Q1 2020 Earnings Call
Good morning, and welcome to the GP strategies first quarter 2020 earnings conference call.
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At this time I'd like to turn the conference call ever to and Black Vice President of Investor Relations Ma'am. Please go ahead.
Thank you good morning, everyone and welcome to GP strategies first quarter 2020 earnings call.
On the call today, our Scott Greenberg Chief Executive Officer.
Adam Adam President and Mike do again, Chief Financial Officer.
Before we begin I would like to remind you that today's comments will include forward looking statements, including statements about the anticipated effects of the coded 19 pandemic unrelated events on our business and results of operations.
Because these forward looking statements are based on management's expectations and assumptions and are subject to risks and uncertainties are important factors that could cause our actual results could be materially different from those expressed or implied by these forward looking statement.
For a complete discussion up these risks we encourage you to read our documents on file with the FCC, which are posted on the investor section of our website, a GP strategies dot com.
A replay of this webcast will be available on our website for 90 days following today's call.
It's a better being presented today are also available on the quarterly earnings releases page of the Investor section of our website.
At this time I'd like to turn the call over to our CEO Scott Greenberg.
Okay. Thank you and good morning, and welcome to our first quarter 2020 earnings Conference call. Today, We will continue to use our regular quarterly format, which will include a webex presentation.
That being said our team is that separate locations today for this presentation.
Hopefully you'll find this information a formidable and useful in your analysis of GP strategies to initiate a call. All I'll provide a brief overview of results for the first quarter focusing on free cash flow and liquidity Dann Adams President will get key updates on our global initiatives and the impact could cope at night.
Team after Adams presentation, Oh, CFO, Mike do good will present, the summary financial now since then I'll provide a recap followed by your Q1 eight session.
During the first quarter, we addressed a challenge of cold at night team by supporting our customers protecting our workforce generating free cash flow, reducing leverage and lowering expenses, we have implemented policies and procedures to maximize formats, while maintaining and promoting safety in the work.
Place the company reduced its debt to approximately 74.8 million at March 31st 2020 from 82.9 million at December 31, 2019, and from approximately 116.6 million at March 31st 2019.
In addition, the company had words reduced costs in all areas as it deals with the ongoing impact a reduced revenue with further reductions in the second quarter, we are prioritized maintaining liquidity and supporting our customer base. During these trials times a positive attribute of our company.
As our recurring revenue stream, resulting in a strong backlog. In addition, we currently have approximately 125 of the global 500 companies as customers as a leader of custom E learning content development and virtual training. We believe we are well positioned for long term growth in our industry.
I'll now turn the call over that.
Thank you Scott.
Like finish Mike's going to provide detailed financials for the first quarter.
I'd like to provide a better understanding of the company's current situation relative to cope with 19.
Because of the global scale and pace of the impacts of covert 19, we had difficulty forecasting the impact on our business in Q1.
We entered 2020 with strong momentum and this position the company to weather the Kobin storm with strong client relationships highly capable salesforce in operations team and a fully capable business continuity plan and processes looking forward. These strengths combined with our.
Improved balance sheet, giving me confidence in our business now we expect our revenues to decline in the second quarter compared to the first quarter, but due to significant cost scaling and cost cutting measures beginning in March 2020, we expect second quarter 2020, adjusted EBITDA to be considered.
With or greater than Q1 of 2020.
In addition, unless the existing walk down to remain in place longer then as expected orders or turn to Lockdowns due to the covert 19 virus. We anticipate the second half of 2020 will outperform the first half 2020.
No we've experienced a significant reduction to our face to face training deliveries.
But other portions of the business remains strong in our growing.
One key aspect to consider regarding our face to face training business is our ability to scale, but there's pent up or down as classes canceled due to a situation like covert 19, and our revenues drop we can reduce the labor cost associated with those deliveries there. So.
Delay between cancellations and labor cost reduction, but we can react in a timely manner in a very few countries legal requirements have limited our ability to respond quickly, but these countries represent a very small portion of GPS revenues cost and profits.
Yeah, It would training delivery.
