Q1 2022 GSE Systems Inc Earnings Call
[music].
Good day and welcome to the GSE systems incorporated reports first quarter of fiscal year 2021 financial results. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.
You May press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Adam look low and Steiner Vice President at Lytham Partners. Please go ahead Sir.
Thank you Chuck sorry, everybody for the delay good afternoon, everyone and thank you for joining us today to review the financial results for GSE systems for the first quarter ended March 31, 2022 with us on the call representing the company today are Kyle Loudermilk, President and CEO of GSE systems, and Emmett Pepe our chief financial.
The officer of GSE systems before we begin I would like to remind everyone that the statements made during the course of the call today may be considered forward looking statements within the meaning of section 27 of the Securities Act of 1033 as amended and section 21 E of the Securities 1934 <unk>.
These statements reflect current expectations concerning future events and results words, such as expect intend believe may will should could anticipate and similar expressions are words that are used to identify forward looking statements, but their absence does not mean a statement is not forward looking these.
Statements are not guarantees of future performance and are subject to risks uncertainties and other important factors that could cause actual performance or achievements to be materially materially materially different from those projected.
For a full discussion on these risks uncertainties and factors you are encouraged to read Gse's documents on file with the Securities and Exchange Commission, including those set forth in periodic reports filed under the forward looking statements and risk factors section <unk>.
<unk> does not intend to update or revise any forward looking statements, whether as a result of new information future events or otherwise on this call management may refer to EBITDA adjusted EBITDA adjusted net income and adjusted EPS, which are not measures of financial performance under generally accepted accounting principles or GAAP.
Management believes that these non-GAAP figures. In addition to other GAAP measures provide meaningful supplemental information regarding the companys operational performance investors should recognize that these non-GAAP figures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to and not.
As a substitute for or superior to any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures in accordance with SEC regulation G can be found in the Companys earnings release with that I would like to now turn the call over to Mr. Kyle Loudermilk, President and Chief Executive.
Sort of GSE solutions Carlo. Please proceed.
Thank you, Adam and I would like to welcome everyone to GSE as first quarter fiscal 2022 financial results Conference call.
Earlier today, we issued a press release detailing our financial results hopefully you've had a chance to review this news release, but if not a copy can be found on our website at www Dot <unk> dot com under the news section play.
Play out the agenda for today's call I'll plan on opening my remarks with a brief discussion on the industry, then drill down into commentary on the quarter's highlights and the status of each of our divisions, including our engineering segment also known as performance improvement solutions.
Workforce solutions also known as nuclear industry training and consulting or at ITC and our software as a service space software solutions business and that will then give a recap of the financial results and we'll then open the call to any questions at the end.
As it has been only 45 days since our last call my commentary on the macro environment will be a better abbreviated since our last call. The overall environment for GSE services continues to be promising while Q1 displayed a bit of a breather. After a very strong Q4, and a solid second half of the prior year. It still was a solid quarter concern.
Quote meat and potatoes type of business, which is which.
Which is a steady stream of projects coming in the.
The macro environment continues to evolve from the worst parts of the pandemic with businesses still transitioning to getting back to pre pandemic levels. Our end user markets are focusing on the necessary improvements and maintenance required to keep the facilities up and running and the most efficient honor the omicron variant likely cause some delays in orders in the quarter.
Yet the high energy prices that are making headlines across the world continue to place emphasis on energy independence and security, while ensuring a stable grid in order to supply ample energy to customers. While many governments are currently focused on these issues. Many are also focused on meeting de carbonization goals, which are additionally, putting pressure on energy.
Prices that said, it's become very evident that many of these countries are rewriting their plans for both nuclear in the near and longer term.
While incorporating renewable energy alternatives like wind and solar have been important. These energy sources are running into issues due to the variability inherent in those power sources and are struggling to meet long term power generation goals.
Lack of equipment from supply chain issues, along with the lack of labor for installation as well as obstacles to permitting.
As a result, these shortages are putting serious pressure are meeting de carbonization goals, making.
Up for those losses from supply chain and labor issues.
Many years, maybe even a decade or two to catch up.
This highlights the acute need and focus on nuclear power as a long term component for energy security and meeting de carbonization goals for the grid.
As I expressed in the past and driving to a zero carbon economy wind and solar simply will not get the west there ended up themselves stable consistent around the clock power generation is required and the more wind and solar that comes onto the grid more base load power required.
The solution to this is nuclear power.
