GP Strategies Reports Third Quarter 2014 Financial Results

COLUMBIA, Md., Oct. 30, 2014 /PRNewswire/ — Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended September 30, 2014.

Overview of Third Quarter 2014 Results:

  • Revenue of $123.9 million for third quarter of 2014 compared to $113.2 million for third quarter of 2013
  • Diluted earnings per share of $0.37 for third quarter of 2014  compared to $0.32 per share for third quarter of 2013
  • EBITDA of $13.8 million for third quarter of 2014 compared to $12.6 million for third quarter of 2013
  • Completed modified “Dutch auction” tender offer on October 3, 2014 and repurchased 2.1 million shares, or 11%, of outstanding common stock for $61.7 million

The Company’s revenue increased $10.7 million or 9.4% during the third quarter of 2014 compared to the third quarter of 2013. The revenue growth is primarily attributable to strong organic growth in the Learning Solutions segment due to new outsourcing contracts. Gross profit was $22.5 million, or 18.2% of revenue, for the third quarter of 2014 compared to $20.1 million, or 17.7% of revenue, for the third quarter of 2013. SG&A expense increased $2.0 million or 20.4% during the third quarter of 2014 largely due to increased costs associated with the Company’s global expansion to support recent outsourcing contracts. Net income was $7.2 million, or $0.37 per diluted share, for the third quarter of 2014 compared to $6.1 million, or $0.32 per diluted share, for the third quarter of 2013.

“In the third quarter of 2014, GP Strategies continued on its path of organic revenue and EBITDA growth,” commented Scott N. Greenberg, Chief Executive Officer of GP Strategies. “We accomplished these improved results while continuing to invest in expanding our infrastructure to support global initiatives. In addition, our successful Dutch auction tender offer, in which we repurchased 2.1 million of our outstanding common shares for $61.7 million, is expected to be accretive to earnings per share for our shareholders in future quarters.”

Balance Sheet and Cash Flow Highlights

As of September 30, 2014, the Company had cash and cash equivalents of $9.1 million compared to $5.6 million as of December 31, 2013. The Company had $4.9 million of short-term borrowings outstanding and $59.3 million of available borrowings under its line of credit as of September 30, 2014. On October 3, 2014, the Company completed a modified “Dutch auction” tender offer in which it repurchased 2.1 million shares of its outstanding common stock for $61.7 million, excluding fees and expenses. To fund the share repurchase, the Company used borrowings under an amended credit agreement which included a $40 million term loan, payable over three years, and additional borrowings under its revolving credit facility.

Cash provided by operating activities was $16.7 million for the nine months ended September 30, 2014 compared to $10.2 million for the same period in 2013.

Investor Call

The Company has scheduled an investor conference call for 10:00 a.m. ET on October 30, 2014. 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 800-750-5861 or 212-231-2911, using conference ID number 21737613. A telephone replay of the call will also be available beginning at 12:00 p.m. on October 30th, until 12:00 p.m. on November 13th. To listen to the replay, dial 800-633-8284 or 402-977-9140, using conference ID number 21737613. 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 this non-GAAP financial measure 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 this non-GAAP financial measure 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
September 30,

Nine months ended
September 30,

2014

2013

2014

2013

Revenue

$123,869

$113,197

$376,667

$319,469

Cost of revenue

101,351

93,136

311,027

264,832

  Gross profit

22,518

20,061

65,640

54,637

Selling, general and administrative expenses

11,863

9,856

34,914

28,825

Gain on change in fair value of
   contingent consideration, net

655

 

135

1,513

 

427

Operating income

11,310

10,340

32,239

26,239

Interest expense

117

90

399

256

Other income (expense)

(72)

4

185

326

   Income before income tax expense

11,121

10,254

32,025

26,309

Income tax expense

3,877

4,111

12,351

9,994

   Net income

$   7,244

$   6,143

$  19,674

$  16,315


Basic weighted average shares outstanding

19,131

19,125

19,138

19,089

Diluted weighted average shares outstanding

19,391

19,404

19,409

19,344


Per common share data:

  Basic earnings per share

$    0.38

$    0.32

$     1.03

$     0.85

  Diluted earnings per share

$    0.37

$    0.32

$     1.01

$     0.84


Other data:
   EBITDA (1)

