Conference Call Scheduled for
today, November
14, 2023, at
4:30pm ET
COLUMBIA, Md., Nov. 14,
2023 /PRNewswire/ -- GSE Systems, Inc. ("GSE
Solutions", "GSE", or "the Company") (Nasdaq: GVP), a leader in
advanced engineering and workforce solutions that support the
future of clean energy production and decarbonization initiatives
of the nuclear power industry, today announced financial results
for the third quarter ("Q3") ended September 30,
2023.
Q3 2023 and Recent
Highlights
- The Company reports positive Adjusted EBITDA of $0.7 million in Q3, an improvement from a loss of
$(0.7) million a year ago.
- New orders of $14.7 million in
Q3, up from $6.2 million in Q2 and
$10.2 million in Q3 of 2022.
- Stronger Gross Profit Margin of 32.1% in Q3, up from 26.0% in
Q2 and 27.4% in Q3 of 2022 due to incremental work in Engineering,
including continued software sales.
- Software and support sales were $1.4
million in Q3 of 2023 bringing our YTD total to $3.7 million, an increase of 3% over the nine
months ended Q3 2022.
- Backlog at September 30, 2023
increased to $37.6 million from
$34.4 million at end of Q2. This
includes $31.4 million of Performance
Improvement Solutions backlog, and $6.2
million of Workforce Solutions backlog.
- Ended Q3 with cash, cash equivalents and restricted cash of
$3.5 million, including restricted
cash of $1.5 million.
Management Commentary
"I am pleased with the meaningful progress made during the
third quarter. Our focus on operational execution resulted in
a significant improvement in Gross Profit, ultimately translating
into positive Adjusted EBITDA, our first positive Adjusted EBITDA
in eight quarters, and strongest Adjusted EBITDA since
2020. This demonstrates where we intend to drive the
business. We will continue to focus on engineering
utilization and driving higher margin business."
commented Kyle J. Loudermilk, GSE's
President and Chief Executive Officer. "Orders in Q3 were solid,
yet we still had orders that remain to be closed as industry
remains conservative in normalizing traditional spend levels.
Our opportunity pipeline is very strong, and we are focused on
converting those opportunities to bookable backlog. We have
purpose-built GSE over the years into a highly regarded provider of
essential services to the nuclear power industry. The essential
services we offer are aligned to the strategic and operational
initiatives the existing fleet is actively planning to invest in:
lifetime extension and the production of more power from the
existing asset base. These initiatives will require
significant investment over decades, and we feel GSE is the right
company with the right people at the right time to serve this
mission. Our recent wins for engineering services in
particular demonstrate early progress towards our goals of winning
new logos to grow and diversify the customer base while focusing on
high margin wins."
Emmett Pepe, CFO of GSE Systems,
added, "I am pleased to see our focus on utilization in our
engineering segment and overall cost controls on operating expenses
contributed to our positive adjusted EBITDA in the quarter.
The gross profit improvement driven by segment revenue growth
related to increased project efficiency on large simulator projects
is the result of our execution. We expect our gross profit margins
and operating expenses to continue to trend positive while we
continue to execute on our sales growth strategy."
Q3 2023 FINANCIAL RESULTS
Revenue during Q3 2023 was $11.6 million
an decrease of 6.6% compared to $12.4 million in Q2
2023, and revenue was $11.9 million in Q3 2022. The sequential
decrease revenues was driven by decrease in Workforce
Solutions, partially offset by large simulator build and upgrade
projects in Engineering. The year-over-year decrease of
$.3 million was primarily due to the
wind down of large projects resulting in a reduction of staffing
from our major customers, which continues to affect the power
industry.
Engineering revenue was $8.7 million in Q3 2023 compared
to $9.0 million in Q2 2023, and $8.1 million in Q3 2022. The sequential and
year-over-year increases were largely due to several
significant simulator upgrade projects which began later in
2022 with continued work performed during 2023.
Workforce Solutions revenue was $2.9 million in Q3 2023 compared
to $3.3 million in Q2 2023, and
$3.8 million in Q3 2022. The
sequential and year-over-year decreases are mainly due to a
reduction in staffing needs from our major customers, and the
continued winding down of ongoing projects.
Gross profit in Q3 2023 was $3.7 million, or 32.1% of revenue. This
compared to gross profit of $3.3 million, or 27.4% of revenue in
Q3 2022, and $3.2 million,
or 26.0% of revenue in Q2 2023. The increase in
gross margin was primarily related to Engineering segment
revenue growth related to increased project efficiency on large
simulator projects.