We believe that for these reasons, many countries will maintain and enhance existing nuclear fleets going for the foreseeable future. The good news is that when the lives of nuclear facilities are formally extended at least in the United States license extensions are usually issued for 10 to 20 years lifetime extension of nuclear power facilities.
A very favorable trend for GSE for years to come as these facilities constantly require upkeep maintenance and upgrades as well as new software to make sure. They are operating as efficiently as possible.
CFC provides many of the essential engineering design work force and technology solutions to facilitate this industry effort.
So by the administration has laid the initial groundwork with a bipartisan.
Bill that was signed into law in November for infrastructure law include several billion dollars, specifically allocated to the nuclear industry with a focus on investing for maintenance efforts at existing nuclear facilities.
It also provides funds to accelerate the advancement of next generation nuclear reactor technologies, including <unk>. We believe the dollars from this law are starting to make their way into the economy, but we are also appreciative of the U S government recognizing that upkeep of current nuclear fleet is of the utmost importance small bridging efforts to the next.
Generation of nuclear facilities.
As a reminder, nuclear power currently provides 20% of the nation's power and over 50% of the nation's 100% carbon free electricity.
As a result, the Biden Harris administration has identified the currently 93 reactors as a vital resource to achieve net zero emissions economy wide by 2050.
The U S Department of energy the Doa.
<unk> released a notice of intent.
And requests for information on the implementation for the bipartisan infrastructure laws 6 billion Civil nuclear credit program. The nuclear credit program support the continued operations of U S nuclear reactors, the nation's largest source of clean power.
The NOI and RFID are critical first steps to help avoid premature retirement of nuclear reactors across the country preserving carbon free power generation at scale for the future, while securing thousands of good paying clean energy jobs.
All of this is all of this commentary makes abundantly clear.
Medicine broad positive momentum for the nuclear power industry energy security zero carbon grid and scalable sustainable growth of zero carbon is now top of mind across the world.
As a result of specialized services and technology to industry as a provider of those services and technology to industry, rather we believe GSE as well positioned as a result.
One more topic I'd like to share about the macro level is the recent consolidation we are seeing in the industry, which resumes the consolidation we had been seeing prior to the pandemic.
As an example, Westinghouse recently announced their intended acquisition of BHI energy.
BHI has over 8500 employees. This is a significant acquisition within the nuclear power industry.
CACI has a range of services. It provides in the U S and Canada, primarily servicing the support of all operating commercial nuclear plants.
Another recent deal was the acquisition of Paragon energy solutions by Windjammer capital investors Paragon is a small independent provider of critical parts and services for the nuclear energy industry and has been delivering products to nuclear utility customers and providers for over the past 30 years. Additionally.
Additionally, last fall <unk> capital acquired a majority interest in Sonic systems International Sonic provides a range of services to the majority of U S nuclear reactors, including non destructive evaluation QA QC program refueling and reactor maintenance engineering and project management.
While the financial terms of these privately transacted deals haven't been disclosed this deal flow is important to note as clearly investment equity is flowing into this highly important sector.
Specialty asset serving our nuclear sector are clearly in demand.
Now, let's dive into some of the key events GSE experienced in the first quarter.
Key events in Q1, the market overview dynamics in new orders overall, the first quarter produced a good quarter, while quarters, we're not at the levels of Q4, New orders were solid for Q1, and we maintained our backlog.
Suspect that orders ebbs after two strong quarters due to business cycles, starting back up and our customers during the third.
As well as likely sluggishness, resulting from the <unk> and derivatives.
We have seen over the last 24 months.
This can come and fits in.
But any delays, resulting in our spread of business like we experienced in the back half 2021.
Even so.
Stable as I mentioned in the quarter and we have lots of work ahead of US also the soft since that we built for the past few years into a mature high value line of business is now looking and feeling like a software business, including the typical timing associated with it we had several renewals renewals and new logo sales close at the end of last fiscal year and Q.
One involved a lot of business development activities to drive what we will be a solid Q2 and another strong year as a results investors should now look at our software business as a hockey stick as we progress through the fiscal year, just as a house last few years. Our goal is for the X axis.
Excuse me the goal is for the Y axis of the hockey stick chart to grow larger for each year just as it has for each of the prior three years.
Is exciting progress.
Before getting a bit more granularity Q1 in general was a bit tepid for the industry.
It was off the heels of a very busy second half of 2021, we believe customers took a pause whether it be the omicron variant or strong back half of 2021, either way. It is an unusual experience such spending puts and takes from quarter to quarter. The good news is we secured a solid cross sell.
