GP Strategies Reports Second Quarter 2021 Financial Results

GP STRATEGIES CORPORATION AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data) 

(Unaudited)

Three Months Ended

Six Months Ended 

June 30,

June 30,

2021

2020

2021

2020

Revenue

$    128,782

$    106,144

$    243,333

$    234,425

Cost of revenue

104,954

90,247

198,064

200,914

Gross profit

23,828

15,897

45,269

33,511

General and administrative expenses

15,442

14,180

30,278

31,464

Sales and marketing expenses

2,562

1,857

5,030

3,696

Restructuring charges

1,763

855

2,462

855

Loss on change in fair value of contingent consideration

—

—

269

—

Gain (loss) on sale of business

(377)

—

(377)

1,064

Operating income (loss)

3,684

(995)

6,853

(1,440)

Interest expense

197

607

378

1,585

Other expense

196

189

1,019

689

Income (loss) before income tax expense (benefit)

3,291

(1,791)

5,456

(3,714)

Income tax expense (benefit)

812

(1,185)

1,253

(1,814)

Net income (loss)

$        2,479

$ (606)

4,203

(1,900)

Basic weighted average shares outstanding

17,453

17,144

17,389

17,113

Diluted weighted average shares outstanding

18,321

17,207

18,237

17,162

Per common share data:

Basic earnings (loss) per share

$          0.14

$        (0.04)

$0.24

$        (0.11)

Diluted earnings (loss) per share

$          0.14

$        (0.04)

$          0.23

$        (0.11)

Other data:

Adjusted EBITDA⁽¹⁾

$      11,100

$        5,984

$      20,294

$        9,408

Adjusted EPS ⁽¹⁾

$          0.33

$          0.12

$          0.58

$          0.09

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)

Three Months

Six Months Ended 

June 30,

June 30,

2021

2020

2021

2020

Revenue by segment ⁽²⁾:

North America

$   82,999

$   72,913

$ 155,328

$ 157,849

Europe Middle East Africa

31,831

23,680

61,804

55,578

Emerging Markets

13,952

9,551

26,201

20,998

Total revenue                                                  

$ 128,782

$ 106,144

$ 243,333

$ 234,425

Gross profit by segment ⁽²⁾:

North America

$   16,676

$  13,527

$   31,169

$   26,585

Europe Middle East Africa

4,993

1,393

10,043

5,169

Emerging Markets

2,159

977

4,057

1,757

Total gross profit                                            

$   23,828

$  15,897

$   45,269

$   33,511

Supplemental Cash Flow Information:

Net cash provided by (used in) operating activities

$    (3,935)

$  22,918

$    (3,371)

$   32,765

Capital expenditures  

(554)

(579)

(1,009)

(1,046)

     Free cash in (out) flow

$    (4,489)

$  22,339

$    (4,380)

$   31,719

(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. Effective January 1, 2021 as a result of change in management, we transferred one of our businesses from our North America segment to our EMEA segment. In addition, we realigned some of our business between our OPS and TPS solutions to more accurately align with their focus industries. 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)

Three Months

Six Months Ended 

June 30,

June 30,

2021

2020

2021

2020

Net income (loss)

$     2,479

$       (606)

$    4,203

$    (1,900)

Interest expense

197

607

378

1,585

Income tax expense (benefit)

812

(1,185)

1,253

(1,814)

Depreciation and amortization

1,487

2,077

2,959

4,254

EBITDA

4,975

893

8,793

2,125

Adjustments:

Non-cash stock compensation expense

1,620

1,536

3,287

2,792

Restructuring charges

1,763

855

2,462

855

Severance expense

585

2,354

1,124

2,565

Loss on change in fair value of contingent consideration

—

—

269

—

Foreign currency transaction losses

372

346

1,621

842

Legal acquisition/divestiture and transaction

1,408

—

2,258

1,038

Impairment of operating lease right-of-use asset

—

—

103

255

Loss (gain) on sale of business

377

—

377

Adjusted EBITDA

$ 11,100

$     5,984

$  20,294

$     9,408

(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 restructuring charges, severance expense, loss on change in fair value of contingent consideration, foreign currency transaction losses, legal acquisition/divestiture 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)

Three Months

Six Months Ended 

June 30,

June 30,

2021

2020

2021

2020

Diluted earnings (loss) per share

$       0.14

$      (0.04)

$       0.23

$      (0.11)

Restructuring charges

0.07

0.04

0.10

0.04

Severance expense

0.02

0.10

0.05

0.11

Loss on change in fair value of contingent consideration

—

—

0.01

—

Foreign currency transaction losses

0.02

0.01

0.07

0.03

Legal acquisition/divestiture and transaction costs

0.06

—

0.10

0.04

Impairment of operating lease right-of-use asset

—

—

—

0.01

Settlement of contingent consideration in shares

—

0.01

—

0.01

Loss (gain) on sale of business

0.02

—

0.02

(0.04)

Adjusted EPS

$       0.33

$       0.12

$       0.58

$       0.09

(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

(In thousands)

June 30, 
2021

December 31,
2020

Current assets:

Cash

$               15,460

$               23,076

Accounts and other receivables

100,494

110,575

Unbilled revenue

38,254

28,100

Prepaid expenses and other current assets

22,537

15,186

Assets held for sale

40,875

42,463

Total current assets

217,620

219,400

Property, plant and equipment, net

3,880

4,650

Operating lease right-of-use assets

17,752

20,862

Goodwill and intangible assets, net

125,124

126,245

Other assets

9,012

10,619

Total assets

$             373,388

$             381,776

Current liabilities:

Accounts payable and accrued expenses

$               83,583

$               91,572

Current portion of operating lease liabilities

5,382

5,523

Deferred revenue

16,511

16,509

Liabilities held for sale

4,823

5,868

Total current liabilities

110,299

119,472

Long-term debt

8,995

12,748

Long-term portion of operating lease liabilities

13,878

16,260

Other liabilities

9,386

9,950

Total liabilities

142,558

158,430

Total stockholders' equity

230,830

223,346

Total liabilities and stockholders' equity

$             373,388

$             381,776