COLUMBIA, Md., Aug. 16, 2021 /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
overall decarbonization initiatives of the power industry, today
announced financial results for the second quarter ended
June 30, 2021.
Q2 2021 and Recent
Highlights
- New orders in Q2 2021 increased by 59% to $10.8 million, from $6.8
million in Q2 2020. Workforce Solutions orders were
$5.0 million in the second quarter
while Performance Improvement Solutions (Engineering) orders were
$5.8 million.
- Q2 revenue increased 3.2% sequentially to $13.5 million from $13.1
million in Q1 2021 , led by an 11% sequential increase in
Workforce Solutions.
- EnVision Software as a Service (SaaS) revenue increased 129%
compared to the year ago quarter.
- Workforce Solutions (Nuclear Industry Training and Consulting
or NITC) revenues were $6.7 million
in Q2 2021, an increase of 11% from Q1 2021 of $6.0 million and 10% from Q2 2020 of $6.1 million.
- Operating loss of $(1.4) million
in Q2 2021, compared to $(1.9)
million in Q2 2020.
- Operating expenses decreased by 25% in Q2 2021 compared to Q2
2020, and 21% sequentially.
- Company reported net income of $3.2
million in Q2 2021 compared to net loss $(2.1) million in Q2 2020 due to the recognition
of an Employee Retention Credit.
- Adjusted EBITDA was $(0.4)
million in Q2 2021 compared to $(0.8)
million in Q1 of 2021, due to improved revenue and continued
tight expense controls.
- The Company ended Q2 2021 with a cash position of $3.8 million. During the quarter the company
recorded $5.1 million of other income
pertaining to the Employee Retention Credit of which the company
realized a cash benefit in the quarter of $0.9 million and is expecting a cash refund for
the balance of $4.2 million
subsequent to the end of the period.
- On August 4, 2021, the Small
Business Administration (SBA) has approved the Company's Paycheck
Protection Program (PPP) loan forgiveness application.
Management Commentary
"The second quarter results reveal general stabilization in
GSE's businesses, with improvements in revenue, efficient
management of the business and balance sheet, and year over year
improvements in new orders," commented Kyle
J. Loudermilk, GSE's President and Chief Executive
Officer. "However, while order flow has improved from the
lows of last year, the industry has yet to return to the more
robust levels of spend for maintenance and improvement on
their facilities as they had prior to the pandemic, specifically
impacting our Performance Improvement Solutions segment new orders.
A continued growth area for the Company has been EnVision, our
emerging software as a service (SaaS) subscription solution, which
saw revenues grow 129% compared to Q2 2020 and continues
to resonate well with customers. In the near-term, we believe that
delayed upgrades and shutdowns of power plants caused by the
pandemic is creating pent up demand for projects that will
require GSE's solutions. Macro trends continue to point in the
right direction, which is towards grid stability and
decarbonization, and we are well positioned to capture greater
business as industry spend picks up to pre-pandemic levels."
Emmett Pepe, CFO of GSE Systems,
added, "During the second quarter, we continued to focus on
improving our capital structure by repaying some of our debt and
strengthening the balance sheet with non-dilutive capital. We also
continued very efficient management of operating expenses which
decreased 25% year over year. Further, we reported net income
in the quarter primarily due to recording an Employee Retention
Credit of $5.1 million, of which
about $4.2 is expected to be received in the coming months,
significantly improving our cash balances. Lastly, we were recently
approved by the SBA for the forgiveness of $10 million of debt from Payroll Protection
Program, which will be reflected in the third quarter."
Q2 2021 FINANCIAL
RESULTS
Revenue during Q2 2021 was $13.5 million
a slight increase of 3.2% compared to $13.1 million in Q1 2021, and revenue
was $14.3 million in Q2 2020.
The sequential improvement in revenues was driven by
11% growth in the Company's Workforce Solutions segment,
offset by a 3% sequential decrease in Engineering Solutions.
The year over year decrease of $0.8 million is due to the
continued impact from the pandemic, which continues to affect
the power industry.
Performance Improvement Solutions revenue was $6.9 million in Q2 2021 compared
to $7.1 million in Q1 2021, and $8.3 million in Q2 2020. The sequential
change was largely due to customers delaying certain upgrades. The
year-over-year change was primarily due to lower orders on the
simulator part of the business but offset with improvements in
specialized engineering and consulting services.
Workforce Solutions revenue was $6.7 million in Q2 2021 compared to
$6.0 million in Q1 2021,
and $6.1 million in Q2 2020. The
sequential improvement is due to slight reengagement by customers.
The year-over-year change is also due to the overall increase in
activity due to the COVID-19 pandemic.