No I mentioned that some aspects of our business are experiencing an upturn our content development business, where approximately 17% of GPS workforce work is up double digits from 29 team.
This award winning custom content development organization is one of the largest and most copel capable and the entire industry.
The team is very well positioned to benefit from any growth trends in the custom E learning marketplace.
Gee page UK apprenticeship services revenue in Q1 2020 exceeded the revenue delivered in the same period last year.
This year over year trend is expected to continue into Q2.
Now we believe that we have significant opportunities within the apprenticeship program due to circumstances related to the covert virus, especially the increased unemployment in the UK.
Regardless of the current situation large companies continue to pay the apprenticeship levy and a crew training carbon credits with the government.
Going forward when these companies need to train their staff, there will be able to preserve cash and avoid income statement expense by utilizing their levy vouchers to pay for apprenticeship related training in lieu of external trainings bed.
Overtime. These companies may build back up their head count in a more cost effective apprenticeship may enter.
Now in addition to the corporate Levy apprenticeship business GP non led the apprenticeship business has a strong concentration in the care sector. The UK government has put new measures in place due to co bid. These measures are intended to drive recruitment in the care industry and as a result, we expect to benefit.
From an increase in apprenticeships and this area and the need to Upskill this new workforce by providing mandatory training.
Other parts of our business or maintaining their positions.
GPS human capital team is currently maintaining revenues only slightly below 2019, and most of their work does not require face to face contact.
As for our outsourcing business, although clients have cancelled face to face training due to covert 19. The business is not lost a single outsourcing clients since the crisis began.
We have multiyear contracts with our outsourcing clients the comedy fluctuations in demand and allow us to scale up and scale down as required we expect those contract your remain in place during the covert 19 situation and may provide opportunities for future.
Growth after the coded 19 situation.
We're actively working with these clients to convert their alive instructor led training that they historically it used to other modalities such as E learning and virtual instructor led training.
Now during 2019, the automotive sector delivered revenue growth that exceeded GPS overall organic growth rate.
This year and the automotive industry is facing significant challenges and that's impacting GP strategies. During the second half of Q1 and Q2 for 2020.
Going forward, our automotive team is well positioned to enable our clients successful digital for digital transformation, sorry about that as they reach all their retail model.
And our Q4 earnings call, we announced a multi year several million dollar per year outsourcing contract with an automotive client.
This outsourcing is specifically targeted at enabling dealerships digital transformations and demonstrates the type of services GP can offer the automotive industry as it rebounds from coated 19.
This outsourcing engagement is on track to begin next month and we remain confident in the long term growth opportunities for GP strategies within the global automotive industry.
[laughter] overall Q1 2020 backlog is up slightly from Q1 2019, our sales pipeline at the end of Q1 2020 is down less than 10% from Q1 2019.
So obviously the current kobin situation is impacting GP strategies as well as our clients.
With that said, we're a leading provider of digital transformation in custom E learning services and our outsourcing clients continue to benefit from our business continuity processes and procedures.
Types such as these strengthen the relationship between GP and key clients as we helped any all the way they operate their learning.
We remain confident our ability to execute to the current market environment and grow the business over the long term.
Now I'll turn the call over to Mike and he'll provide more detailed financial review for the first quarter.
Thanks, Adam and good morning, everyone.
Starting with revenue and gross profit on slide eight.
We reported Q1 revenue of 128.3 million, which was down 11.2 million or 8% from the 139.5 million a revenue reported in Q1 of last year.
Breaking the revenue drivers out by segment.
The workforce excellent segment reported Q1 revenue of 74.4 million, which was down 7.1 million or 8.7% from 81.5 million a revenue reported in Q1 of last year.
Within this segment the MLS practice contributed a net decrease of 1.9 million, primarily due to a 5.6 million decrease related to cobot 19 business disruptions and a 1.4 million decrease related to the tuition business that was divested October onest for 2019.
Partially offsetting these decreases in the MLS practice was a 2.2 million increase and E learning and virtual instructor led training content development services and a 2.9 million increase primarily due to new outsourcing contracts awarded in 2019 that are now fully ramped up.
He asked practice experienced a net.