<unk> of new orders in Q1 spite lower industry spend in addition, some of our work that was expected to start at the beginning of Q1 was shifted to the end of the quarter or move further to the right and should commence in the coming quarters.
For the first quarter total orders were $11 1 million, which was lower from Q4 and Q1, a year ago that said.
The industry has showed overall signs of renewed strength compared to the recent past in the quarter. Our performance Engineering Division managed to improve orders over last year as we continue to work with a variety of customers in different projects. The makeup of these orders were highly diversified by order type primarily across our specialty engineering and non simulation ends.
Nearing businesses and also relatively similar in monetary size, thus the meat and potato aspect of a steady stream of orders.
Workforce solutions is where we experienced.
With work.
Or into 'twenty.
'twenty one that said the division did win several key orders some sizable in nature. We also made some new investments into the division during the quarter with the addition of sales and recruiting personnel and expect those investments to start contributing in the coming quarters as these resources.
Debottleneck, our ability to generate revenue from the business.
Although new water levels.
Pre pandemic levels, we are very pleased to be trending in the right direction. The new order subordinate in first quarter combined with the acceleration we experienced in the second half of 2021, we feel has created great momentum momentum for the remainder of 2022.
Also with the financing we conducted in the first quarter GSE has been a very strong position competitively bid for new business and make the necessary investments to improve organic growth through sales and product development efforts aligning our business has been a big effort through the pandemic and that we have significantly improved our capital structure, one things for certain <unk>.
Catalysts still are at the forefront for the nuclear industry.
One the need for a stable grid to the drive towards energy security Independents and three the de carbonization of the power sector. The.
The drivers have provided increased visibility for our business pipeline and we are excited for the year.
I will remain important catalysts for the power industry and we will continue to gain momentum as we continue to suffer from higher energy costs and geopolitical issues, causing energy security concerns.
It is these catalysts that gives us confidence that the nuclear industry will be in high and increasing demand for the foreseeable future.
Now, let's review a bit into each operating segment. Our engineering performance also known as performance improvement solutions revenue decreased slightly sequentially from the fourth quarter and when compared to the year ago period orders for this division continues to be robust in the first quarter to $6 4 million up 15% from the same quarter a year ago.
This increase was attributable to several new contract wins, specifically coming for our DP engineering and true North divisions. The specialized engineering services. These two divisions are showing solid demand within array of customers on an assortment of different engineering projects from a transmission transmitter replacement to assisting our clients with remediation work on.
Tank car.
A highlight these wins as they have been able to show, our breadth and depth of services and capabilities for our clientele.
Looking further into the engineering performance Division, our true North consulting and DP engineering units performed well compared to the first quarter a year ago as more customers are investing in these essential services that we provide to the industry.
While the division is still in the midst of recovering from the pandemic, we're seeing customers start to put more work out to bid and acquire specifically a very unique solutions. There has been a large uptick in the opportunity pipeline as a result of this increased activity because of this we have reason to be confident that the industry is emerging from the pandemic related slowdown in spend.
And do you expect additional business within this division over the longer term.
Our pipeline of opportunities overall for this segment has clearly improved as nuclear budgets and a focus on energy security and independence increases and for good reason.
As a result of our focus is working diligently with our customers and potential customers to convert these bids into orders and subsequently revenue as experienced during the quarter with several new key orders that we have received.
For software solutions moving on to our cloud based SaaS solutions as I have mentioned in the past. While this is technically categorized under our engineering performance Division is a very exciting and unique component of our business and one which I believe warrants its own conversation.
Revenue from our software solutions was <unk> 4 million for the first quarter compared to <unk> 8 million in the same quarter, a year ago and compared to $2 4 million in the fourth quarter as I mentioned earlier, our software business has developed into a nice division for GSE with lots of predictable high margin revenue.
That said given the conversion from license to SaaS over the past few years many of the revenues from software ramps up towards the end of the year.
So youll see recognized revenue on a ratable basis for SaaS software quarterly over the lifetime of the contract we made a significant push to convert our perpetual licenses to term licenses with our customer as well as capture net new business delivering the SaaS solution via the cloud.
We've been successful in converting several of our clients to the SaaS based license agreements are in discussions with several more clients and new opportunities about onboarding them with these solutions, we've already made investments and bringing on more people into our sales force. So we fully expect this investment to deliver further enhanced results in the second half of the year <unk>.
To see what was a nascent effort when we first joined develop over the past three years and two significant and growing software business as part of GSE.
We continue to be excited about these high value high margin software solutions, which have demonstrated the potential for continued above average growth rates, while bringing strong predictability to the software license business.
