Q1 2020 GSE Systems Inc Earnings Call

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I'll now turn the conference over to our hosts Kelly all of that I can be equity group. Thank you. Please go ahead.

Thank you Diego and good afternoon, everyone. Thank you for joining us today.

Before we begin I would like to remind everyone that statements made during the course of this call may be considered forward looking statements within the meaning of section 20, Sevena <unk> Securities Act of 1933 as amended.

And section 20, many of the Securities Act of 1934.

These statements reflect current expectations concerning future events and resolved.

Words, such as I expect intends believes may will should it could anticipate and similar expressions are words that are used to identify forward looking statements, but they're absence does not mean a statement is not forward looking.

Statements are not guarantees of future performance center subject to risks and uncertainties. Another important factors that could cause actual performance or achievements to be materially different from those projected.

For full discussion of these risks and uncertainties in factors you're encouraged to read yes. These documents on file with the U.S. Securities and Exchange Commission.

Well you know set forth in periodic reports filed under the forward looking statements and risk factor section.

Do you see does not intend to update or revise any forward looking statements whether it was all the new information future events or otherwise.

On this call a management may refer to EBITDA adjusted EBITDA adjusted net income and adjusted EPS, which are not measure the financial performance under generally accepted accounting principles for gap management believes that these non-GAAP figures. In addition to other GAAP measures provide meaningful supplemental information regarding the companys operational performance.

This information facilitates management's internal comparisons to the G.S. These historical operating results as well as those operating results of its competitors.

Since management finds these measures useful Jesse believes that investors may benefit by valley in both.

Non-GAAP and GAAP results.

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Aired in accordance with gap.

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She of FCC it can be found in the company's earnings release.

I'd now like to turn the call over to Mr., Kyle Loudermilk, a cheap chief Executive officer of Jesse caught up. Please go ahead.

Thank you call it I'd like to welcome everyone to G.S. He is first quarter 20, <unk> financial results Conference call. Joining me on today's call is Emmett Pepe, our Chief Financial Officer.

Earlier today, we issued a press release coming into first quarter financial results hopefully you've had a chance to review this news release, but that's not the copies can be found on our website at www Dot G.S. E <unk> dot com under the news section.

Due to the reporting delays, we experienced since the onset of the cobot 19 pathogenic remarks today will be limited substantially Jesse's first quarter financial results will not.

Before discussing specific details related to the second quarter until those research results have been finalized, which we anticipate dissipate occurring next month as we get back on track with our regular financial reporting cycle.

Our first quarter revenue of 17.7 million adjusted EBITDA negative point Sixmillion came in below our expectations, primarily due to the timing of driving recognition for certain projects as well as industrywide delays in or keeping processors and new business Awards.

Given the impact of couldn't like Jim.

In general as an essential services provider to a critical industry.

That's a self serving the nuclear power industry is continuing at a place are working effectively.

We're seeing customer behavior shifts still anymore, there can be delayed and limiting their use of staff augmentation house, they wish to keep onsite employees to a bare minimum.

Yes, we are seeing an impact on our business as a result at the parent dock.

The type of services, we provide to the industry are essential for operational safety and efficiency as a result, and we've seen this before in times of crisis. This work can only be delayed for a limited period of time, thus, we expect the purchasing behavior well ramp back up although we kept estimate as to when given the continuing pandemic I'll speak.

Part of this a mobile.

Despite these challenges in the first quarter, we generated strong cash flow from operations totaling 1.6 million and we paid down approximately 5.2 million up our long term debt.

At quarter end or total debt was 16.8 billion or cost position was 11.4 million.

Our total debt consisted of 13.3 million up long term debt at 3.5 million draw on a line of credit which was taken as a precaution related to uncertainty due to the coded pandemic.

We intend to pay down our debt aggressively and expect to be able to refinance our remaining debt by your reps.

On another bright note, our new orders starting the first quarter increased approximately 36% year over year to 19.6 million exceeding our internal plans notwithstanding challenges created by the code at 19 pent up back.

You know performance solutions like that well, there's totaled 5.3 million up to 4.6 million in the prior year quarter.

We want to study slow fundamental meat and potato business as we continue to provide essential services to a critical industry in a period of time was between large fullscope. Some other projects. This is good news and the validation of body Central services that we provide the industry.

In the first quarter, we entered into a strategic collaboration with Abbvie Bally, Japan School by thermal simulation services and technology to the Japanese power market.

Together, we will develop high fidelity operation training, some others combined with $80 industry, leading disturbing control systems for the Japanese fossil market.

We're very excited about the long term potential this partnership.

In our nuclear industry training consulting side that orders totaled 14.3 million up from 8.5 billion in the prior year quarter.

