GP Strategies Reports Third Quarter 2015 Financial Results
COLUMBIA, Md., Oct. 29, 2015 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended September 30, 2015.
Overview:
- Revenue of $122.9 million for third quarter of 2015 compared to $123.9 million for third quarter of 2014; foreign exchange adversely impacted revenue by $2.8 million in the third quarter of 2015
- Diluted earnings per share of $0.22 for third quarter of 2015, inclusive of $0.04 per share of restructuring charges and $0.04 per share of foreign currency losses and negative foreign currency translation impact, compared to $0.37 per share for third quarter of 2014
- Successfully implementing cost reduction plan; estimated to result in approximately $10 million of annualized cost savings, net of additional investments in key initiatives
The Company's revenue decreased $0.9 million or 1% during the third quarter of 2015 compared to the third quarter of 2014. The revenue decline is largely attributable to a $4.5 million decrease in the Company's non-core alternative fuels business due to project completions in 2014 and a $2.8 million negative effect of foreign currency exchange rate changes on U.S. dollar reported revenue during the third quarter of 2015 compared to the third quarter in 2014. Excluding both of these items, the Company's revenue increased 5% or $6.3 million. The Sandy Training & Marketing segment reported 39% revenue growth and the Learning Solutions segment reported 9% revenue growth excluding the negative effect of foreign exchange rates in the third quarter. This growth was partially offset by a $3.6 million or 16% revenue decline in the Performance Readiness Solutions segment.
Operating income declined $4.4 million to $6.9 million for the third quarter of 2015 from $11.3 million for the third quarter of 2014. The decrease in operating income is primarily due to a $2.1 million decline in gross profit during the quarter, largely due to the completion of alternative fuels projects in 2014, and $1.2 million of restructuring charges, primarily consisting of severance expense in connection with the implementation of a cost savings initiative to better align costs with revenues and improve operating margins. The Company estimates that its cost savings initiative will result in approximately $10 million of annualized cost reductions, net of additional investments in key initiatives. Also contributing to a decline in operating income was a $0.8 million increase in medical benefits expense during the third quarter. Operating income for the third quarter of 2015 also includes a $0.1 million loss on the change in fair value of contingent consideration for previously completed acquisitions compared to a gain of $0.7 million for the third quarter of 2014. Income before income taxes was $5.9 million for the third quarter of 2015 compared to $11.1 million for the third quarter of 2014. Foreign currency rate fluctuations adversely impacted pre-tax income by $1.1 million and earnings by $0.04 per share during the third quarter of 2015. Net income was $3.7 million, or $0.22 per diluted share, for the third quarter of 2015 compared to $7.2 million, or $0.37 per diluted share, for the third quarter of 2014.
"Our third quarter results reflect both successes and challenges," commented Scott N. Greenberg, Chief Executive Officer of GP Strategies. "GP Strategies continued to achieve organic growth in its core business, including a significant increase in profit margin in the Learning Solutions segment. We accomplished this despite the continued negative impact of foreign currency fluctuations on our reported results and lower revenue in our non-core alternative fuels business. In addition, we are effectively implementing our previously announced cost cutting initiative which we anticipate will contribute positively to our operating results beginning in the fourth quarter. We continue to be optimistic about the future and are starting to see some opportunities from our past investments in global initiatives. We are also hiring new business leaders to further grow our international operations, and are looking for acquisitions, returning to a strategy which has contributed positively to GP Strategies' growth over the years."
Balance Sheet and Cash Flow Highlights
As of September 30, 2015, the Company had cash and cash equivalents of $13.6 million compared to $14.5 million as of December 31, 2014. The Company had $27.8 million of long-term debt outstanding as of September 30, 2015. In addition, the Company had $32.9 million of short-term borrowings outstanding and $31.5 million of available borrowings under its line of credit as of September 30, 2015.
Cash provided by operating activities was $9.5 million for the nine months ended September 30, 2015 compared to $16.7 million for the same period in 2014. During the three and nine months ended September 30, 2015, the Company repurchased approximately 222,000 and 255,000 shares, respectively, of its common stock in the open market for a total cost of approximately $5.5 million and $6.6 million, respectively. As of September 30, 2015, there was approximately $8.4 million available for future repurchases under the buyback program.
Investor Call
The Company has scheduled an investor conference call for 10:00 a.m. EDT on October 29, 2015. In addition to prepared remarks from management, there will be a question and answer session on the call. The dial-in numbers for the live conference call are 888-222-1517 or 303-223-2683, using conference ID number 21783582. A telephone replay of the call will also be available beginning at 12:00 p.m. on October 29th, until 12:00 p.m. on November 12th. To listen to the replay, dial 800-633-8284 or 402-977-9140, using conference ID number 21783582. A replay will also be available on GP Strategies' website shortly after the conclusion of the call.