Operating expenses in Q3 2023 were $5.5 million compared to $12.3 million in Q3 2022. Operating
expenses were $4.0 million in Q2 2023. Included in
Operating expenses was $0.9 million
and $7.5 million of Goodwill and
Intangible Asset impairment for the Q3 2023 and Q3 2022
respectively. In Q3 2023 we incurred a one-time $0.8 million expense related to litigation that
was settled subsequent to quarter's end. When adjusted for the
non-recurring impairment and litigation fees, Operating expenses
were lower due to an improved corporate cost structure. The Company
continues to maintain tight expense controls despite
inflationary pressures.
Operating loss was approximately $(1.8) million in Q3 2023,
compared $(9.0) million in Q3 2022. Operating loss was
$(0.8) million in Q2 2023.
Net loss in Q3 2023 was $(2.0) million or
$(0.82) per basic and diluted share, compared to net loss
of $(9.0) million or $(4.22) per basic and diluted share
in Q3 2022. Net loss was $(1.5) million or
$(0.62) per basic and diluted share in Q2 2023.
Adjusted net loss1 totaled $0.2 million, or $0.07 per diluted share in Q3 2023,
compared to adjusted net loss of $(1.1) million, or
$(0.49) per diluted share, in Q3 2022. Adjusted net
loss1 totaled $(1.3) million, or
$(0.53) per diluted share in Q2 2023.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") for Q3 2023 was approximately $(1.4) million, compared to $(8.4) million in Q3 2022. EBITDA for Q2 2023 was
approximately $(0.4) million.
Adjusted EBITDA1 totaled $0.7 million in Q3 2023, compared to
$(0.7) million in Q3 2022. Adjusted
EBITDA1 totaled $(0.4) million in
Q2 2023.
Backlog at September 30, 2023, was
$37.6 million, including $31.4 million of Performance Improvement
Solutions backlog, and $6.2 million
of Workforce Solutions.
1 Refer
to the non-GAAP reconciliation tables at the end of this press
release for a definition of "EBITDA", "adjusted EBITDA" and
"adjusted net income".
|
CONFERENCE CALL
GSE Systems has scheduled a conference call for today,
November 14, 2023, at 4:30 p.m.
ET (1:30 p.m. PT) to review these
results. Interested parties can access the conference call by
dialing (833) 974-2453 or (412) 317-5784 or can listen via a live
Internet webcast at: https://app.webinar.net/qnLERpEj4B7. Access to
the link is also available in the Investor Relations section of the
Company's website at: https://www.gses.com/about/investors/.
A teleconference replay of the call will be available for seven
days at (877) 344-7529 or (412) 317-0088, confirmation
# 5754057. A webcast replay will be available in the Investor
Relations section of the Company's website at
https://www.gses.com/about/investors/ for 90 days.
ABOUT GSE SOLUTIONS
Proven by more than 50 years of experience in the nuclear power
industry, GSE knows what it takes to help customers deliver
carbon-free electricity safely and reliably. Today, GSE Solutions
leverages top talent, expertise, and technology to help energy
facilities achieve next-level power plant performance. GSE's
advanced Engineering and Workforce Solutions divisions offer
highly specialized training, engineering design, program
compliance, simulation, and technical staffing that reduce risk and
optimize plant operations. With more than 1,100 installations and
hundreds of customers in over 50 countries, GSE delivers
operational excellence. 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.
Company
Contact
|
|
Investor
Contact
|
Kyle
Loudermilk
|
|
Lytham
Partners
|
Chief Executive
Officer
|
|
Adam Lowensteiner, Vice
President
|
GSE Systems,
Inc.