Last year. It represented nearly 10% of our total revenue for GSE and we're focused on growing this business. It has proven to be an excellent follow on to the company's legacy business a powerpoint some goods.
In addition to the recurring revenue of our software solutions.
It provides very high gross margins typically 80%.
For <unk>, we are happy with our growth in this area and look forward to continuing the transformation to make this segment a larger part of our business.
Workforce solutions now moving to workforce solutions also known as our <unk> segment sales were $5 million in the first quarter, which was basically in line with.
With the $6 million from the quarter first quarter, a year ago order showed a bit of a pause in the first quarter coming in at $4 7 million due primarily to AUM or prime which put some orders to the right as clients pause certain decision, making to assess the impact to their respective workforce on premise efforts, we continue to make smart investments in the business by.
Adding new sales and recruiting professionals further division in order to improve organic growth.
A bit more specific the division did receive four key orders from our customers with two very sizeable orders won with a major utility and the other with construction services company.
To summarize I am very proud of our team and the results produced in the first quarter. We clearly have additional work to do are now in a position to do so with a strong balance sheet, we've begun to make necessary investments to be able to win more orders as they are starting to pick up, especially as the pandemic related constraints as time goes on in.
In the meantime, the company has been aligned to the market opportunities and our diversified business mix that we purposely built over the past few years has proven resilient throughout this time.
We believe it is positioning the company to broadly benefit from the macro trends that bode very well for Gse's future. We are an essential part of the power industry ecosystem and our clients rely on us to keep their assets up and running are creating a highly efficient and safe environment.
The strong reputation we have in industry and the relationships, we maintain with our customers and the value added engineering workforce and software technology to operate industry should position us well to beat out the competition is more business flows into the vendor ecosystem for nuclear and broader zero carbon power generation.
As the industry continues to develop a resilient grid that will advance the role of de Carbonization GST is at the forefront of providing such solutions and ready to partner with the power industry to achieve these goals.
In addition industry tailwind is our extremely strong for GSE as governments Society is becoming educated so the fact that in order to achieve net zero carbon emissions and have a stable grid with energy independence nuclear must be an integral and growing part of the solution.
We've all read the headlines we are seeing today from the energy turmoil in Europe erupting as a result of the Ukraine, Russia conflict to climate change necessitating an accelerated path to zero carbon grid nuclear is now recognized as a critical part of the world's power mix industry news items that are previously shared are but a few of the many exciting developments in the nuclear industry right now.
That makes me feel extremely confident about gse's future. Our unique solutions are at the forefront of making nuclear power generation technologies in plants operate and run safely and efficiently produce more power from those assets over time.
I will now turn the call over to Emmett Pepe GSE CFO , who will review the first quarter financial results <unk>.
Please proceed.
Thank you Tal.
With the numbers highlighted in detail in the press release, let me focus my comments on a few areas and provide added color where I can.
Revenue during the first quarter of 2022 was $12 3 million a decrease of six 3% compared to $13 1 million in the first quarter of 2021 and compared to $13 9 million in the fourth quarter of 2021.
The revenues were lower primarily from.
Q4 reflected emergencies analogy in the software business, whereby many renewals occur.
Year over year results were slightly lower due to certain project flow that was not recurring in nature and stemming from the company's legacy business of nuclear stimulators.
Engineering performance revenues were $6 4 million in the first quarter of 2022 compared to $7 1 million in the first quarter of 2021 and compared to $6 8 million in the fourth quarter of 2021 the.
The sequential and year over year change was due to lower orders within the stimulated part of our business.
Extremely cyclical in nature, however, while that part of the division isn't growing at times difficult to predict we have several key projects in the coming quarters as we've seen this business segment pick up in the second half of 2021, when orders increased 63% over the first half of 2021.
Workforce solutions revenue in the quarter was $5 9 million compared to $6 million in the first quarter of 2021 and compared to $7 million in the fourth quarter.
While the year.
And was due to a reduction in field professionals needs for two major customers.
In response, we are working with new business development teams and recruiting hires made in the quarter to drive future growth.
Gross profit in the first quarter of 2022 was $2 4 million or.
Our approximately 19, 8% of revenue.
Sure.
A profit of two point.
22, 3% of revenue in the first quarter of 2021 and three.
6% of revenue in the fourth quarter 2021.
Gross margin was down primarily due to product.
Typically lower margins from workforce solutions as we have some transition in that segment and a reduction from our legacy PNC.
Which is typical of our.