$   13,764

 

$   12,649

$   39,901

 

$   32,820

(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
September 30,

Nine months ended
September 30,

2014

2013

2014

2013

Revenue by segment:

Learning Solutions

$ 60,811

$ 49,304

$175,748

$137,223

Professional & Technical Services

20,226

19,157

58,925

54,220

Sandy Training & Marketing

15,883

16,929

50,364

52,061

Performance Readiness Solutions

13,315

13,037

40,454

41,491

Energy Services

13,634

14,770

51,176

34,474

Total revenue

$ 123,869

$ 113,197

$376,667

$319,469

Gross profit by segment:

Learning Solutions

$  9,338

$  8,629

$  24,798

$  23,998

Professional & Technical Services

4,207

3,229

11,641

9,194

Sandy Training & Marketing

2,519

2,433

7,727

7,295

Performance Readiness Solutions

2,640

2,031

6,695

5,521

Energy Services

3,814

3,739

14,779

8,629

Total gross profit

$  22,518

$  20,061

$ 65,640

$ 54,637

Operating income by segment:

Learning Solutions

$  3,045

$  4,120

$  7,356

$  10,886

Professional & Technical Services

2,383

1,530

6,384

4,335

Sandy Training & Marketing

1,023

975

3,204

2,797

Performance Readiness Solutions

1,354

907

2,953

1,802

Energy Services

2,850

2,673

10,829

5,992

Gain on change in fair value of
   contingent consideration, net

655

 

135

1,513

 

427

Total operating income

$  11,310

$  10,340

$  32,239

$  26,239

Supplemental Cash Flow Information:

Net cash provided by operating activities

$  18,581

$  4,770

$  16,664

$  10,249

Capital expenditures

(871)

(2,447)

(2,315)

(4,608)

Free cash flow

$  17,710

$  2,323

$  14,349

$   5,641

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Non-GAAP Reconciliation – EBITDA (2)

(In thousands)

(Unaudited)

Quarters ended
September 30,

Nine months ended
September 30,

2014

2013

2014

2013

Net income

$  7,244

$  6,143

$ 19,674

$ 16,315

Interest expense

117

90

399

256

Income tax expense (3)

3,877

4,111

12,351

9,994

Depreciation and amortization

2,526

2,305

7,477

6,255

EBITDA

$  13,764

$  12,649

$ 39,901

$ 32,820

(2)

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.

(3)

Income tax expense for the third quarter of 2014 includes a $0.6 million income tax benefit resulting from a claim for a deduction under Internal Revenue Code Section 199 for the Domestic Production Deduction on the Company’s 2013 U.S. federal income tax return which was not taken in previous years. The Company is currently evaluating whether a deduction is available for prior years in which the statute of limitations is open and may recognize an income tax benefit in future periods.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

September 30,

December 31,

2014

2013

(Unaudited)

Current assets:

   Cash and cash equivalents

$       9,118

$        5,647

   Accounts and other receivables

89,064

94,662

   Costs and estimated earnings in excess of
      billings on uncompleted contracts

38,425

 

22,706

   Prepaid expenses and other current assets

16,313

13,523

      Total current assets

152,920

136,538

Property, plant and equipment, net

8,403

9,231

Goodwill and other intangibles, net

139,675

132,116

Other assets

1,686

2,271

      Total assets

$ 302,684

$   280,156

Current liabilities:

   Short-term borrowings

$       4,880

$          407

Accounts payable and accrued expenses

55,881

55,339

   Billings in excess of costs and estimated
      earnings on uncompleted contracts    

18,931

 

22,062

      Total current liabilities

79,692

77,808

Other noncurrent liabilities

12,640

9,321

      Total liabilities

92,332

87,129

Total stockholders’ equity

210,352

193,027

      Total liabilities and stockholders’ equity

$ 302,684

$   280,156

© 2014 GP Strategies Corporation. All rights reserved. GP Strategies and the GP Strategies logo design are trademarks of GP Strategies Corporation.

SOURCE GP Strategies Corporation

For further information: Scott N. Greenberg, Chief Executive Officer, 443-367-9640; Sharon Esposito-Mayer, Chief Financial Officer, 443-367-9636; Ann M. Blank, Investor Relations, 443-367-9925

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