COLUMBIA, Md., Nov. 5, 2020 /PRNewswire/
-- Global workforce transformation solutions provider GP
Strategies Corporation (NYSE: GPX) today reported financial
results for the quarter ended September 30, 2020.
Overview:
- Revenue of $115.6 million for
third quarter of 2020 compared to $139.0
million for third quarter of 2019 and compared to
$106.1 million for the second quarter
of 2020
- Gross profit of $20.7 million, or
17.9% of revenue, for third quarter of 2020 compared to
$21.7 million, or 15.6%, for third
quarter of 2019 and compared to $15.9
million, or 15.0% of revenue for the second quarter of
2020
- Diluted earnings per share of $0.03 for third quarter of 2020 compared to
$0.13 per share for third quarter of
2019 and compared to diluted loss per share of $0.04 for the second quarter of 2020. (Adjusted
EPS of $0.24 for the third quarters
of 2020 and 2019, respectively, and compared to $0.12 for the second quarter of 2020, after
adjusting for special items)
- Cash flow from operations of $12.6
million for third quarter of 2020 compared to $10.9 million for third quarter of 2019 and
compared to $22.9 million for the
second quarter of 2020
- Reduced long term-debt balance by $39.1
million to $43.8 million as of
September 30, 2020 compared to
$82.9 million as of December 31, 2019
- Divested IC Axon business on October 1,
2020 for approximately $28.0
million, less an escrow of $1.5
million, that will further reduce our debt during the fourth
quarter of 2020
"In a tough environment, we are pleased with our third quarter
of 2020 results that demonstrate the Company is effectively
managing the business through the macroeconomic disruption caused
by the COVID-19 pandemic. During the third quarter the Company
delivered a sequential increase in revenue, gross margin, adjusted
earnings per share and adjusted EBITDA compared to the second
quarter of 2020." stated Adam
Stedham, Chief Executive Officer and President of GP
Strategies.
"We successfully reduced our long-term debt and took actions to
generate positive cash flow. The Company has reduced its
long-term debt by $75.9 million, or
63%, in just 15 months. In addition, the sale of IC Axon further
reduced debt in the fourth quarter of 2020. GP Strategies is
in a position of strength with the flexibility to capitalize on
opportunities as they develop in the marketplace." concluded Mr.
Stedham.
The Company's revenue decreased $23.4
million, or 16.8%, to $115.6
million for the third quarter of 2020 from $139.0 million in the third quarter of 2019.
Revenue in the North America
segment decreased $14.9 million, or
16.1%, revenue in the EMEA segment decreased $4.1 million, or 14.0% and revenue in the
Emerging Markets segment decreased $4.4
million, or 25.7%.
The Company's revenue decline was primarily due to circumstances
related to the macroeconomic impact of COVID-19, specifically the
postponement of certain training events and other delays in client
projects. In addition, our revenue decreased $4.6 million during the third 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 $1.0
million increase in U.S. dollar reported revenue during the
third quarter of 2020.
The Company had operating income of $1.3
million for the third quarter of 2020, a $3.2 million decrease compared to operating
income of $4.5 million for the third
quarter of 2019. The decline in operating income is primarily due
to a gross profit decrease of $1.0
million, or 4.6%, and a $2.4
million increase in general and administrative expenses. For
the quarter, the company incurred severance expense, that was
partially offset by a change in our Paid Time Off Policy, that in
net totaled $4.8 million. Of
this amount, $1.9 million is
reflected in cost of revenue and the remaining $2.9 million is in general and administrative
expenses on the condensed consolidated statement of
operations.
Net income was $0.5 million, or
$0.03 per share, for the third
quarter of 2020 compared to net income of $2.1 million, or $0.13 per share, for the third quarter of 2019.
After accounting for special items, which are set forth in the
Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was
$0.24 for both the third quarter of
2020 and 2019 respectively.
