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GSE Systems Announces Third Quarter 2019 Financial Results

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GSE Systems, Inc. (GSE or the Company) (NASDAQ:GVP), a leader in delivering end-to-end training, engineering, compliance, simulation, and workforce solutions to the power industry, today announced financial results for the third quarter (Q3) ended September 30, 2019.

Q3 2019 vs. Q3 2018 OVERVIEW

  • Revenue of $20.0 million, compared to $21.8 million.
  • Gross profit of $4.7 million, compared to $5.4 million.
  • Net loss of $(1.1) million, or $(0.06) per diluted share, compared to net loss of $(0.5) million, or $(0.03) per diluted share.
  • Adjusted net income1 of $0.6 million, or $0.03 per diluted share, compared to $0.8 million, or $0.04 per diluted share.
  • Adjusted EBITDA1 of $1.4 million, compared to $1.6 million.
  • Reduced debt by approximately $1.2 million during Q3 2019.

At September 30, 2019

  • Cash and cash equivalents of $8.6 million.
  • Total debt of $19.7 million.
  • Working capital of $8.8 million and current ratio of 1.5x.
  • YTD new orders of $42.9 million.
  • Backlog of $53.7 million.

Kyle J. Loudermilk, GSE's President and Chief Executive Officer, said, "GSE's third quarter adjusted EBITDA totaled $1.4 million, down slightly from the prior year period. We continued to be impacted by the termination in August 2019 of our Engineer of Choice contract with DP Engineering's largest customer and what we believe is a temporary lull in industry staffing demand in our Nuclear Industry Training & Consulting (NITC) segment. The contract termination at DP Engineering reduced our planned adjusted EBITDA for our Performance Improvement segment by approximately $(0.8) million in the third quarter of 2019 and $(2.5) million year to date. We anticipate a positive-to-neutral contribution from DP Engineering beginning in the fourth quarter of 2019, so we can start 2020 with the impact behind us. We are well-positioned for an uptick in NITC activity, and recently announced a multi-year contract for operations, maintenance and technical training support for the nuclear fleet of a major US utility. In our Performance Solutions segment, we are bidding on and winning a steady flow of contracts and gaining traction on cross-selling and up-selling into the industry."

Mr. Loudermilk concluded, "We have paused our acquisition activity following the purchases of Absolute Consulting, True North and DP Engineering in the last two years. While we believe that GSE remains a highly-viable acquisition platform, today our emphasis is on growing organically, streamlining operations, containing costs, maximizing cash flow and paying down debt. At the right time we will consider M&A opportunities, particularly those that can be transformational in nature."

1 Refer to the non-GAAP reconciliation tables at the end of this press release for a definition of "adjusted EBITDA" and "adjusted net income".

Q3 2019 RESULTS

Q3 2019 revenue decreased $1.8 million to $20.0 million, from $21.8 million in Q3 2018.

 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

September 30,

Revenue

2019

2018

2019

2018

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Performance

$

11,417

$

9,849

$

36,617

$

30,614

NITC

 

8,614

 

11,952

 

29,066

 

38,780

Total Revenue

$

20,031

$

21,801

$

65,683

$

69,394

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Improvement Solutions (Performance) revenue totaled $11.4 million and $9.8 million for Q3 2019 and Q3 2018, respectively. The Company recorded total Performance orders of $10.7 million and $17.2 million for Q3 2019 and Q3 2018, respectively. The increase in revenue was primarily driven by the acquisition of DP Engineering in Q1 2019, which contributed $1.9 million of revenue in Q3 2019, partially offset by the decrease of $0.3 million in revenue from foreign subsidiaries as a result of the winding down of the international subsidiaries.

Nuclear Industry Training and Consulting (NITC) revenue decreased to $8.6 million for Q3 2019 from $12.0 million for Q3 2018. NITC orders totaled $8.3 million and $10.7 million for Q3 2019 and Q3 2018, respectively. The decrease in revenue was largely due to lower staffing needs during the quarter, particularly reflecting the natural completion of a large contract at the end of 2018.

Q3 2019 gross profit decreased to $4.7 million, or 23.3% of revenue, from $5.4 million, or 24.9% of revenue, in Q3 2018.

(in thousands)

Three months ended September 30,

Nine months ended September 30,

Gross profit

2019

%

2018

%

2019

%

2018

%

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Performance

$

3,548

31.1%

$

3,638

36.9%

$

11,787

32.3%

$

11,318

37.0%

NITC

 

1,125

13.1%

 

1,783

14.9%

 

3,489

12.0%

 

5,341

13.8%

Gross Profit

$

4,673

23.3%

$

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