Margin business.
While the gross profits can fluctuate.
The gross profit improvement over time.
Operating expenses.
Restructuring depreciation and amortization expense for the first quarter of 2022 were $4 6 million compared to $3 9 million in the first quarter of 2021, and $4 6 million in the fourth quarter of 2021.
The increase in Q1 was partially due to what many other companies in our industry and across the economy. We are seeing now higher expenses for corporate insurance and other inflationary pressures part of which was reflected in the Q1 results and with other increases being other corporate expenditures that are onetime in nature. Despite these pressures.
We continue to closely monitor our operating expenses and continue to expect them to be in a similar range in the future.
Net loss for the first quarter of 2022 was $3 4 million or a loss of <unk> 16 per basic and diluted share compared to $2 2 million.
Or a loss of <unk> 11 per basic and diluted share in Q1 of 2021 and compared to $1 9 million or a loss of nine per basic and diluted share in Q4 2021.
As reflected in our non-GAAP disclosure $1 1 million or a net loss is due to noncash related expense expenses, roughly 700000 related to our convertible debt and 400000 related to stock compensation.
Adjusted EBITDA was a loss of $1 7 million in the first quarter of 2022 compared to 800000 in Q1 of 2021.
And a loss of $1 million.
Which was reported fourth quarter of 2021.
Company's backlog remained healthy and stable during the first quarter at $40 1 million compared to $41 3 million at the end of the fourth quarter of 'twenty one.
Performance Engineering segment backlog was fairly stable at $31 9 million and workforce solutions Division burned off some backlog then was that $8 2 million at the end of the first quarter and compares to $9 5 million at the end of the fourth quarter. These backlog figures really highlights the company's performance whereby we burned off some old orders.
But still have a good amount of those orders in the back half of 'twenty, one still in front of us for the remainder of 'twenty two.
Moving our discussion to the company's balance sheet.
Improved as the company entered into an agreement for a convertible debenture in the first quarter.
We exited the quarter with $5 $7 million in cash and repaid.
In full the $1 8 billion that remained on our prior credit facility.
As a result removed many restricted covenants and the going concern language in our filings.
You mentioned are very valuable to our capital status and the timing of the new capital couldn't have been better, especially given recent moves in interest rates and markets.
Net unrestricted cash also improved in the quarter and was $1 9 million at the end of the first quarter up from $1 7 million in the fourth quarter.
Lastly, we received $1 1 million.
<unk> refunds from the IRS during the first quarter, which also enhanced our capital structure, we anticipate.
The additional $3 1 million ERC refunds still outstanding.
In the coming months with receipt of these funds in the first quarter. The company had a cash flow breakeven quarter.
I am pleased with the actions in the first quarter to improve our capital structure and I believe we have positioned ourselves for stability and renewed growth in the coming periods.
I'll now turn the conversation back to Kyle.
Thank you Amit.
Summarizing the first quarter was a good quarter and show progress we've made along with the value we've added by creating a company with diversified number of offerings we have.
Feeling more confident in our future as the pandemic is getting behind us and customers are getting back into the marketplace. We have entered the year with an improved capital structure and have utilized our progress to make certain key investments and hires to bolster our organic sales efforts and improved cross selling opportunities to make sure that we have as many touch points.
As possible with our customers.
Our team is highly focused on improving order flow and I believe we're in a solid position to capitalize on helping our customers to upgrade and maintain their existing fleet of facilities.
This really bodes well for GSE and the near to midterm I would like to conclude that we believe that the company has worked hard in the past year to stabilize the operations and we continue to work on pursuing newer contracts for the industry, it resumes upgrades and maintenance facilities and their workforce.
Bidding in recent months continues to improve and many of our customers are coming back to the table and a need for upgrades and upkeep services, while the timing and this business is still hard to pinpoint as seen in the first quarter, which showed a pause relative to clarity of order flow at the back half of 2021, we believe we see the business in front of us and GSE is well positioned.
To win our fair share of opportunities and with a leaner cost structure.
Given our very unique situation as a heavily tech enabled provider of essential services to the de carbonization of the power sector in nuclear power industry, we remain very confident in our opportunity to create substantial long term value.
With that said operator, please open the floor for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw. Your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Again to ask a question. Please press Star then one.
Chuck This is Adam loewenstein over Lytham partners.
If I may I'd like to pose a few questions to the management team.
Floor is yours.
So Kyle you mentioned, a little bit about some new investments and hires in the quarter.
Maybe maybe share with us how long that takes to see some of those moves to start to perform and make their way into the business.