The bulk of the orders one word comet work continuation of the services provided to our primary nuclear utility customers as discussed during our last conference call prior to the Toby not covered by Jean crisis. We went discussion surrounding some potentially very sick that's kept new contracts for 2020.

I'll update investors as these opportunities he ball.

The long term demand outlook for industry, stopping and trading services remains very strong given the unique needs the nuclear power industry.

Our total backlog at the end of Q1 stood at 54 million consisting of 32.2 million or performance Superga backlog in 21.8 million that actually see backlog.

Q1, total backlog exceeded our year end 2019 backlog 52.7 million. This was a very solid starts at the New York, especially given the emergence of dependable. This provides us with the solid Krishna business to weather the storm so to speak.

As mentioned, we believe that pent up demand for our services ultimately will be released.

Translate into a higher backlog figure for GRC us nuclear facilities must continue to deliver reliable always on carbon free power to the grid.

Our services are considered essential given our critical sporting safe and efficient operation of our clients nuclear facilities.

Nuclear plants required fuel replacement services during outages for example, plus periodic safety reviews, regardless of the external environment.

Some work can be pushed out for a period of time, but they can't be entirely eliminate.

Nuclear project work routinely has rebounded to industry shocks, including major events, such as Fukushima and the 22008 financial crisis, we expect that same cycle to be a case post cobot.

Well it is difficult to estimate the precise impacted because it by GE outbreak in our business for the remainder 2020, we expect.

Another challenging period during the second quarter as clients have taken a conservative near term approach to commencing the projects.

In closing Chia seeds emphasis today is on protecting the health and safety of our employees a quiet string covered by cheap pandemic, while working diligently to grow organically streamlining our operations contain costs maximize cash flow and pay down debt. We're doing that we provide complex solutions and services to the blue chip nuclear power customers.

Yes.

Which produce most of the world Spaceland carbon free energy.

Nuclear plants must be operate it may change in service, regardless of global disruptions, including coded died cheap.

The longer term fundamentals for end markets remain solid as the nuclear power industry continues to invest for safety operational reliability extensional plant life and performance improvements generate more power from existing assets.

Given the difficult to replace assets.

Specialized employees and innovative technologies that we have amassed under a single go to service provider platform. We remain optimistic about yes. These future.

I'll now turn the call ever to Emmett Pepe, our CFO, who will review the first quarter financial results and that please go ahead.

Thank you Carl.

Total revenue in Q1, 2020 was 17.79 compared to 22.2 million in Q1, 2019, reflecting a 2.5 million decrease in our performance improvement segment revenue and a 2 million decrease in our and I can see segment revenue.

The decrease in performance improvement revenue was driven primarily by the successful conclusion of major simulator projects in the first quarter of 2019 the decline in an ITC revenue was primarily due to lower staff augmentation needs from customers during the quarter as Carl touched on previously we're excited about new busy.

Development activity in this segment.

Gross profit in Q1, 2020 totaled 4.1 million compared to 4.7 million in Q1 2019.

Sam its improvement gross profit declined by approximately 700000.

[laughter] <unk> to Threem for 3 million.

And I T C. Gross profit increased by approximately 50000 year over year to 1.1 million.

So despite the decline in revenue in an ITC segment was able to overcome that shortfall, primarily due to high margin fixed price training course projects.

<unk> expenses totaled 4.9 million in Q1 2020 versus the comparable figure a 4.4 million in Q1 2019.

The increase in US you know expenses were driven by.

Like incremental audit tax and consulting fees related to our FCC filing requirements.

Operating loss equaled approximately 6.1 million in both Q1 2020 in Q1 2019.

Non-GAAP adjusted EBITDA as defined in our earnings release totaled approximately negative 600000 in Q1 2020 compared to positive 200000 in Q1 2019.

As a result of the Kobin 19 pandemic, we concluded that a triggering event had occurred which required an interim assessment for impairment of intangible assets. As a result of this analysis, we recorded an impairment charge of 4.3 million related to DP Engineerings intangible assets in Q1 2020.

We concluded Q1 2020 with a cash position of 11.4 million and total debt of 16.8 million, which decreased by 1.79 compared to the end of Q4 2019, reflecting debt payments, we made during the quarter.

In April we received 10 million from the federal payroll protection program, which further bolstered our cash position.

I'll now turn the conversation back to call.

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Thank you, ladies and gentlemen, I'll turn it.

Back to Kyle Loudermilk for closing remarks.

Well. Thank you everybody for joining us really appreciate your time an interesting GRC.

While we won't be on the road for Investor conferences in the near term given cobot.

We remain accessible for one on one call. So please feel free to reach out directly to us or you can reach out to our IR affirmed the equity group called the all if you're interested for scale joining a follow up calls and I hope you well and I agree much look forward to speaking like thanks again everybody.

Thank you. This concludes todays conference all parties may disconnect have a good day.