Balance Sheet and Cash Flow Highlights
As of September 30, 2020, the Company had cash of
$13.2 million compared to
$8.2 million as of December 31,
2019. The Company had $43.8 million
of long-term debt outstanding as of September 30, 2020 under
its revolving credit facility compared to $82.9 million outstanding as of December 31,
2019. Cash provided by operating activities was $45.4 million for the nine months ended
September 30, 2020 compared to $4.6
million for the same period in 2019.
In October 2020, the Company sold
its IC Axon business division for $28.0
million subject to certain adjustments and $1.5 million was held in escrow. In
addition there is a potential earnout of up to $2.0 million based on the business's revenue for
calendar year 2020. The company used the net proceeds to
further reduce its debt.
Investor Call
The Company has scheduled an investor conference call and
webcast for 12:00 p.m. Eastern Time on
Thursday, November 5, 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/gpx201105.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
https://dpregister.com/sreg/10149048/db1754fc58.
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 10149048.
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 U.S.
GAAP equivalents, see the Non-GAAP Reconciliations, along with
related footnotes, below.
About GP Strategies
GP Strategies Corporation (NYSE: GPX) is a global workforce
transformation solutions provider of 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,
automotive, financial services, technology, and other commercial
and government customers.
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
|
Nine Months
Ended
|
September
30,
|
September
30,
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Revenue
|
$
|
115,594
|
|
$
|
139,005
|
|
$
|
350,019
|
|
$
|
427,891
|
|
Cost of
revenue
|
94,929
|
|
117,338
|
|
295,843
|
361,987
|
Gross
profit
|
20,665
|
|
21,667
|
|
54,176
|
65,904
|
General and
administrative expenses
|
17,642
|
|
15,240
|
|
49,106
|
46,769
|
Sales and marketing
expenses
|
1,685
|
|
1,830
|
|
5,381
|
|
5,725
|
|
Restructuring
charges
|
—
|
|
104
|
|
855
|
|
1,405
|
|
Gain on change in
fair value of contingent
consideration, net
|
—
|
|
—
|
|
—
|
|
677
|
|
Gain on sale of
business
|
—
|
|
—
|
|
1,064
|
|
—
|
|
Operating
income (loss)
|
1,338
|
|
4,493
|
|
(102)
|
|
12,682
|
|
Interest
expense
|
440
|
|
1,575
|
|
2,025
|
|
4,852
|
|
Other income
(expense)
|
196
|
|
184
|
|
(493)
|
|
272
|
|
Income
(loss) before income tax expense
|
1,094
|
|
3,102
|
|
(2,620)
|
|
8,102
|
|
Income tax expense
(benefit)
|
573
|
|
961
|
|
(1,241)
|
2,408
|
Net
income (loss)
|
$
|
521
|
|
$
|
2,141
|
|
$
|
(1,379)
|
|
$
|
5,694
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
17,094
|
|
16,901
|
|
17,082
|
16,773
|
Diluted weighted
average shares outstanding
|
17,507
|
|
16,939
|
|
17,252
|
16,807
|
Per common share data:
|
|
|
|
|
Basic earnings (loss)
per share
|
$
|
0.03
|
|
$
|
0.13
|
|
$
|
(0.08)
|
|
$
|
0.34
|
|
Diluted earnings
(loss) per share
|
$
|
0.03
|
