COLUMBIA, Md., May 11,
2020 /PRNewswire/ -- Global performance improvement solutions
provider GP Strategies Corporation (NYSE: GPX) today
reported financial results for the quarter ended March 31,
2020.
Overview:
- Cash flow from operations of $9.8
million for first quarter of 2020 compared to cash used in
operations of $2.6 million for first
quarter of 2019
- Reduced long term-debt balance by $8.0
million to $74.8 million as of
March 31, 2020 compared to
$82.9 million as of December 31, 2019
- Revenue of $128.3 million for
first quarter of 2020 compared to $139.5
million for first quarter of 2019 (revenue from divested
businesses in 2019 was $3.9 million
in first quarter of 2019)
- Gross profit of $17.6 million, or
13.7% of revenue, for first quarter of 2020 compared to
$21.3 million, or 15.3%, for first
quarter of 2019
- Diluted loss per share of $(0.08)
for first quarter of 2020 compared to earnings of $0.02 per share for first quarter of 2019
- Backlog of $341.2 million as of
March 31, 2020 compared to
$334.7 million as of March 31, 2019
"During the first quarter, we addressed the challenge of
COVID-19 by supporting our customers, generating free cash flow,
reducing leverage and lowering expenses," stated Scott N. Greenberg, Chief Executive Officer of
GP Strategies. "The Company reduced its debt outstanding to
approximately $74.8 million at
March 31, 2020 from $82.9 million at December
31, 2019. In addition, the Company has reduced costs in all
areas as it deals with the ongoing impact of reduced revenue, with
further reductions to come in the second quarter. We have
prioritized maintaining liquidity and supporting our customer base
during these trying times."
"Because of the global scale and variability of the impacts of
COVID-19, there is uncertainty in forecasting the impact on our
business," stated Adam H. Stedham,
President of GP Strategies. "That said, I remain confident that the
progress we made last year in terms of our client relationships,
the capabilities of our sales force and operations, and improving
our balance sheet, position us to weather this storm.
Although we expect our revenues will decline more significantly in
the second quarter compared to the first quarter, due to
significant cost scaling and cost cutting measures enacted
beginning in mid-March 2020, we
expect second quarter 2020 Adjusted EBITDA to be consistent with or
greater than the first quarter of 2020. Looking to a post COVID-19
world, while there are many uncertainties, we do expect to benefit
from our position as one of the largest and most capable custom
eLearning content development companies."
The Company's revenue decreased $11.2
million, or 8.0%, to $128.3
million for the first quarter of 2020 from $139.5 million in the first quarter of 2019.
Revenue in the Workforce Excellence segment decreased $7.1 million, or 8.7%, and revenue in the
Business Transformation Services segment decreased $4.1 million, or 7.1%. The Company estimates that
COVID-19 negatively impacted revenue by approximately $11.5 million in the first quarter of 2020. In
addition, the Company expects COVID-19 to negatively impact its
revenues more significantly in the second quarter of 2020 as
compared to the first quarter of 2020. The Company also expects to
continue to experience year over year revenue declines in the
second half of 2020. The full extent to which the COVID-19 pandemic
will directly or indirectly impact the Company's business, results
of operations and financial condition will depend on future
developments that are uncertain and cannot be accurately predicted,
including new information that may emerge concerning COVID-19, the
actions taken to contain it or treat its impact and the economic
impact on local, regional, national and international markets.
The Company had an operating loss of $0.4
million for the first quarter of 2020, a $2.5 million decrease compared to operating
income of $2.1 million for the first
quarter of 2019 primarily due to a gross profit decrease of
$3.7 million, or 17.2%, due to the
decreased revenues and a $1.2 million
increase in general and administrative expenses, partially offset
by a $1.1 million pre-tax gain on the
sale of the Company's Alternative Fuels Division in the first
quarter of 2020 and $1.1 million of
restructuring charges in the first quarter of 2019 that did not
recur in 2020.
Net loss was $1.3 million, or
$(0.08) per share, for the first
quarter of 2020 compared to net income of $0.3 million, or $0.02 per share, for the first quarter of 2019.
