COLUMBIA, Md., Aug. 7, 2020 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended June 30, 2020.

Overview:

  • Cash flow from operations of $22.9 million for second quarter of 2020 compared to cash used in operations of $3.7 million for second quarter of 2019
  • Reduced long term-debt balance by $25.2 million to $57.7 million as of June 30, 2020 compared to $82.9 million as of December 31, 2019
  • Revenue of $106.1 million for second quarter of 2020 compared to $149.4 million for second quarter of 2019
  • Gross profit of $15.9 million, or 15.0% of revenue, for second quarter of 2020 compared to $23.0 million, or 15.4%, for second quarter of 2019
  • Diluted loss per share of $(0.04) for second quarter of 2020 compared to earnings of $0.19 per share for second quarter of 2019
  • Backlog of $327.0 million as of June 30, 2020 compared to $330.5 million as of June 30, 2019

"We continue to navigate through these unprecedented times and have taken swift and strategic actions, reducing leverage and lowering expenses, establishing a strong foundation to ensure our long-term success," stated Adam Stedham, Chief Executive Officer & President of GP Strategies.  "Clearly the second quarter was a challenge, but we delivered Adjusted EBITDA of $6.0 million, an increase of 75% compared to the first quarter of 2020. We expect our revenue to increase sequentially for the third and fourth quarters of the year, and Adjusted EBITDA for the second half of 2020 to improve compared to the first half."

"We are successfully transitioning multiple programs to virtual modalities. In addition, we are beginning to see face-to-face training activities reschedule. The rate of marketplace adoption of virtual learning, remote performance support and e-learning creates significant opportunities for the Company to increase revenues from our current levels," concluded Mr. Stedham. 

The Company's revenue decreased $43.3 million, or 29.0%, to $106.1 million for the second quarter of 2020 from $149.4 million in the second quarter of 2019. Revenue in the Workforce Excellence segment decreased $18.1 million, or 21.6%, and revenue in the Business Transformation Services segment decreased $25.2 million, or 38.4%.

The Company's revenue decline was primarily due to the impact of COVID-19 as a result of the postponement of certain training events and other delays in client projects. In addition, our revenue decreased $4.6 million during the second 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 $1.8 million decrease in U.S. dollar reported revenue during the second quarter of 2020.

The Company had an operating loss of $1.0 million for the second quarter of 2020, a $7.1 million decrease compared to operating income of $6.1 million for the second quarter of 2019. The decline is primarily due to a gross profit decrease of $7.1 million, or 30.8%, due to the decreased revenues. In addition, the Company incurred $2.4 million of severance expense during the second quarter of 2020, of which $2.1 million is included in cost of revenue and $0.3 million is included in general and administrative expenses on the condensed consolidated statement of operations. 

Net loss was $0.6 million, or $(0.04) per share, for the second quarter of 2020 compared to net income of $3.2 million, or $0.19 per share, for the second quarter of 2019. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $0.12 for the second quarter of 2020 compared to $0.22 for the second quarter of 2019.

Balance Sheet and Cash Flow Highlights

As of June 30, 2020, the Company had cash of $12.1 million compared to $8.2 million as of December 31, 2019. The Company had $57.7 million of long-term debt outstanding as of June 30, 2020 under its revolving credit facility compared to $82.9 million outstanding as of December 31, 2019.  Cash provided by operating activities was $32.8 million for the six months ended June 30, 2020 compared to cash used in operating activities of  $6.3 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 Friday, August 7, 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/gpx200807.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/10146928.

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 10146928.

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 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

Six Months Ended

June 30,

June 30,







2020

2019

2020

2019






Revenue

$

106,144


$

149,413


$

234,425


$

288,886


Cost of revenue

90,247


126,454


200,914


244,649


Gross profit

15,897


22,959


33,511


44,237


General and administrative expenses

14,180


15,402


31,464


31,529


Sales and marketing expenses

1,857


1,906


3,696


3,895


Restructuring charges

855


182


855


1,301


Gain on change in fair value of contingent consideration, net


627



677


Gain on sale of business



1,064



Operating income (loss)

(995)


6,096


(1,440)


8,189


Interest expense

607


1,679


1,585


3,277


Other income (expense)

(189)


102


(689)


88


   Income (loss) before income tax expense

(1,791)


4,519


(3,714)


5,000


Income tax expense (benefit)

(1,185)


1,300


(1,814)


1,447


Net income (loss)

$

(606)


$

3,219


$

(1,900)