|
$
|
0.13
|
|
$
|
(0.08)
|
|
$
|
0.34
|
|
|
|
|
|
|
Other
data:
|
|
|
|
|
Adjusted
EBITDA(1)
|
$
|
10,114
|
|
$
|
10,758
|
|
$
|
19,522
|
|
$
|
29,964
|
|
Adjusted EPS
(1)
|
$
|
0.24
|
|
$
|
0.24
|
|
$
|
0.33
|
|
$
|
0.61
|
|
|
|
(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 U.S. 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
|
Nine Months
Ended
|
September
30,
|
September
30,
|
|
2020
|
2019
|
2020
|
2019
|
Revenue by segment
(2):
|
|
|
|
|
North
America
|
$
|
77,436
|
|
$
|
92,302
|
|
$
|
237,654
|
|
$
|
292,122
|
|
EMEA
|
25,437
|
|
29,577
|
|
78,647
|
|
91,373
|
|
Emerging
Markets
|
12,721
|
|
17,126
|
|
33,718
|
|
44,396
|
|
Total
revenue
|
$
|
115,594
|
|
$
|
139,005
|
|
$
|
350,019
|
|
$
|
427,891
|
|
|
|
|
|
|
Gross profit by
segment (2):
|
|
|
|
|
North
America
|
$
|
15,335
|
|
$
|
15,461
|
|
$
|
42,405
|
|
$
|
49,240
|
|
EMEA
|
2,845
|
|
3,046
|
|
7,530
|
|
10,282
|
|
Emerging
Markets
|
2,485
|
|
3,160
|
|
4,241
|
|
6,382
|
|
Total gross
profit
|
$
|
20,665
|
|
$
|
21,667
|
|
$
|
54,176
|
|
$
|
65,904
|
|
|
|
|
|
|
Supplemental Cash
Flow Information:
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
12,604
|
|
$
|
10,854
|
|
$
|
45,369
|
|
$
|
4,551
|
|
Capital
expenditures
|
(238)
|
|
(878)
|
|
(1,284)
|
|
(1,905)
|
|
Free cash
flow
|
$
|
12,366
|
|
$
|
9,976
|
|
$
|
44,085
|
|
$
|
2,646
|
|
|
|
(2)
|
Effective July 1,
2020, we began managing our business under a new organizational
structure on a regional basis through our three geographic markets,
North America, EMEA (Europe Middle East Africa) and Emerging
Markets. 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
|
Nine Months
Ended
|
September
30,
|
September
30,
|
|
2020
|
2019
|
2020
|
2019
|
Net income
(loss)
|
$
|
521
|
|
$
|
2,141
|
|
$
|
(1,379)
|
|
$
|
5,694
|
|
Interest
expense
|
440
|
|
1,575
|
|
2,025
|
|
4,852
|
|
Income tax expense
(benefit)
|
573
|
|
961
|
|
(1,241)
|
|
2,408
|
|
Depreciation and
amortization
|
1,950
|
|
2,335
|
|
6,204
|
|
6,992
|
|
EBITDA
|
3,484
|
|
7,012
|
|
5,609
|
|
19,946
|
|
Adjustments:
|
|
|
|
|
Non-cash stock
compensation expense
|
1,618
|
|
1,520
|
|
4,410
|
|
3,939
|
|
Stock compensation
related to severance
|
1,721
|
|
—
|
|
1,721
|
|
—
|
|
Restructuring
charges
|
—
|
|
104
|
|
855
|
|
1,405
|
|
Severance
expense
|
4,937
|
|
1,015
|
|
7,502
|
|
2,026
|
|
Change in paid time
off policy
|
(1,894)
|
|
—
|
|
(1,894)
|
|
—
|
|
Gain on change in
fair value of contingent consideration, net
|
—
|
|
—
|
|
—
|
|
(677)
|
|
ERP implementation
costs
|
—
|
|
455
|
|
—
|
|
1,603
|
|
Foreign currency
transaction (gains) losses
|
(120)
|
|
500
|
|
722
|
|
1,052
|
|
Legal acquisition and
transaction costs
|
368
|
|
152
|
|
1,406
|
|
670
|
|
Impairment of
operating lease right-of-use asset
|
—
|
|
—
|
|
255
|
|
—
|
|
Gain on sale of
business
|
—
|
|
—
|
|
(1,064)
|
|
—
|
|
Adjusted
EBITDA
|
$
|
10,114
|
|
$
|
10,758
|
|
$
|
19,522
|
|
$
|
29,964
|
|
|
|
(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 (benefit), depreciation and
amortization, non-cash stock compensation expense, and other