After accounting for special items, which are set forth in the
Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was
$(0.03) for the first quarter of 2020
compared to $0.16 for the first
quarter of 2019.
Balance Sheet and Cash Flow Highlights
As of March 31, 2020, the Company had cash of $9.0 million compared to $8.2 million as of December 31, 2019. The
Company had $74.8 million of
long-term debt outstanding as of March 31, 2020 under its
$200 million revolving credit
facility compared to $82.9 million
outstanding as of December 31, 2019. Cash provided by
operating activities was $9.8 million
for the quarter ended March 31, 2020 compared to cash used in
operating activities of $2.6
million for the same period in 2019.
Investor Call
The Company has scheduled an investor conference call and
webcast for 8:30 a.m. Eastern Time on
Tuesday, May 12, 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/gpx200512.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/10143923.
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 10143923.
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. In particular, with regard to
our comparison of our first quarter 2020 Adjusted EBITDA to our
currently anticipated second quarter 2020 Adjusted EBITDA, we
believe that certain gains and charges in the first quarter and
certain anticipated gains and charges in the second quarter, such
as the gain on sale of business, legal acquisition and transaction
costs, restructuring charges and severance expense, while difficult
to predict in the current environment, will vary significantly and
make a quarter to quarter comparison of net income less useful to
investors than a comparison of Adjusted EBITDA in understanding the
impact of COVID-19 and related effects on our results of
operations. The Company is unable without unreasonable efforts to
estimate specific line items in Adjusted EBITDA which are necessary
to a quantitative reconciliation for the forward-looking
information above, due to factors including the COVID-19 pandemic
and its rapidly-changing effects. Without the availability of this
significant information, the Company is unable to provide such a
reconciliation. 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, 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
|
March 31,
|
|
|
|
|
2020
|
2019
|
|
|
|
Revenue
|
$
|
128,281
|
$
|
139,473
|
Cost of
revenue
|
110,667
|
118,195
|
Gross
profit
|
17,614
|
21,278
|
General and
administrative expenses
|
17,284
|
16,127
|
Sales and marketing
expenses
|
1,839
|
1,989
|
Restructuring
charges
|
—
|
1,119
|
Gain on change in
fair value of contingent
consideration, net
|
—
|
50
|
Gain on sale of
business
|
1,064
|
—
|
Operating income
(loss)
|
(445)
|
2,093
|
Interest
expense
|
978
|
1,598
|
Other
expense
|
500
|
14
|
Income
(loss) before income tax expense
|
(1,923)
|
481
|
Income tax expense
(benefit)
|
(629)
|
147
|
Net income
(loss)
|
$
|
(1,294)
|
$
|
334
|
|
|
|
Basic weighted
average shares outstanding
|
17,082
|
16,672
|
Diluted weighted
average shares outstanding
|
17,117
|
16,703
|
Per common share data:
|
|
|
Basic earnings (loss)
per share
|
$
|
(0.08)
|
$
|
0.02
|
Diluted earnings
(loss) per share
|
$
|
(0.08)
|
$
|
0.02
|
|
|
|
Other
data:
|
|
|
Adjusted
EBITDA(1)
|
$
|
3,424
|
$
|
8,771
|
Adjusted EPS
(1)
|
$
|
(0.03)
|
$
|
0.16
|
|
(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
Reconciliations, along with related footnotes, below.