Presentation of Non-GAAP Information
This press release contains non-GAAP financial measures, including EBITDA (earnings before interest, income taxes, depreciation and amortization). The Company believes that EBITDA is useful to investors in evaluating the Company's results. This measure 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 EBITDA 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 EBITDA to the most comparable GAAP equivalent, see the Non-GAAP Reconciliation – EBITDA, along with related footnotes, below.
About GP Strategies
GP Strategies Corporation (NYSE: GPX) is a global performance improvement solutions provider of sales and technical training, eLearning 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, manufacturing, process and energy industries, and other commercial and government customers. Additional information may be found at www.gpstrategies.com.
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. 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. 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, | |||||||||||
|
2015 |
2014 |
2015 |
2014 | |||||||||
|
Revenue |
$ |
122,931 |
$ |
123,869 |
$ |
363,849 |
$ |
376,667 | ||||
|
Cost of revenue |
102,562 |
101,351 |
304,269 |
311,027 | ||||||||
|
Gross profit |
20,369 |
22,518 |
59,580 |
65,640 | ||||||||
|
Selling, general and administrative expenses |
12,253 |
11,863 |
35,859 |
34,914 | ||||||||
|
Restructuring charges |
1,195 |
— |
1,195 |
— | ||||||||
|
Gain (loss) on change in fair value of |
(56) |
655 |
(314) |
1,513 | ||||||||
|
Operating income |
6,865 |
11,310 |
22,212 |
32,239 | ||||||||
|
Interest expense |
340 |
117 |
1,011 |
399 | ||||||||
|
Other income (expense) |
(606) |
(72) |
(1,141) |
185 | ||||||||
|
Income before income tax expense |
5,919 |
11,121 |
20,060 |
32,025 | ||||||||
|
Income tax expense |
2,203 |
3,877 |
7,523 |
12,351 | ||||||||
|
Net income |
$ |
3,716 |
$ |
7,244 |
$ |
12,537 |
$ |
19,674 | ||||
|
Basic weighted average shares outstanding |
17,117 |
19,131 |
17,151 |
19,138 | ||||||||
|
Diluted weighted average shares outstanding |
17,272 |
19,391 |
17,313 |
19,409 | ||||||||
|
Per common share data: |
||||||||||||
|
Basic earnings per share |
$ |
0.22 |
$ |
0.38 |
$ |
0.73 |
$ |
1.03 | ||||
|
Diluted earnings per share |
$ |
0.22 |
$ |
0.37 |
$ |
0.72 |
$ |
1.01 | ||||
|
Other data: |
||||||||||||
|
EBITDA(1) |
$ |
8,221 |
$ |
13,764 |
$ |
27,085 |
$ |
39,901 | ||||
|
(1) |
The term EBITDA (earnings before interest, income taxes, depreciation and amortization) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent, see the Non-GAAP Reconciliation – EBITDA, 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, | |||||||
|
2015 |
2014 |
2015 |
2014 | |||||
|
Revenue by segment: |
||||||||
|
Learning Solutions (2) |
$ |
51,879 |
$ |
49,638 |
$ |
154,463 |
$ |
143,578 |
|
Professional & Technical Services (2) |
30,354 |
36,138 |
90,317 |
118,364 | ||||
|
Sandy Training & Marketing |
22,115 |
15,883 |
62,043 |
50,364 | ||||
|
Performance Readiness Solutions (2) |
18,583 |
22,210 |
57,026 |
64,361 | ||||
|
Total revenue |
$ |
122,931 |
$ |
123,869 |
$ |
363,849 |
$ |
376,667 |
|
Gross profit by segment: |
||||||||
|
Learning Solutions (2) |
$ |
9,808 |
$ |
8,384 |
$ |
26,542 |
$ |
22,214 |
|
Professional & Technical Services (2) |
5,527 |
7,384 |
17,769 |
26,099 | ||||
|
Sandy Training & Marketing |
2,470 |
2,519 |
7,873 |
7,727 | ||||
|
Performance Readiness Solutions (2) |
2,564 |
4,231 |
7,396 |
9,600 | ||||
|
Total gross profit |
$ |
20,369 |
$ |
22,518 |
$ |
59,580 |
$ |
65,640 |
|
Operating income by segment: |
||||||||
|
Learning Solutions (2) |
$ |
4,815 |
$ |
3,300 |
$ |
11,637 |
$ |
8,049 |
|
Professional & Technical Services (2) |
2,731 |
4,426 |
9,716 |
16,577 | ||||
|
Sandy Training & Marketing |
150 |
1,023 |
1,481 |
3,204 | ||||
|
Performance Readiness Solutions (2) |
420 |
1,906 |
887 |
2,896 | ||||
|
Restructuring charges |
1,195 |
— |
1,195 |
— | ||||
|
Gain (loss) on change in fair value of |
(56) |