|
|
(646)
829-9702
|
(410)
970-7800
|
|
gvp@lythampartners.com
|
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,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Revenue
|
|
$11,566
|
|
$11,898
|
|
$34,826
|
|
$36,918
|
Cost of
revenue
|
|
7,850
|
|
8,642
|
|
25,500
|
|
28,063
|
Gross profit
|
|
3,716
|
|
3,256
|
|
9,326
|
|
8,855
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
4,301
|
|
4,336
|
|
12,742
|
|
13,253
|
Research and
development
|
|
139
|
|
186
|
|
474
|
|
510
|
Goodwill and
Intangible asset impairment charge
|
|
937
|
|
7,505
|
|
937
|
|
7,505
|
Depreciation
|
|
43
|
|
69
|
|
144
|
|
213
|
Amortization of
definite-lived intangible assets
|
|
108
|
|
209
|
|
400
|
|
700
|
Total
operating expenses
|
|
5,528
|
|
12,305
|
|
14,697
|
|
22,181
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(1,812)
|
|
(9,049)
|
|
(5,371)
|
|
(13,326)
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(430)
|
|
(422)
|
|
(1,483)
|
|
(928)
|
Change in fair value
of derivative instruments, net
|
|
180
|
|
263
|
|
420
|
|
377
|
Other loss,
net
|
|
(30)
|
|
(2)
|
|
(118)
|
|
(58)
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
(2,092)
|
|
(9,210)
|
|
(6,552)
|
|
(13,935)
|
|
|
|
|
|
|
|
|
|
Benefit from income
taxes
|
|
(70)
|
|
(218)
|
|
(81)
|
|
(108)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$(2,022)
|
|
$(8,992)
|
|
$(6,471)
|
|
$(13,827)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
per common share - basic
and diluted
|
|
$(0.82)
|
|
$(4.22)
|
|
$(2.70)
|
|
$(6.55)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic and
diluted
|
|
2,480,505
|
|
2,128,888
|
|
2,398,468
|
|
2,110,194
|
GSE SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands,
except share and per share data)
|
|
|
September 30,
2023
|
|
December 31,
2022
|
|
(unaudited)
|
|
(audited)
|
ASSETS
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
2,041
|
|
$
|
2,789
|
Restricted cash,
current
|
|
378
|
|
|
1,052
|
Contract receivables,
net of allowance for credit loss
|
|
10,697
|
|
|
10,064
|
Prepaid expenses and
other current assets
|
|
569
|
|
|
2,165
|
Total current
assets
|
|
13,685
|
|
|
16,070
|
|
|
|
|
|
|
Equipment, software and
leasehold improvements, net
|
|
648
|
|
|
772
|
Software development
costs, net
|
|
698
|
|
|
574
|
Goodwill
|
|
5,362
|
|
|
6,299
|
Intangible assets,
net
|
|
1,287
|
|
|
1,687
|
Restricted cash - long
term
|
|
1,081
|
|
|
535
|
Operating lease
right-of-use assets, net
|
|
518
|
|
|
506
|
Other assets
|
|
42
|
|
|
53
|
Total
assets
|
$
|
23,321
|
|
$
|
26,496
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
|
Current portion of
long-term note
|
|
1,445
|
|
|
3,038
|
Accounts
payable
|
|
2,346
|
|
|
1,262
|
Accrued
expenses
|
|
1,832
|
|
|
2,084
|
Accrued
compensation
|
|
1,790
|
|
|
1,071
|
Billings in excess of
revenue earned
|
|
4,215
|
|
|
4,163
|
Accrued
warranty
|
|
265
|
|
|
370
|
Income taxes
payable
|
|
1,629
|
|
|
1,774
|
Derivative
liabilities
|
|
1,538
|
|
|
603
|
Other current
liabilities
|
|
987
|
|
|
1,286
|
Total current
liabilities
|
|
16,047
|
|
|
15,651
|
|
|
|
|
|
|
Long-term note, less
current portion
|
|
942
|
|
|
310
|
Operating lease
liabilities noncurrent
|
|
315
|
|
|
160
|
Other noncurrent
liabilities
|
|
168
|
|
|
144
|
Total
liabilities
|
|
17,472
|
|
|
16,265
|
|
|
|
|
|
|
Commitments and
contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Preferred stock $0.01
par value; 2,000,000 shares authorized; no shares issued and
outstanding
|
|
-
|
|
|
-
|
Common stock $0.01 par
value; 60,000,000 shares authorized, 2,648,085 and 2,404,681
shares
issued,
2,488,194 and 2,244,790 shares outstanding,
respectively
|
|
26
|
|
|
24
|
Additional paid-in
capital
|
|
85,196
|
|
|
83,127
|
Accumulated
deficit
|
|
(76,455)
|
|
|
(69,927)
|
Accumulated other
comprehensive income
|
|
81
|
|
|
6
|
Treasury stock at
cost, 159,891 shares
|
|
(2,999)
|
|
|
(2,999)
|
Total stockholders'
equity
|
|
5,849
|
|
|
10,231
|
Total liabilities and
stockholders' equity
|
$
|
23,321
|
|
$
|
26,496
|
EBITDA and Adjusted EBITDA
Reconciliation (in thousands)
References to "EBITDA" mean net loss, before considering
interest expense, benefit from income taxes, depreciation and
amortization. References to Adjusted EBITDA excludes irregular or
non-recurring items and are not directly related to the Company's
core operating performance. EBITDA and Adjusted EBITDA are not
measures of financial performance under U.S. GAAP. Management
believes EBITDA and Adjusted EBITDA, in addition to operating
profit, net income and other U.S. GAAP measures, are useful to
investors to evaluate the Company's results because it excludes
certain items 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 U.S. GAAP. A reconciliation of non-U.S. GAAP
EBITDA and Adjusted EBITDA to the most directly comparable U.S.