Gross profit in Q2 2021 was $2.7 million, or 19.9% of revenue. This
compared to gross profit of $3.6 million, or 24.8% of revenue in
Q2 2020, and $2.9 million,
or 22.3% of revenue in Q1 2021. Gross margin was
affected by higher budgeted costs from a mid-contract review on
certain existing projects. These additional expenses are expected
to be considered one-time and done as result of mid-contract review
to ensure no additional expenditures are required to complete
certain contracts.
Operating expenses in Q2 2021 were $4.1 million compared to $5.4 million in Q2 2020. Operating
expenses (excluding restructuring charges) was $4.3 million in Q1 2021. Tight expense
controls continued into the second quarter of 2021.
Operating loss was approximately $(1.4) million in Q2 2021,
compared $(1.9) million in Q2 2020. Operating loss was
$(1.4) million in Q1 2021, excluding the restructuring
charge.
Net income in Q2 2021 was $3.2 million or $0.16 per basic and diluted share, compared
to net loss of $(2.1) million or $(0.11) per
basic and diluted share in Q2 2020. Net loss was
$(2.2) million or $(0.11) per basic and diluted share in
Q1 2021. The improvement in Q2 is due to a $5.1 million other income recorded from the
Employee Retention Credit.
Adjusted net loss1 totaled $(0.6) million,
or $(0.03) per diluted share in Q2 2021, compared to
adjusted net loss of $(0.7) million, or $(0.03) per
diluted share, in Q2 2020. Adjusted net
loss1 totaled $(1.0) million, or
$(0.05) per diluted share in Q1 2021.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") for Q2 2021 was approximately $3.8 million, compared to
$(1.2) million in Q2 2020. EBITDA for Q1 2021 was
approximately $(1.7) million.
Adjusted EBITDA1 totaled $(0.4) million in Q2
2021, compared to $(0.2) million in Q2 2020.
Adjusted EBITDA1 totaled $(0.8) million in
Q1 2021.
Backlog at June 30, 2021, was
$37.5 million, including
$27.7 million of Performance
Improvement Solutions backlog, and $9.8 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 Monday, August 16, 2021 at 4:30 p.m. ET (1:30 p.m.
PT) to review these results. Interested parties can access
the conference call by dialing (877) 270-2148 or (412) 902-6510 or
can listen via a live Internet webcast, which is available in the
Investor Relations section of the Company's website at:
https://www.gses.com/about/investors/
or via the following link:
https://www.webcaster4.com/Webcast/Page/2700/42129
A teleconference replay of the call will be available for
seven days at (877) 344-7529 or (412) 317-0088, confirmation #
10158609. 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
We are visionaries, and the solutions we create now will be at
the forefront of the power industry. GSE Solutions leverages five
decades of proven industry experience to provide unique and
essential engineering and workforce solutions, services and
products focused on performance optimization, regulatory
compliance, simulation, training, and staffing for customers
worldwide. As one of the few independent public companies serving
the clean energy sector of nuclear power and adjacent industries,
our solutions support the future of clean energy production and
overall decarbonization initiatives of the power industry.
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
|
GSE
Solutions
|
|
Lytham
Partners
|
Kyle
Loudermilk
|
|
Adam Lowensteiner,
Vice President
|
Chief Executive
Officer
|
|
(646)
829-9702
|
GSE Systems,
Inc.
|
|
gvp@lythampartners.com
|
(410)
970-7800
|
|
|
GSE SYSTEMS, INC.