4.8 million decrease in revenue, primarily due to a 2.3 million decrease related to cope at 19 business disruptions.
And a 2.5 million decrease related to the LNG business that was divested on January Onest 2020.
Within this segment there was a point 4 million decrease in revenue due to changes in foreign currency exchange rates.
The business transformation services segment reported Q1 revenue of 53.9 billion, which was down 4.1 billion or 7.1% from the 58 million up revenue reported in Q1 at night team.
Within this segment sales enablement practice contributed a net decrease in revenue of 3 million, primarily due to a 2.7 million decrease related to cobot 19 business disruptions and they point Threemillion decrease primarily in automotive sales training services.
The organizational development practice contributor net decrease in revenue of 8.8 million.
Primarily due to a point $9 million decrease related to cobot 19 business disruptions and a 1.6 million decrease and other OTI services, primarily street strategic consulting services.
Partially offsetting these decreases within though D. What the 1.7 million increase in UK apprenticeship training services.
Within this segment there was a point 2 million decrease in revenue due to changes it changes in foreign currency exchange rates.
Publication revenue in the sales enablement practice in Q1 up 25 million, which is consistent with the 5 million a pub revenue recorded in Q1 of 19.
For 2020, the publication revenue is now forecasted to be down by approximately $8 million in revenue compared to the it to 2019 as to what the five schedule publications in the year had been canceled as a result of Cobra disruption and replace with digital versions the projected publication revenue by quarter through the.
Ended the year is as follows Q2 4.5 million Q3 1.8 million in Q4 5 million.
In terms of gross profit we reported Q1 gross profit of 17.6 million, which is down 3.7 billion or 17.2% from the 21.3 million gross profit reported in Q1 of 19.
Gross profit for both reporting segments is down quarter over quarter, primarily due to the revenue declines related to the cobot 19 disruption.
For some additional color on the margin percent decline in Q1.
Early on in the quarter as our clients were notifying us that they were canceling or delaying services in short time period increments like two or three weeks, our position was to maintain the resources and the capacity to support our clients once they asked us to resume service delivery.
Then as the situation evolved and it became clear that this would be a longer and more drawn out disruption starting in mid March we implemented more aggressive aggressive cost scaling and cost cutting measures. While these cost cutting measures did not have much positive impact on Q1 margins, we expect that they will help to preserve gross margins.
The operating income for Q2 and beyond.
We continue to monitor the ever changing landscape and our objective is to take the necessary steps to preserve gross margin percent present to the extent possible. During this period of depressed revenue due to global global Cobot 19. This restrictions.
Moving on to ask DNA expenses on slide nine.
General and administrative expenses for Q1 are up 1.2 million or 7.2% from the 16.1 billion in Q1 of 19.
Primary drivers are a 1 million dollar increase in legal and other transaction fees related to a potential transaction that was a bordered in March of 2020.
And 8.2 million increased primarily due to higher <unk> expenses in Q1 of 2020 compared to first quarter 19.
Sales and marketing expenses for Q1 of 2020 is down <unk> point 2 million, primarily due to lower labor costs.
Moving on to other items on slide 10 and to touch upon just a few.
We reported a 1.1 million pre tax gain on sale of our alternative fuels business income recorded was net of direct selling costs associated with the deal and was after adjusting for the carrying value of the business, which primarily included net working capital and goodwill.
Interest expense in the quarter is down <unk> point Sixmillion from Q1 last year do it due to lower borrowings in interest rates under the credit facility.
And other expenses include they point $3 million impairment charge on an operating lease asset due to consolidation a two facilities and a point 2 million dollar increase in noncash foreign exchange transaction losses in Q1 2020 versus Q1 of 19.
Moving onto the earnings summary on slide 11.
After adjusting for special items, we reported.
Adjusted loss per share for Q1 of three cents versus earnings of 16 cents per share for Q1 of last year. Adjusted EBITDA for Q1 was 3.4 million, which is down from the 8.8 million of adjusted EBITDA reported in Q1 last year.
As we look forward, we expect cobot 19 could negatively impact our revenues more significantly in the second quarter 2020, as compared to the first quarter 2020. However, as mentioned previously due to significant cost scaling and cost cutting measures enacted in mid March of 2020, we expect second quarter 2020 adjusted.
