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
   contingent consideration, net

(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
   contingent consideration, net

(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
   billings on uncompleted contracts

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
   earnings on uncompleted contracts

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.

GP Strategies Corporation logo.

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SOURCE GP Strategies

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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