|
GP STRATEGIES
CORPORATION AND SUBSIDIARIES
|
SUPPLEMENTAL
FINANCIAL INFORMATION
|
(In
thousands)
|
(Unaudited)
|
|
|
Quarters
ended
|
March 31,
|
|
|
|
|
2020
|
2019
|
Revenue by segment
(2):
|
|
|
Workforce
Excellence
|
$
|
74,378
|
$
|
81,478
|
Business
Transformation Services
|
53,903
|
57,995
|
Total
revenue
|
$
|
128,281
|
$
|
139,473
|
|
Gross profit by
segment (2):
|
|
|
Workforce
Excellence
|
$
|
11,493
|
$
|
13,455
|
Business
Transformation Services
|
6,121
|
7,823
|
Total gross
profit
|
$
|
17,614
|
$
|
21,278
|
|
Supplemental Cash
Flow Information:
|
|
|
Net cash provided by
(used in) operating
activities
|
$
|
9,847
|
$
|
(2,605)
|
Capital
expenditures
|
(467)
|
(542)
|
Free cash
flow
|
$
|
9,380
|
$
|
(3,147)
|
|
(2)
|
Effective January 1,
2020, we transferred the management responsibility of certain
business units between the two operating segments, primarily the
management of the Company's UK apprenticeship training business to
the Business Transformation Services segment, and the management of
the platform adoption services business to the Workforce Excellence
segment. 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
|
March 31,
|
|
|
|
|
2020
|
2019
|
Net income
(loss)
|
$
|
(1,294)
|
$
|
334
|
Interest
expense
|
978
|
1,598
|
Income tax expense
(benefit)
|
(629)
|
147
|
Depreciation and
amortization
|
2,177
|
2,341
|
EBITDA
|
1,232
|
4,420
|
Adjustments:
|
|
|
Non-cash stock
compensation expense
|
1,256
|
1,089
|
Restructuring
charges
|
—
|
1,119
|
Severance
expense
|
211
|
1,011
|
Gain on change in
fair value of contingent consideration, net
|
—
|
(50)
|
ERP implementation
costs
|
—
|
684
|
Foreign currency
transaction losses
|
496
|
345
|
Legal acquisition and
transaction costs
|
1,038
|
153
|
Impairment of
operating lease right-of-use asset
|
255
|
—
|
Gain on sale of
business
|
(1,064)
|
—
|
Adjusted
EBITDA
|
$
|
3,424
|
$
|
8,771
|
|
(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, 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)
|
|
|
Quarters ended
|
March 31,
|
|
|
|
|
2020
|
2019
|
Diluted earnings per
share
|
$
|
(0.08)
|
$
|
0.02
|
Restructuring
charges
|
—
|
0.05
|
Severance
expense
|
0.01
|
0.04
|
ERP implementation
costs
|
—
|
0.03
|
Foreign currency
transaction losses
|
0.02
|
0.01
|
Legal acquisition and
transaction costs
|
0.04
|
0.01
|
Impairment of
operating lease right-of-use asset
|
0.01
|
—
|
Settlement of
contingent consideration in shares
|
0.01
|
—
|
Gain on sale of
business
|
(0.04)
|
—
|
Adjusted
EPS
|
$
|
(0.03)
|
$
|
0.16
|
|
(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 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)
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
9,025
|
|
$
|
8,159
|
Accounts and other
receivables
|
|
104,195
|
|
131,852
|
Unbilled
revenue
|
|
60,655
|
|
57,229
|
Prepaid expenses and
other current assets
|
|
21,306
|
|
19,115
|
Total current
assets
|
|
195,181
|
|
216,355
|
Property, plant and
equipment, net
|
|
5,508
|
|
5,803
|
Operating lease
right-of-use assets
|
|
25,036
|
|
27,251
|
Goodwill and other
intangible assets, net
|
|
179,395
|
|
187,907
|
Other
assets
|
|
11,474
|
|
11,586
|
Total
assets
|
|
$
|
416,594
|
|
$
|
448,902
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
75,328
|
|
$
|
92,332
|
Deferred
revenue
|
|
25,560
|
|
23,234
|
Current portion of
operating lease liabilities
|
|
7,739
|
|
7,871
|
Total current
liabilities
|
|
108,627
|
|
123,437
|
Long-term
debt
|
|
74,837
|
|
82,870
|
Long-term portion of
operating lease liabilities
|
|
20,776
|
|
22,159
|
Other noncurrent
liabilities
|
|
9,862
|
|
10,522
|
Total
liabilities
|
|
214,102
|
|
238,988
|
Total stockholders'
equity
|
|
202,492
|
|
209,914
|
Total liabilities and
stockholders' equity
|
|
$
|
416,594
|
|
$
|
448,902
|
© 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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SOURCE GP Strategies Corporation