EBITDA to be consistent with or greater than the first quarter of 2020.
For details on adjusted EPS and adjusted EBITDA, you can refer to the dependencies at the end of this presentation.
Moving onto some balance sheet highlights on slide 12.
Operating cash flow for Q1 was 9.8 million.
Or is down 27.7 million from year end 2019, primarily due to lower revenue and continued improvements in collections.
Net debt was 65.8 million as of Threethirty, 120, which as a reduction of 8.9 million from a 74.7 billion reported for the 12 31 19 as a 511, our net debt debt has continued this downward trend.
The company's leverage ratio as defined under our credit facility as of Q1 2020, What's 2.3, which is consistent with Q4 2019 leverage ratio and as a full turn lower than a 3.3 leverage ratio reported just six months ago at the end of Q3 2019.
Lastly, the company disclosed in our 10-Q filing that on May 7th 2020 in partnership with our banks, we have amended our credit facility to provide additional liquidity should we need it through the ended the year.
This comes in the form of an increase in the maximum leverage allowed during this time period under the compliance terms of the existing credit facility are available borrowings as of Q1 2020 was 22.3 million.
With this amendment are available borrowings while we currently are not expected to reach these levels.
Would increase by 24.3 million to 46.6 million.
Finally, turning to backlog on page 13.
Backlog as of Q1, 2020 was 341.2 million, which is up 6.5 million or 1.9% compared to the $334.7 billion backlog that was recorded for Q1 of 19.
After removing the 2019 backlog related to the divested tuition and LNG fuels businesses to increase in backlog is approximately 20.7 million or 6.5%.
This concludes the financial update I'll now turn the call back to Scott.
Thank you Mike.
As you heard today, we've had a common theme.
And the common theme was the company was very proactive dealing with Coca 19.
Focusing on a highly variable cost structure.
And on the balance sheet liquidity side, not only protecting our liquidity, but improving on it. We believe that this will provide long term opportunities after the impact of co with 19.
Lessons, so we're very optimistic and the long term outlook.
With that being said I will turn it over to the QNX session moderator.
Ladies and gentlemen at this time will begin the question answer session.
To ask a question you May press Star then one using a touched on telecom. So it's all your questions you May press star into.
If you are using a speaker phone and would you asked me please pick up the handset before pressing the numbers to ensure the best sound quality.
Once again that is star and then one to ask a question.
We will pause momentarily to assemble the roster.
Our first question today comes from Jeff Martin from Roth Capital. Please go ahead with your question.
Thanks, Good morning, guys mining, Jeff I hope, you're saying doing their families will be in your families are well. Thank you seem to you.
Wanted to get a sense of what is the revenue base in person or instructor led training and.
Has that.
Each to stable stabilization point, and if so kind of where is that level.
Well a lot of our revenue does face to face as blended in different areas. So we have an estimate on that Jeff our estimate of total face to face.
Training is approximately 25% to 30% of our overall revenue in 2019 I'm looking at all our results that is the area that was hit the most most of Q1 and that's the area why we're projecting the downturn.
In Q2, as well that that we discussed.
Adam would you like to add anything to that.
No I think in particular are our face to face our face to face business consist of two components. One its database you go to customer locations and you work with clients, we're actually seeing some that in various areas coming back different part.
To the world at different paces, and then you have where you're pulling together a group of people tend to live or a class with a group of people that portion of the business, we're not seeing a resurgence yet, but I would point out a lot of that business.
It's tied to compliance related learning and so we are working with clients right now around identifying other modalities to deliver that learning to their employees because the compliance deadlines are not shifting and they have to come up with alternative solutions to train there.
Our employees.
Okay, and then kind of tied to that was a question in terms as.
What percentage do you foresee.
Converting to virtual any learning out of that 25% to 30% of base that based fee.
Adam.
Well I. So I don't think we can we can determine that right now I think the appetite for phase that then the final appetite for face to face versus virtual instructor led everybody's trying to figure that out we're having a tremendous amount of success right now.