AND SUBSIDIARIES Condensed Consolidated Statements of
Operations (in thousands, except share and per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
ended
|
|
|
Six Months ended
|
|
|
|
|
June
30,
|
|
|
June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Revenue
|
|
$13,522
|
|
$14,340
|
|
$26,626
|
|
$32,045
|
Cost of
revenue
|
|
10,833
|
|
10,778
|
|
21,009
|
|
24,368
|
Gross
profit
|
|
2,689
|
|
3,562
|
|
5,617
|
|
7,677
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
3,522
|
|
4,722
|
|
7,256
|
|
9,670
|
Research and
development
|
|
154
|
|
179
|
|
311
|
|
389
|
Restructuring
charges
|
|
-
|
|
-
|
|
808
|
|
10
|
Loss on
impairment
|
|
-
|
|
-
|
|
-
|
|
4,302
|
Depreciation
|
|
71
|
|
70
|
|
147
|
|
178
|
Amortization of
definite-lived intangible assets
|
|
303
|
|
444
|
|
643
|
|
1,114
|
Total operating
expenses
|
|
4,050
|
|
5,415
|
|
9,165
|
|
15,663
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(1,361)
|
|
(1,853)
|
|
(3,548)
|
|
(7,986)
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(49)
|
|
(187)
|
|
(103)
|
|
(428)
|
Gain on derivative
instruments, net
|
|
-
|
|
47
|
|
-
|
|
4
|
Other income
(expense), net
|
|
4,637
|
|
24
|
|
4,638
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
|
3,227
|
|
(1,969)
|
|
987
|
|
(8,357)
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
(4)
|
|
180
|
|
(39)
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$3,231
|
|
$(2,149)
|
|
$1,026
|
|
$(8,407)
|
|
|
|
|
|
|
|
|
|
|
Net income(loss) per common share -
basic
|
|
$0.16
|
|
$(0.11)
|
|
$0.05
|
|
$(0.41)
|
Net Income(loss) per
common share - Diluted
|
|
$0.16
|
|
$(0.11)
|
|
$0.05
|
|
$(0.41)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - Basic
|
|
20,647,426
|
|
20,407,958
|
|
20,638,116
|
|
20,375,446
|
Weighted average
shares outstanding - Diluted
|
|
20,702,003
|
|
20,407,958
|
|
20,638,116
|
|
20,375,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE SYSTEMS, INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (in thousands, except share and per share
data)
|
|
|
June 30,
2021
|
|
December 31,
2020
|
|
(unaudited)
|
|
(audited)
|
ASSETS
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
3,829
|
|
$
|
6,702
|
Contract receivables,
net
|
|
11,368
|
|
|
10,494
|
Prepaid expenses and
other current assets
|
|
5,287
|
|
|
1,554
|
Total current
assets
|
|
20,484
|
|
|
18,750
|
|
|
|
|
|
|
Equipment, software
and leasehold improvements, net
|
|
791
|
|
|
616
|
Software development
costs, net
|
|
575
|
|
|
630
|
Goodwill
|
|
13,339
|
|
|
13,339
|
Intangible assets,
net
|
|
3,589
|
|
|
4,234
|
Operating lease
right-of-use assets, net
|
|
1,279
|
|
|
1,562
|
Other
assets
|
|
58
|
|
|
59
|
Total
assets
|
$
|
40,115
|
|
$
|
39,190
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
|
Line of
credit
|
$
|
2,317
|
|
$
|
3,006
|
PPP Loan, current
portion
|
|
10,118
|
|
|
5,034
|
Accounts
payable
|
|
1,005
|
|
|
570
|
Accrued
expenses
|
|
1,430
|
|
|
1,297
|
Accrued
compensation
|
|
2,389
|
|
|
1,505
|
Billings in excess of
revenue earned
|
|
4,693
|
|
|
5,285
|
Accrued
warranty
|
|
547
|
|
|
665
|
Income taxes
payable
|
|
1,623
|
|
|
1,621
|
Other current
liabilities
|
|
1,393
|
|
|
2,498
|
Total current
liabilities
|
|
25,515
|
|
|
21,481
|
|
|
|
|
|
|
PPP Loan, noncurrent
portion
|
|
-
|
|
|
5,034
|
Operating lease
liabilities noncurrent
|
|
1,315
|
|
|
1,831
|
Other noncurrent
liabilities
|
|
282
|
|
|
339
|
Total
liabilities
|
|
27,112
|
|
|
28,685
|
|
|
|
|
|
|
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, 22,460,679 and 22,192,569
shares issued, 20,861,768 and 20,593,658 shares outstanding,
respectively
|
|
225
|
|
|
222
|
Additional paid-in
capital
|
|
80,024
|
|
|
79,687
|
Accumulated
deficit
|
|
(64,165)
|
|
|
(65,191)
|
Accumulated other
comprehensive loss
|
|
(82)
|
|
|
(1,214)
|
Treasury stock at
cost, 1,598,911 shares
|
|
(2,999)
|
|
|
(2,999)
|
Total stockholders'
equity
|
|
13,003
|
|
|
10,505
|
Total liabilities and
stockholders' equity
|
$
|
40,115
|
|
$
|
39,190
|
The accompanying notes are an integral part of
these consolidated financial statements.