unusual or infrequently occurring items. For the periods presented,
these other items are stock compensation related to severance,
restructuring charges, severance expense, change in paid time off
policy, gain on change in fair value of contingent consideration,
net, ERP implementation costs, foreign currency transaction (gains)
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
|
Nine Months
Ended
|
September
30,
|
September
30,
|
|
2020
|
2019
|
2020
|
2019
|
Diluted earnings per
share
|
$
|
0.03
|
|
$
|
0.13
|
|
$
|
(0.08)
|
|
$
|
0.34
|
|
Stock compensation
severance expense
|
0.07
|
|
—
|
|
0.07
|
|
—
|
|
Restructuring
charges
|
—
|
|
—
|
|
0.04
|
|
0.06
|
|
Severance
expense
|
0.21
|
|
0.04
|
|
0.32
|
|
0.08
|
|
Change in paid time
off policy
|
(0.08)
|
|
—
|
|
(0.08)
|
|
—
|
|
Gain on change in
fair value of contingent consideration, net
|
—
|
|
—
|
|
—
|
|
(0.03)
|
|
ERP implementation
costs
|
—
|
|
0.02
|
|
—
|
0.07
|
|
Foreign currency
transaction (gain) losses
|
(0.01)
|
|
0.02
|
|
0.02
|
0.04
|
|
Legal acquisition and
transaction costs
|
0.01
|
|
0.01
|
|
0.05
|
0.03
|
|
Impairment of
operating lease right-of-use asset
|
—
|
|
—
|
|
0.01
|
|
—
|
|
Settlement of
contingent consideration in shares
|
0.01
|
|
0.02
|
|
0.02
|
|
0.02
|
|
Gain on sale of
business
|
—
|
|
—
|
|
(0.04)
|
|
—
|
|
Adjusted
EPS
|
$
|
0.24
|
|
$
|
0.24
|
|
$
|
0.33
|
|
$
|
0.61
|
|
|
|
(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 U.S. 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)
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
|
$
|
13,206
|
|
|
$
|
8,159
|
|
|
Accounts and other
receivables
|
|
91,169
|
|
|
131,852
|
|
|
Unbilled
revenue
|
|
39,256
|
|
|
57,229
|
|
|
Prepaid expenses and
other current assets
|
|
21,690
|
|
|
19,115
|
|
|
Assets held for
sale
|
|
25,128
|
|
|
—
|
|
|
Total current
assets
|
|
190,449
|
|
|
216,355
|
|
|
Property, plant and
equipment, net
|
|
4,933
|
|
|
5,803
|
|
|
Operating lease
right-of-use assets
|
|
22,637
|
|
|
27,251
|
|
|
Goodwill and
intangible assets, net
|
|
160,243
|
|
|
187,907
|
|
|
Other
assets
|
|
11,023
|
|
|
11,586
|
|
|
Total
assets
|
|
$
|
389,285
|
|
|
$
|
448,902
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
73,227
|
|
|
$
|
92,332
|
|
|
Deferred
revenue
|
|
21,669
|
|
|
23,234
|
|
|
Current portion of
operating lease liabilities
|
|
6,073
|
|
|
7,871
|
|
|
Liabilities held for
sale
|
|
2,898
|
|
|
—
|
|
|
Total current
liabilities
|
|
103,867
|
|
|
123,437
|
|
|
Long-term
debt
|
|
43,750
|
|
|
82,870
|
|
|
Long-term portion of
operating lease liabilities
|
|
19,325
|
|
|
22,159
|
|
|
Other noncurrent
liabilities
|
|
13,353
|
|
|
10,522
|
|
|
Total
liabilities
|
|
180,295
|
|
|
238,988
|
|
|
Total stockholders'
equity
|
|
208,990
|
|
|
209,914
|
|
|
Total liabilities and
stockholders' equity
|
|
$
|
389,285
|
|
|
$
|
448,902
|
|
|
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trademarks of GP Strategies Corporation.
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SOURCE GP Strategies Corporation