$

3,553







Basic weighted average shares outstanding

17,144


16,747


17,113


16,710


Diluted weighted average shares outstanding

17,207


16,780


17,162


16,741


Per common share data:





Basic earnings (loss) per share

$

(0.04)


$

0.19


$

(0.11)


$

0.21


Diluted earnings (loss) per share

$

(0.04)


$

0.19


$

(0.11)


$

0.21







Other data:





Adjusted EBITDA(1)

$

5,984


$

10,435


$

9,408


$

19,206


Adjusted EPS (1)

$

0.12


$

0.22


$

0.09


$

0.37




(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

Six Months Ended

June 30,

June 30,







2020

2019

2020

2019

Revenue by segment (2):





Workforce Excellence

$

65,811


$

83,903


$

140,189


$

165,381


Business Transformation Services

40,333


65,510


94,236


123,505


Total revenue

$

106,144


$

149,413


$

234,425


$

288,886


Gross profit by segment (2):





Workforce Excellence

$

11,402


$

13,763


$

22,895


$

27,218


Business Transformation Services

4,495


9,196


10,616


17,019


Total gross profit

$

15,897


$

22,959


$

33,511


$

44,237


Supplemental Cash Flow Information:





Net cash provided by (used in) operating activities

$

22,918


$

(3,698)


$

32,765


$

(6,303)


Capital expenditures

(579)


(485)


(1,046)


(1,027)


Free cash flow

$

22,339


$

(4,183)


$

31,719


$

(7,330)




(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

Six Months Ended

June 30,

June 30,







2020

2019

2020

2019

Net income (loss)

$

(606)


$

3,219


$

(1,900)


$

3,553


Interest expense

607


1,679


1,585


3,277


Income tax expense (benefit)

(1,185)


1,300


(1,814)


1,447


Depreciation and amortization

2,077


2,316


4,254


4,657


EBITDA

893


8,514


2,125


12,934


Adjustments:





Non-cash stock compensation expense

1,536


1,330


2,792


2,419


Restructuring charges

855


182


855


1,301


Severance expense

2,354



2,565


1,011


Gain on change in fair value of contingent consideration, net


(627)



(677)


ERP implementation costs


464



1,148


Foreign currency transaction losses

346


207


842


552


Legal acquisition and transaction costs


365


1,038


518


Impairment of operating lease right-of-use asset



255



Gain on sale of business



(1,064)



Adjusted EBITDA

$

5,984


$

10,435


$

9,408


$

19,206




(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

Six Months Ended

June 30,

June 30,







2020

2019

2020

2019

Diluted earnings per share

$

(0.04)


$

0.19


$

(0.11)


$

0.21


Restructuring charges

0.04


0.01


0.04


0.06


Severance expense

0.10



0.11


0.04


Gain on change in fair value of contingent consideration, net


(0.03)



(0.03)


ERP implementation costs


0.02



0.05


Foreign currency transaction losses

0.01


0.01


0.03


0.02


Legal acquisition and transaction costs


0.02


0.04


0.02


Impairment of operating lease right-of-use asset



0.01



Settlement of contingent consideration in shares

0.01



0.01



Gain on sale of business



(0.04)



Adjusted EPS

$

0.12


$

0.22


$

0.09


$

0.37




(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)








June 30,


December 31,



2020


2019



(Unaudited)



Current assets:






Cash and cash equivalents


$

12,097



$

8,159



Accounts and other receivables


99,828



131,852



Unbilled revenue


40,029



57,229



Prepaid expenses and other current assets


21,272



19,115



Total current assets


173,226



216,355



Property, plant and equipment, net


5,393



5,803



Operating lease right-of-use assets


23,591



27,251



Goodwill and other intangible assets, net


179,830



187,907



Other assets


11,670



11,586



Total assets


$

393,710



$

448,902









Current liabilities:






Accounts payable and accrued expenses


$

72,519



$

92,332



Deferred revenue


21,529



23,234



Current portion of operating lease liabilities


6,707



7,871



Total current liabilities


100,755



123,437



Long-term debt


57,650



82,870



Long-term portion of operating lease liabilities


19,824



22,159



Other noncurrent liabilities


12,740



10,522



Total liabilities


190,969



238,988



Total stockholders' equity


202,741



209,914



Total liabilities and stockholders' equity


$

393,710



$

448,902



© 2020 GP Strategies Corporation. All rights reserved. GP Strategies and GP Strategies with logo design are registered trademarks of GP Strategies Corporation.

GP Strategies Corporation logo. (PRNewsFoto/GP Strategies Corporation)

 

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