GAAP measure in accordance with SEC Regulation G follows:
|
|
|
|
|
|
Three Months
ended
|
|
Nine Months
ended
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net loss
|
|
$(2,022)
|
|
$(8,992)
|
|
$(6,471)
|
|
$(13,827)
|
Interest expense,
net
|
|
430
|
|
422
|
|
1,483
|
|
928
|
Benefit from income
taxes
|
|
(70)
|
|
(218)
|
|
(81)
|
|
(108)
|
Depreciation and
amortization
|
|
232
|
|
365
|
|
792
|
|
1,167
|
EBITDA
|
|
(1,430)
|
|
(8,423)
|
|
(4,277)
|
|
(11,840)
|
Stock-based
compensation expense
|
|
322
|
|
491
|
|
853
|
|
1,592
|
Change in fair value of
derivative instruments, net
|
|
(180)
|
|
(263)
|
|
(420)
|
|
(377)
|
Goodwill and intangible
asset impairment charge
|
|
937
|
|
7,505
|
|
937
|
|
7,505
|
Advisory
fees
|
|
260
|
|
-
|
|
260
|
|
-
|
Provision for legal
settlement
|
|
750
|
|
-
|
|
750
|
|
-
|
Adjusted
EBITDA
|
|
$659
|
|
$(690)
|
|
$(1,897)
|
|
$(3,120)
|
Adjusted
Net (Loss) Income and Adjusted EPS
Reconciliation (in thousands, except per share
amounts)
References to Adjusted Net Loss excludes certain items that are
not directly related to the Company's core operating performance
and non-cash items that may, or could, have a disproportionate
positive or negative impact on our results for any particular
period. Adjusted Net Loss and Adjusted Loss per Share (adjusted
EPS) are not measures of financial performance under U.S. GAAP.
Management believes Adjusted Net Loss and Adjusted Loss per Share,
in addition to other U.S. GAAP measures, are useful to investors to
evaluate the Company's results because the excluded items 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 U.S.
GAAP. A reconciliation of non-U.S. GAAP Adjusted Net Loss and
Adjusted Loss per common Share to U.S. GAAP net loss, the most
directly comparable U.S. GAAP financial measure, is as follows:
|
|
|
|
|
|
Three Months
ended
|
|
Nine Months
ended
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net
loss
|
|
(2,022)
|
|
(8,992)
|
|
$(6,471)
|
|
$(13,827)
|
Stock-based
compensation expense
|
|
322
|
|
491
|
|
853
|
|
1,592
|
Change in fair value of
derivative instruments, net
|
|
(180)
|
|
(263)
|
|
(420)
|
|
(377)
|
Goodwill and intangible
asset impairment charge
|
|
937
|
|
7,505
|
|
937
|
|
7,505
|
Advisory
fees
|
|
260
|
|
-
|
|
260
|
|
-
|
Provision for legal
settlement
|
|
750
|
|
-
|
|
750
|
|
-
|
Amortization of
intangible assets related to acquisitions
|
|
108
|
|
209
|
|
400
|
|
700
|
Adjusted net
loss
|
|
175
|
|
(1,050)
|
|
$(3,691)
|
|
$(4,407)
|
|
|
|
|
|
|
|
|
|
Adjusted loss per
common share – Diluted
|
|
0.07
|
|
(0.49)
|
|
(1.54)
|
|
(2.09)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding – diluted(1)
|
|
2,480,505
|
|
2,128,888
|
|
2,398,468
|
|
2,110,194
|
|
(1)
During the three and nine months ended September 30, 2023, we
reported a U.S. GAAP net loss and an adjusted net loss.
Accordingly, there were no dilutive shares from RSUs,
warrants, or other dilutive instruments that are included in
the adjusted net loss per share calculation, as all shares were
considered anti-dilutive when calculating the net loss per
share.
|
|
(1)
During the three and nine months ended September 30, 2022, we
reported a U.S. GAAP net income and an adjusted net loss.
Accordingly, there were no dilutive shares from RSUs, warrants, or
other dilutive instruments that are included in the adjusted net
loss per share calculation, as all shares were considered
anti-dilutive when calculating the net loss per share.
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SOURCE GSE Systems, Inc.