Now with helping clients develop their best practices for virtual instructor led training and were seeing significant ramp up in the virtual instructor led training.
As we see a ramp down and alive instructor led.
But we don't really have a feel for aware that ultimately is going to balance out.
Okay, and then a lot of companies are giving a a look at April trends do you have that information that can you discuss what what the revenue trajectory has been in April.
Mike.
Well, yeah, so we're not able to provide or not providing specifics on the guidance or looking for what we what we discussed as we do expect a more significant decline in revenue up in Q2.
Compared to Q1, you heard Scott discussed at about 20 somewhere between 25 in 30% of our business is is the per in person or face to face interaction and I would say that Q2 is is you know based on what happened globally is going to be the most significant.
Shutdown period were.
I had the most significant impact so those are the factors that we can we can discuss at this time, but we don't have specifics on what what's April results or or specifically what is our or what is a specific projection for Q for Q2.
But to add to that job you know we did say is that we have a very variable cost base business.
And because of that even with reductions of revenue were projecting for the whole corridor that the Q2 profit or adjusted EBITDA will be at or above the first quarter levels. So I think one of the positive elements of the company.
As we do have the ability to adjust variable costs in the downturn and then when it starts ramping up we could ramp up quickly the other way as well.
You go back and this is a while ago, but if you go back to 2000 and on a on the company with the downturn in the automotive and what happened in the World was able to maintain is gross margin percentage on a variable basis and that had a significant ramp up in the following years. So.
It out that's been the type of model the company has on their stressful situations.
The other thing I would add since you asked specifically about April this is Adam.
So.
Probably saw a wide scale cancellations unfair for face to face we are sitting here. The middle of May. So we had seen returns in may of some of those we have also converted face to face instructor led diverge on instructor led Thats now scheduled that's running.
In may.
Based upon the current schedule, assuming that things continue on the current track it looks like more will be scheduled in June so based upon the insights that we have right. Now April is the lowest month may we're seeing an improvement from there and everything that were.
Seeing as of right now indicates June would be an improvement from may onset may with it looks to be the bottom out month for us.
That's helpful. Thank you I'll circle back in Q.
Okay. Thank you Jeff.
Once again, if you would like to ask your question. Please press Star and then one.
Our next question comes from Zach Cummins from B. Riley FBR. Please go ahead with your question.
Hi, Good morning, everyone. Thanks for taking my question.
I guess just building on this that it seems like Jeff I saw that same questions, but in terms of the areas on the base base business that were most impacted by coated 19.
Can you take a little bit of a deeper dive in terms of what sectors were most impacted here and then how many of these engagements have been canceled versus maybe some just being pushed out later date.
What I can answer that okay.
So it so so thanks for the questions that as we said.
Hi, Joe alluded to earlier on.
Automotive is is a very strong industry for us and and outside of travel and leisure. There are few industries that have been hit harder than automotive during this so.
By far in automotive has been the hardest hit for us.
If you look at our government business. It's intact. If you look at our defense and aerospace business actually you know doing well you know we're happy with that there's some impact on financial services. Some impact on life Sciences, but really automotive is where were seeing.
During the most significant impact to our business.
And and with that said and now we're actively working with them. The great thing about our business on the automotive side is that's probably where we have the longest deepens relationships. So as they recover from this we're positioned to recover with them and as Scott mentioned early.
And I would.
Mind every one of GPS automotive concentration hearing you know 2008 2009 in as some of the largest automotive companies in the world file bankruptcy and and GP. You know continued through that and our automotive business grew significantly after that but that.
Well were taken the biggest hit.
And if I could just add to that exactly as part of your question.
When you look at the revenue stream, we've developed a lot of it as sales training in the financial services, we do initiatives, we do regulatory a government compliance. So that's why I believe that when you're looking at all backlog.
Backlog has been pushed back right. So the services that we developed a long term services continue to be they're just being delayed currently and that's and again, that's why I believe our backlog were so strong at the end of Q1, despite the revenue declined.
Got it got to that's that's helpful and Adam I know you mentioned, you're actively trying and transition some of these faced a base cheney engagements to more of a virtual format.
