GSE Solutions Announces Second Quarter 2020 Financial Results

Columbia, MD – August 19, 2020 – GSE Systems, Inc. (“GSE Solutions”, “GSE” or “we”) (Nasdaq: GVP),  a leader in delivering and supporting end-to-end training, engineering, compliance, simulation and workforce solutions to the power industry, announced today its financial results for the three months ended June 30, 2020.

Financial overview for the second quarter of fiscal 2020

• Revenue of $14.3 million, compared to $23.5 million in Q2 2019
• Gross profit of $3.6 million, compared to $5.9 million in Q2 2019
• Net loss of $2.1 million or $(0.11) per basic and diluted share in Q2 2020, compared to a net loss of $216 thousand or $(0.01) per basic and diluted share in Q2 2019
• Adjusted net loss¹ of $707 thousand or $(0.03) adjusted loss per diluted share in Q2 2020, compared to adjusted net income of $964 thousand or $0.05 adjusted earnings per diluted share in Q2 2019
• Adjusted EBITDA¹ of $(191) thousand, compared to $1.9 million in Q2 2019
• Cash provided by operations of $2 million YTD, compared to cash used in operations of $909 thousand YTD 2019
• Repaid $3.5 million of long-term debt during Q2 2020
• New orders of $6.8 million, compared to $9.5 million in Q2 2019

At June 30, 2020

• Cash and cash equivalents of $3 million
• Total indebtedness of $23.3 million, inclusive of $10.0 million loan pursuant to the Payroll Protection Program
• Working capital totaled $3.4 million and current ratio equaled1x
• Backlog of $46.6 million

 

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”.

Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said, “As anticipated, our second quarter financial results were depressed due to the COVID-19 pandemic. The pandemic has resulted in industrywide RFP delays, project postponements and softer customer demand. Nonetheless, we generated positive cash flow and paid down approximately $3.5 million of long-term debt during the quarter. This demonstrates our ability to manage through the current challenges through providing essential services to our industry while operating the business within the constraints of the pandemic.”

Mr. Loudermilk continued, “We believe that significant pent-up demand for our services ultimately will be released as the COVID-19 impact abates. In the meantime, we are pursuing a number of meaningful second-half opportunities in Nuclear Industry Training & Consulting and expect a steady flow of new orders in Performance Improvement Solutions.  To emerge stronger from the current challenges, we are focused on driving organic growth, containing costs, generating cash flow and deleveraging our balance sheet.  Our long-term outlook remains bullish as GSE delivers differentiated products and services required for the safe, efficient and reliable operation of our clients’ nuclear facilities.”

 

Q2 2020 FINANCIAL RESULTS

Q2 2020 revenue of $14.3 million decreased by $9.1 million from $23.5 million in Q1 2019.

	Three months ended						Six months ended
(in thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue:
Performance	$	8,273		$	13,010		$	17,984		$	25,200
NITC		6,067			10,448			14,061			20,452
Total revenue	$	14,340		$	23,458		$	32,045		$	45,652

 

Performance revenue decreased to $8.3 million in Q2 2020 from $13.0 million in Q2 2019. The change was mainly driven by a decrease of $2.2 million due to major project completions in the second quarter of 2019. We recorded total Performance orders of $7.1 million and $3.7 million for Q2 2020 and Q2 2019, respectively.

NITC revenue decreased to $6.1 million in Q2 2020 from $10.4 million in Q2 2019. The decrease in revenue was largely due to lower staffing needs during the quarter, particularly attributed to lower demand for staff augmentation support from two major customers. NITC orders totaled $(0.3) million and $5.8 million for Q2 2020 and Q2 2019, respectively.

Q2 2020 gross profit was $3.6 million or 24.8% of revenue, compared to $5.9 million or 25.0% of revenue, in Q2 2019.

	Three months ended										Six months ended
	June 30, 2020					June 30, 2019					June 30, 2020					June 30, 2019
(in thousands)	$			%		$			%		$			%		$			%
Gross profit:
Performance	$	2,970		35.9%		$	4,540		34.9%		$	5,758		32.0%		$	8,239		32.7%
NITC		592		9.8%			1,327		12.7%			1,919		13.6%			2,364		11.6%
Consolidated gross profit	$	3,562		24.8%		$	5,867		25.0%		$	7,677		24.%		$	10,603		23.2%

The decrease in our gross profit of $2.9 million was primarily driven by decreased gross profit margins in our Performance segment, due to completion of higher margin projects in our True North and DP Engineering subsidiaries during fiscal 2019.

Selling, general and administrative expenses in Q2 2020 totaled $4.7 million or 32.9% of revenue, compared to $4.3 million or 18.5% of revenue, in Q2 2019. The increase in SG&A during the three months ended June 30, 2020 over the same period for fiscal 2019, relates to a relates primarily to a provision for a loss on legal settlement of $861 thousand and an increase in the consulting expenses due to the COVID-19 pandemic.

Net loss for Q2 2020 totaled $2.1 million or $(0.11) per basic and diluted share, compared to a net loss of $216 thousand or $(0.01) per basic and diluted share, in Q2 2019.

Adjusted net loss¹ totaled $707 thousand or $(0.03) per diluted share in Q2 2020, compared to adjusted net income of $964 thousand, or $0.05 per diluted share, in Q2 2019.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)¹ for Q2 2020 was approximately $(1.2) million, compared to $1.3 million in Q2 2019.

Adjusted EBITDA¹ totaled $(191) thousand in Q2 2020, compared to $1.9 million in Q2 2019.

 

BACKLOG AND CASH POSITION

Backlog at June 30, 2020 was $46.6 million, compared to $52.7 million at December 31, 2019. Backlog at June 30, 2020 included $31.2 million of Performance backlog and $15.4 million of NITC backlog. Performance backlog decreased by $6 million primarily due to 2019 backlog that was converted to revenues during 2020 and has only been partially replaced by new orders.

Our cash position was $18.3 million at June 30, 2020, compared to $11.7 million at December 31, 2019. The increase of $6.6 million during the six months ended June 30, 2020 in our cash and cash equivalents was primarily due to a positive, operating cash flow of $2 million, receipt of $10 million from the Paycheck Protection Program Loan and a draw on our revolving line of credit of $3.5 million on our credit line, offset by repayments of debt of $8.7 million.

 

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.