235 | ) | ||||||||||
Income (loss) before income taxes | 248 | (3,713 | ) | 693 | (5,520 | ) | ||||||||||
Provision for income taxes | 80 | 50 | 275 | 211 | ||||||||||||
Net income (loss) | $ | 168 | $ | (3,763 | ) | $ | 418 | $ | (5,731 | ) | ||||||
Basic earnings (loss) per common share | $ | 0.01 | $ | (0.21 | ) | $ | 0.02 | $ | (0.32 | ) | ||||||
Diluted earnings (loss) per common share | $ | 0.01 | $ | (0.21 | ) | $ | 0.02 | $ | (0.32 | ) | ||||||
Weighted average shares outstanding – Basic | 18,230,148 | 17,894,272 |
18,052,019 |
17,890,020 | ||||||||||||
Weighted average shares outstanding – Diluted | 18,470,117 | 17,894,272 | 18,287,870 | 17,890,020 | ||||||||||||
GSE SYSTEMS, INC AND SUBSIDIARIES |
||||||||
Selected Balance Sheet Data (in thousands) |
||||||||
(unaudited) | (audited) | |||||||
September 30, 2016 | December 31, 2015 | |||||||
Cash and cash equivalents |
$ |
14,093 |
|
$ |
11,084 |
|
||
Restricted cash – current | 1,601 | 1,771 | ||||||
Current assets | 34,839 | 28,414 | ||||||
Long-term restricted cash | 1,735 | 1,779 | ||||||
Total assets | 45,132 | 39,371 | ||||||
Current liabilities | $ | 22,943 | $ | 19,708 | ||||
Long-term liabilities | 2,076 | 1,295 | ||||||
Stockholders’ equity | 20,113 | 18,368 | ||||||
EBITDA and Adjusted EBITDA Reconciliation (in thousands)
EBITDA and Adjusted EBITDA are not measures of financial performance
under generally accepted accounting principles (“GAAP”). Management
believes EBITDA and Adjusted EBITDA, in addition to operating profit,
net income and other GAAP measures, are useful to investors to evaluate
the Company’s results because it excludes certain items that are not
directly related to the Company’s core operating performance that may,
or could, have a disproportionate positive or negative impact on our
results for any particular period. Investors should recognize that
EBITDA and Adjusted EBITDA might not be comparable to similarly-titled
measures of other companies. This measure should be considered in
addition to, and not as a substitute for or superior to, any measure of
performance prepared in accordance with GAAP. A reconciliation of
non-GAAP EBITDA and Adjusted EBITDA to the most directly comparable GAAP
measure in accordance with SEC Regulation G follows:
Three Months ended | Nine Months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 168 | $ | (3,763 | ) | $ | 418 | $ | (5,731 | ) | ||||||
Interest income, net | (11 | ) | (19 | ) | (52 | ) | (67 | ) | ||||||||
Provision for income taxes | 80 | 50 | 275 | 211 | ||||||||||||
Depreciation and amortization | 163 | 242 | 513 | 753 | ||||||||||||
EBITDA | 400 | (3,490 | ) | 1,154 | (4,834 | ) | ||||||||||
Write-down of capitalized software development costs | – | 1,538 | – | 1,538 | ||||||||||||
Gain/Loss from the change in fair value of contingent consideration | (524 | ) | 306 | (370 | ) | 739 | ||||||||||
Restructuring charges | 85 | 1,600 | 487 | 1,746 | ||||||||||||
Stock-based compensation expense | 412 | 121 | 900 | 392 | ||||||||||||
Consulting support for finance restructuring | 232 | – | 310 | – | ||||||||||||
Adjusted EBITDA | $ | 605 | $ | 75 | $ | 2,481 | $ | (419 | ) | |||||||
Adjusted Net Income and Adjusted EPS Reconciliation (in
thousands, except per share amounts)
Adjusted Net Income and adjusted earnings (loss) per share (“adjusted
EPS”) are not measures of financial performance under generally accepted
accounting principles (“GAAP”). Management believes adjusted net income
and adjusted EPS, in addition to other GAAP measures, are useful to
investors to evaluate the Company’s results because they exclude certain
items that are not directly related to the Company’s core operating
performance that may, or could, have a disproportionate positive or
negative impact on our results for any particular period. These measures
should be considered in addition to, and not as a substitute for or
superior to, any measure of performance prepared in accordance with
GAAP. A reconciliation of non-GAAP adjusted net income and adjusted EPS
to GAAP net income, the most directly comparable GAAP financial measure,
is as follows:
Three Months ended | Nine Months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 168 | $ | (3,763 | ) | $ | 418 | $ | (5,731 | ) | ||||||
Gain/loss from the change in fair value of contingent consideration | (524 | ) | 306 | (370 | ) | 739 | ||||||||||
Restructuring charges | 85 | 1,600 | 487 | 1,746 | ||||||||||||
Stock-based compensation expense | 412 | 121 | 900 | 392 | ||||||||||||
Consulting support for finance restructuring | 232 | – | 310 | – | ||||||||||||
Adjusted net income | $ | 373 | $ | (1,736 | ) | $ | 1,745 | $ | (2,854 | ) | ||||||
Earnings (loss) per share – diluted | $ | 0.01 | $ | (0.21 | ) | $ | 0.02 | $ | (0.32 | ) | ||||||
Adjusted earnings (loss) per share – diluted | $ | 0.02 | $ | (0.10 | ) | $ | 0.10 | $ | (0.16 | ) | ||||||
Weighted average shares outstanding – Diluted | 18,470,117 | 17,894,272 | 18,287,870 | 17,890,020 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20161114006461/en/
Company
GSE Systems, Inc.
Chris Sorrells, 410-970-7802
Chief
Operating Officer
or
The Equity Group Inc.
Devin
Sullivan, 212-836-9608
Senior Vice President
dsullivan@equityny.com
or
Kalle
Ahl, CFA, 212-836-9614
Senior Associate
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