I was just curious of the clients a willingness to do this versus just waiting for a later date to reschedule that training I know you mentioned there was some compliance deadlines that need to be.
He knows that that's a great question and actually it's interesting when I talk about some of the things that we think are positive trends for us. So we've actually been a very significant proponent of virtual instructor led training for a number of years and and typically the biggest impediment.
And to that type of of modality is not the technology itself, it's the appetite as the customer in the willingness for change well the situation like Cobot 19, obviously has significantly increased everyone's appetite for change and willingness to try new things.
So we're actually seeing quite a bit of adoption and the conversion of alive.
I am life instructor led training to virtual instructor led training is not a negative for GP strategies and our business outlook because once again, whether we're flying somewhere two to teacher class forward teaching it virtually it.
Secondly, the same revenue for us and actually we are able to have better instructor utilization. If we're not wasting time flying people around to teach classes. If we can do it virtually our Chad eliminate the travel time, so I would say that historically, there's been reluctance to change and.
We're very optimistic and upbeat around the adoption of that change and where we don't know where it's going to go but it could potentially be very positive for us.
That's helpful. And then a final question for me I mean options on the balance sheet, who as impressive and the latest <unk> and I guess the environment are they going to Q1 to actually see improvements on the balance sheet. I know you expanded your borrowing capacity within the line of credit, but do you believe there theres going to be a need to draw down upon that in here.
In the coming quarters or how are you thinking about the balance sheet is as we move forward.
Well, so far I'm Zach for Q2, we continue being cash flow positive are generating free cash flow.
So I I think you know what we have this flexibility.
You know, we we have always been a strong flow strong cash flow generator, especially in these times when you look at our company itself.
We are very small capital appropriations and very small deferrals sung does not a lot of investments fixed assets at the company.
Basically the services, we do or paid for by our customers and not per pad. So we do have the flexibility from the bank, but hopefully you know is something we won't have to need.
Understood. Thank you for taking my questions in a best of luck as you move forward here in Q2.
Thank you Sir.
[noise] and our next question is a follow up from Jeff Martin. Please go ahead with your question.
Thank you want me to to get a sense of up your observation score.
Ah returned to work various parts of the World I mean, everyone has different.
Approaches but.
Some of your international markets are probably starting to come back and just wanted to get a sense of what you're what you're seeing in observing in terms of how that impacts the business.
Adam.
Yeah. So so we were we were hit and early on because in China as other companies who are in China are were actually starting to see things recover a little bit there were starting to see some business reschedule in China in the.
Okay.
Hello, I I think we just lost Adam.
I'm just kind of checking pump. This is the conference operator.
And can you hear me this is Scott.
Yes, we can.
Okay. So so let me go on with with Adam's question first off I I exact I just wanted to expand on one thing that we didn't discuss regarding liquidity. One other things that we do have is that we got to defer certain tax payments FICA taxes.
Those under the new U.S. Oh rules. So basically that is approximately $2 million a quarter cat would start in Q2, where the first payment is made to 2000 late 2021. So we do get some benefit from that and started and tax.
Benefits in the UK, and deferrals, which will increase our our our cash flow as well and the upcoming quarters.
Going back I got this is Adam on back I don't know what happened I was drops on back on I I. When you finish I'll go ahead and finish answering and let you answer now that there was no I did not I I went back to liquidity for a second Adam. So you could go back to your answer.
Okay.
So the UK business. The UK business has not started to come back. The parts that were cancelled has not started to come back as much I don't know of everyone realizes that the UK just extended its berlow scheme that this morning.
So a lot of or a lot of our clients are looking at the the for the government furlough plan and employee training and balancing that together, they're also trying to figure out the impact of the for other people being on furlough versus compliance training and so we're working with.
Them on that and then in the U.S. actually.
I said the automotive industry has been the hardest hit where activity, we're seeing things start to come back in may.
We believe may will be more active in April and then the current schedule shows June will be more so than may so the U.S., where we've seen the big automotive downturn April was the lowest then may and June will be the best for the quarter.
The today, Okay, sorry, I'm not sure what happened when I dropped their sorry for the disconnect but did I answer your question.