EBITDA and Adjusted EBITDA Reconciliation
(in thousands)
References to "EBITDA" mean net income (loss), before
taking into account interest income and expense, provision for
income taxes, depreciation and amortization. References to Adjusted
EBITDA exclude the impact on our (loss) of any impairment of
our intangibles, gain from the change in fair value of contingent
consideration, restructuring charges, stock-based compensation
expense, impact of the change in fair value of derivative
instruments, acquisition-related expense, acquisition-related
legal settlement and VAT write-off. EBITDA and Adjusted
EBITDA are not measures of financial performance under generally
accepted accounting principles (GAAP). Management believes EBITDA
and Adjusted EBITDA, in addition to operating profit, net income
and other GAAP measures, are useful to investors to evaluate the
Company's results because it excludes certain items that are not
directly related to the Company's core operating performance 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
GAAP. A reconciliation of non-GAAP EBITDA and Adjusted EBITDA to
the most directly comparable GAAP measure in accordance with SEC
Regulation G follows:
|
|
|
|
|
|
Three Months
ended
|
|
Six Months
ended
|
|
|
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net income
(loss)
|
|
$3,231
|
|
$(2,149)
|
|
$1,026
|
|
$(8,407)
|
Interest expense,
net
|
|
49
|
|
187
|
|
103
|
|
428
|
Provision for income
taxes
|
|
(4)
|
|
180
|
|
(39)
|
|
50
|
Depreciation and
amortization
|
|
481
|
|
598
|
|
994
|
|
1,451
|
EBITDA
|
|
3,757
|
|
(1,184)
|
|
2,084
|
|
(6,478)
|
Provision for legal
settlement
|
|
-
|
|
861
|
|
-
|
|
861
|
Loss on
impairment
|
|
-
|
|
-
|
|
-
|
|
4,302
|
Employee retention
credit
|
|
(5,075)
|
|
-
|
|
(5,075)
|
|
-
|
Restructuring
charges
|
|
-
|
|
-
|
|
808
|
|
10
|
Stock-based
compensation expense
|
|
463
|
|
177
|
|
501
|
|
324
|
Change in fair value
of derivative instruments
|
|
-
|
|
(47)
|
|
-
|
|
(4)
|
Acquisition-related
expense
|
|
-
|
|
7
|
|
-
|
|
188
|
VAT
write-off
|
|
450
|
|
-
|
|
450
|
|
-
|
Adjusted
EBITDA
|
|
$(405)
|
|
$(186)
|
|
$(1,232)
|
|
$(797)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income and Adjusted EPS
Reconciliation (in thousands, except per share
amounts)
References to Adjusted net income exclude the impact of gain
from the change in fair value of contingent consideration, loss on
impairment of our intangibles, restructuring charges,
stock-based compensation expense, change in fair value of
derivative instruments, acquisition-related expense,
acquisition-related legal settlement, amortization of intangible
assets related to acquisitions and VAT
write-off. Adjusted Net Income and adjusted earnings per
share (adjusted EPS) are not measures of financial performance
under generally accepted accounting principles (GAAP). Management
believes adjusted net income and adjusted EPS, in addition to other
GAAP measures, are useful to investors to evaluate the Company's
results because they exclude 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.
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 GAAP. A reconciliation of non-GAAP adjusted net
income and adjusted EPS to GAAP net income, the most directly
comparable GAAP financial measure, is as follows:
|
|
|
|
|
|
Three Months
ended
|
|
Six Months ended
|
|
|
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net income
(loss)
|
|
3,231
|
|
(2,149)
|
|
$1,026
|
|
$(8,407)
|
Provision for legal
settlement
|
|
-
|
|
861
|
|
-
|
|
861
|
Loss on
impairment
|
|
-
|
|
-
|
|
-
|
|
4,302
|
Employee retention
credit
|
|
(5,075)
|
|
-
|
|
(5,075)
|
|
-
|
Restructuring
charges
|
|
-
|
|
-
|
|
808
|
|
10
|
Stock-based
compensation expense
|
|
463
|
|
177
|
|
501
|
|
324
|
Change in fair value
of derivative instruments
|
|
-
|
|
(47)
|
|
-
|
|
(4)
|
Acquisition-related
expense
|
|
-
|
|
7
|
|
-
|
|
188
|
VAT
write-off
|
|
450
|
|
-
|
|
450
|
|
-
|
Amortization of
intangible assets related to acquisitions
|
|
303
|
|
444
|
|
643
|
|
1,114
|
Adjusted net
loss
|
|
(628)
|
|
(707)
|
|
$(1,647)
|
|
$(1,612)
|
|
|
|
|
|
|
|
|
|
Adjusted income
(loss) per common share – Diluted
|
|
(0.03)
|
|
(0.03)
|
|
(0.08)
|
|
(0.08)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted(a)
|
|
20,647,426
|
|
20,407,958
|
|
20,638,116
|
|
20,375,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) During the
three and six months ended June 30, 2021, we reported a GAAP net
income and an adjusted net loss.
Accordingly, there were 54,577 of dilutive
shares that were excluded in the adjusted net loss per share
calculation that were included when calculating the diluted net
income per common share for the three months ended June 30, 2021.
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SOURCE GSE Systems, Inc.