655 |
(314) |
1,513 | ||||
|
Total operating income |
$ |
6,865 |
$ |
11,310 |
$ |
22,212 |
$ |
32,239 |
|
Supplemental Cash Flow Information: |
||||||||
|
Net cash provided by operating activities |
$ |
6,403 |
$ |
18,581 |
$ |
9,528 |
16,664 | |
|
Capital expenditures |
(481) |
(871) |
(1,831) |
(2,315) | ||||
|
Free cash flow |
$ |
5,922 |
$ |
17,710 |
$ |
7,697 |
14,349 | |
|
(2) |
Effective January 1, 2015, the Company made changes to its organizational structure and transferred the management responsibility of certain business units between segments, which changed the composition of certain of its operating segments. The changes primarily consisted of: (i) the Energy Services group became part of the Professional & Technical Services segment; (ii) certain business units providing leadership development offerings were transferred from the Learning Solutions segment to the Performance Readiness Solutions segment, (iii) a business unit which predominantly provides content development services to U.S. government and commercial clients transferred from the Professional & Technical Services segment to the Performance Readiness solutions segment; and (iv) two business units providing engineering and technical services in Europe were transferred from the Learning Solutions segment to the Professional & Technical Services segment. The Company reclassified the segment financial information above for the prior year period to reflect these changes and conform to the current year's presentation. |
|
GP STRATEGIES CORPORATION AND SUBSIDIARIES Non-GAAP Reconciliation – EBITDA (3) (In thousands) (Unaudited) | ||||||||||||
|
Quarters ended |
Nine months ended | |||||||||||
|
September 30, |
September 30, | |||||||||||
|
2015 |
2014 |
2015 |
2014 | |||||||||
|
Net income |
$ |
3,716 |
$ |
7,244 |
$ |
12,537 |
$ |
19,674 |
||||
|
Interest expense |
340 |
117 |
1,011 |
399 |
||||||||
|
Income tax expense |
2,203 |
3,877 |
7,523 |
12,351 |
||||||||
|
Depreciation and amortization |
1,962 |
2,526 |
6,014 |
7,477 |
||||||||
|
EBITDA |
$ |
8,221 |
$ |
13,764 |
$ |
27,085 |
$ |
39,901 |
||||
|
(3) |
Earnings before interest, income taxes, depreciation and amortization (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. EBITDA is calculated by adding back to net income interest expense, income tax expense, depreciation and amortization. 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 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 CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) | ||||||||
|
September 30, |
December 31, | |||||||
|
2015 |
2014 | |||||||
|
(Unaudited) |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ |
13,631 |
$ |
14,541 |
||||
|
Accounts and other receivables |
99,516 |
99,638 |
||||||
|
Costs and estimated earnings in excess of |
39,301 |
30,211 |
||||||
|
Prepaid expenses and other current assets |
16,308 |
15,967 |
||||||
|
Total current assets |
168,756 |
160,357 |
||||||
|
Property, plant and equipment, net |
6,751 |
7,864 |
||||||
|
Goodwill and other intangibles, net |
130,375 |
136,292 |
||||||
|
Other assets |
1,039 |
939 |
||||||
|
Total assets |
$ |
306,921 |
$ |
305,452 |
||||
|
Current liabilities: |
||||||||
|
Short-term borrowings |
$ |
32,907 |
$ |
20,799 |
||||
|
Current portion of long-term debt |
13,333 |
13,333 |
||||||
|
Accounts payable and accrued expenses |
60,746 |
59,018 |
||||||
|
Billings in excess of costs and estimated |
16,476 |
23,670 |
||||||
|
Total current liabilities |
123,462 |
116,820 |
||||||
|
Long term debt |
14,444 |
24,444 |
||||||
|
Other noncurrent liabilities |
10,778 |
12,463 |
||||||
|
Total liabilities |
148,684 |
153,727 |
||||||
|
Total stockholders' equity |
158,237 |
151,725 |
||||||
|
Total liabilities and stockholders' equity |
$ |
306,921 |
$ |
305,452 |
||||
© 2015 GP Strategies Corporation. All rights reserved. GP Strategies and the GP Strategies logo design are trademarks of GP Strategies Corporation.
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