Yes. That's helpful. Thank I was just looking for some perspective on the reopening and what your observation, but then I mean, it's early in the U.S., but other parts of the world starting to so that helps thank you for that and then wanted to get a sense of.
So unemployment reaches 20 plus percent how does that impact.
Revenue you paid on a on a per head basis in a lot of these contracts and and you know you don't have to quantify that qualitatively looking for some commentary so what I can say it's historically.
That the unemployment and the amount of training doesn't necessarily correlate exactly in the reason is because let's let's say you have to train 20 people and then you let go of 20% of them, which increases your on increases unemployment by 20%.
But you still have to train 16 people. It's just the training is going to be held for 16 people instead of 20 and our revenue basis is based upon whether we actually deliver the event or not so whether we deliver the event with 20 people in it or 16 people in it as long as we deliver it then.
The same now that's a gross over simplification of our business, but hopefully that it helps you understand that theres really not the same correlation between unemployment and training deliveries as as you might think.
And inserting Jeff just adding to that in certain cases as well if a workforce is diminished people have to be cross trained they bring in new people in different positions that beat these type of regulatory what different types of training. So sometimes when there is a.
A lessening of the workforce there is actually more of a demand for cross training, which which gives us new opportunities as well.
And final question is around your acquisition strategy and tenants in general.
Outlook in approach I would imagine that as visibility improves and things stabilize fuel.
We'll look to resume that I just was looking for some commentary around there.
Well you know we've made significant acquisitions in 2018, well for us to leverage on our balance sheet during that period the focus right now.
Is the continue integration of them and the improvement over those acquisitions and working on our business model.
We have assembled so are you know while I can't predict.
Long term future right now the shorter term future is not could be acquisitive to continue generating liquidity and that the same time focus on improving all the opportunities that we have.
Makes sense.
Thanks for your time and be well.
Thank you Jeff stay safe.
And our next question comes from Alex Paris from Barrington Research. Please go ahead with your question.
Hi, guys. It does have a couple of.
A follow up questions.
First.
You noted that your face to face business is 25% to 30% of overall revenue and that's been the hardest hit can you break down the rest of the business. Similarly, like what percentages virtual Instructure led or E learning and then other segments of the business.
Yeah, I'll start and then I'll hand, it over to Mike and Adam I think you know a lot of what we do is blended and it's very difficult to give those type of numbers I will say you know if you're looking at our business in total.
I could do a mall by industry.
I'm done the type of services, we typically do but we do about 12% of our revenues with the UK U.S. government about 8% is pharmaceutical is growl I mean, we do everything from from virtual training to vendor management.
So we have a lot of different services.
Our delivered both.
My stand up instructors and is still little bit of virtual as well, but that being said I don't think we have firm.
Figures on that but I could turn it over the out of the see what clarification. He could go.
Yeah.
We don't we don't track it that way, Alex or what I would say as we've looked at our content development and somewhere somewhere in the 15% to 20% of all of our employees are dedicated to content development and so we don't track the revenue.
Based upon the work stream, but that gives you an employee account.
For that side of the business.
Then if you look at our outsourcing business.
And other parts of our business that that the way the outsourcing works, we provide a large amount of their infrastructure. So we have people that are permanently assigned to those jobs into those.
And.
I mean, a very significant part of Scott talked about we 60% of our revenue is multiyear contracts. So a very significant part of that 60% of the revenue that's multiyear contracts is actually where we've taken over the infrastructure. So we have.
A team of people, who goes there and they manage their learning in their development and all of their infrastructure on a daily basis, because that you know a very large percentage of that 60%. It fits in there. So if you look some of that by the way his face to face instructor deliveries, but that's.
More the way we look at it in terms of the multiyear contracts, where we provide the infrastructure versus the us in particular wins that we have to win every single year, which typically is less than 20% of the revenue.
And then Alex. This is this is Mike just to give a little bit more clarity you know the the content development you know whether its E learning content development or virtual instructor led content development those modalities our throughout all of our services that we offer a if you look at just our dedicated con.
Tent development effort, Adam talked about 15% to 20% of our workforce.
It's probably 13% to 15% of our Robin if some of that workforce is outsourced in our lower lower cost areas. So that's the that's the dedicated teams and the dedicated service lines just on content development activities and that and that's where as I mentioned on the call. We're seeing an increase in demand.
Those are those types of services just for the a rough order of magnitude there.
Oh, and Oh excuse me, Alex just to summarize I mean, the reason it's difficult for.
For us is that when we deal with a customer within one customer. We typically would have maybe modalities I'm sort of when you look at a large financial service customers a larger anymore, but you'll be able companies are pretty much every customer in the company. It's a combination.
Of face to face as Adam mentioned.
A managed service outsourcing content development and some areas, we have a higher percentage of one modality as opposed to another but in most customers were dealing with many different modalities service, which we believe is going to give us the opportunity because we've been working with them in many different areas.
Would you say a virtual instructor led training is is.
Bore a profitable or equal in terms of profitability than a divisional structure Luxuriating. Given you don't have the travel costs is that really the only difference.
Well if you.
So it.
The profitability on a day of learning really is probably is relatively the same but the key to driving profitability of a training delivery business is instructor utilization and we as virtual instructor led training scales your ability to drive better.
Our labor utilization for your trainers is theoretically higher which would improve the profitability of the business.
That's real helpful. Thank you.
And then I guess my last question is.
I think you had talked about before in a press release and I recall this from other.
Natural disasters, you have a big.
Emergency or.
Preparedness and readiness business at GP.
It has.
Is there any color you can you give us a that business in this current crisis environment.
So.
Oh go ahead correct Scott.
Well basically if you look at GPC history, Alex we do have their history doing exercise programs preparedness.
Put things like biological event and Pandemics as well.
So we are doing some work we work with the state of Indiana.
We are starting to market I guess typically what happens is off service.
For pass through the future and does exercise programs and educates in that area. So we're hoping that obviously once the initial crisis, we get beyond that and and people and organizations want to prepare.
For the future then that's how we develop on revenue. So we are getting some jobs now, but they are really the impact will occur.
After the fact, when it's become more normalized if you look back and 911.
You know it wasnt until a year afterwards, when people started focusing on preparing case there was a future events that we generated that type of revenue stream.
Yeah, I mean, we had a specific scope of work, we actually did and that the training in the state of Indiana for bird flu pandemic.
Preparedness right. So just Scott's point as people move to the preparedness stays in that we've we've done this type of work and we have different government vehicles in place that would allow us to be contracted just no one's moved to that next phase yet.
Great. Thank you and then I guess, just one last point of clarification.
You said in the press release that you expect the coke colder than 18 to negatively impact revenues more significantly in the second quarter as compared to the first quarter are you talking about a year over year percentage decline a year over year dollar decline or oh, or a sequential decline in dollars versus the Q1.
So so Alex this is Mike so that that was a comparison to Q1 of 2020.
In our reported EBITDA up we expect with the revenue declined and 2020 that would be a further decline compared to Q1 of 2020, and but we do expect with the cost scaling and cost cutting that our EBITDA for Q2 should be consistent with or even improved from.
Q1, just due to the delay you know the late enactment of the cost cutting in mid March of Q1.
So just to be clear you just reported 128 million in Q1 revenue Q2 revenue you expect to be lower than that number lower than 128.
It's get yes, it's going to be that you know a larger impact in net dollar. So we were down $11 million related to Tobey told it impact is going to be said you know significant.
In Q2 more than the $11 million that we were down in Q1.
Gotcha, and then you got brothers, yes, absolutely. Thank you for that and then you did say that you expect the second half revenue Q3 in Q4 revenue to experienced declines as well year over year year over year, yes, but the second half versus first half of 20 improvement in the second half.
Very good thank you for that yes.
And ladies and gentlemen at this time and showing no additional questions I'd like to turn the conference call back over to Mr. Greenberg for any closing remarks.
Thank you hopefully you've found today informative.
GP strategies will continue to work on maximizing liquidity, reducing cost and then reestablish all business model. So thanks, again and everybody should stay safe out there.
Ladies and gentlemen, with that will conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.