Sure. So specifically the investments we've made of new hires really are geared towards bringing on a couple of new salespeople in a couple of new recruiters for our workforce solutions business, the recruiters, making immediate impact where they have really helped us debottleneck our ability to reach out into our proprietary.
Database of employees and connect workers and connect them to opportunities that we're looking to fill as part of our workforce solutions contracts that are in place. So.
They've come in we've seen.
A relatively quick.
Impact in filling open slots for that business. So that's been great.
We continue to look for more so the business is there for salespeople, we typically look they're hard to find very hard to find good salespeople, especially in a tight.
Environment.
But as we find them, we bring them on and we brought on a couple of these over these past 90 days and it typically takes a quarter to two quarters for them to begin to ramp up and make a full speed impact.
With that said, it's one of the hardest positions to fill if they do well they get paid really well and if they don't we constantly groom the groom our workforce to make sure we're bringing in and focused on.
Making sure people are productive themselves wells hitting their targets.
If they're not.
We look to bring in new people. So this is not a once and done. This is an ongoing effort, but we're in a position with the balance sheet restructure it.
Really take some incremental steps there nothing dramatic to industrial organic growth. So that's really promising that is happening.
Okay.
Regarding the bipartisan infrastructure and jobs Bill that passed in November are you starting to see some of the effects of that is the monies obviously, there how long does it take to make its way into the economy.
Right. So as we discussed in the script.
When you look through.
They've gone out for solicitation of ideas about how to deploy the 7 billion back into the existing fleet and so that takes time. So here. We are in May legislation was passed into law in last November so thats been six seven months to get to this point and we expect that this.
Money will be allocated out over a broad period of time likely over several years not just all upfront lump sum.
But more important so that's going to play out over time.
Literally over the next couple of years with that said however, it provides a high degree of confidence to industry immediately that the industry is getting support from the highest levels of the U S government and that really changes sentiment and Mojo for lack of a better word like industry is very excited about where it is right now.
With the IPO companies like new scale and with industry vendor consolidation that we've seen Utah.
Utility operators are really quite excited by what's going on Exelon is spun out constellation energy over the last quarter as well so a lot of movement in the industry a lot of confidence built up an industry, which is directly resulting from the support from the highest levels of U S. Government. So that's great to see.
Okay.
We do have a investor who'd like to ask some questions to truck. Please proceed sure. Yes. Our next question will come from William Bremer with Vanquish capital. Please go ahead Sir.
Good afternoon Kyle.
Hey will.
Hello first question.
First question here is is definitely on the evolve with new scale during the quarter.
Consummated uplifted pickers now SME.
I know that you guys have had a long term standing relationship with them, maybe give us some color in terms of what we can expect as new scale has been getting quite a bit of press as well.
All of these potential <unk> is being deployed globally.
Yeah, well look it at a high level Bill.
Look this IPO.
The stack.
For new scale has been very exciting for industry.
If you look back at last August .
Single largest.
American Nuclear Society Conference utility working conference down in Florida.
There was a lot of buzz around <unk> and that really I think was the catalyst that drove ultimately where we are with new scale.
Getting a lot of strict number of strategic investors raising capital and creating excitement around.
Accelerating their path to their first.
Plants and going.
Going online hopefully by the end of this decade.
Our relationship with them spans a decade.
We're.
Proud of that relationship its been very successful mutually for both of US. So the closer they get to building plants and building plants, I think thats going to help out their entire vendor ecosystem ourselves included.
So that's very exciting.
Maybe I'll provide.
The services that you are working with new scale to us.
So to break that down a little bit.
Sure well publically available information I'll point to that and you know publicly available information points to the fact that new scale has used our simulation technology as part of their.
Engineering design licensing program with the NRC.
Achieving.
The design basis license.
In record time, and they've been very open and we're grateful for that about their partnership with us using our simulation technology.
Additionally, they use our stimulation technology as part of their Samuel as an integral part of their simulation island. So whenever you see there.
12 pack.
Units.
That's our simulation technology, and we've had staff embedded with them from time to time, we have former employees that are working there at new scale. So this this is a very healthy healthy ecosystem, we have between the two companies.
These contracts are multi year or multi service contracts, that's the way I should look at them.
Well effectively they have licensed our simulation technology to use to support their development efforts of there.
Proprietary technology from time to time to enter into services agreements with us to use our expertise and knowhow and we'd certainly like we would with any client and opportunity to promote further surfaces to them.
I think it's it's a healthy relationship which means we are in constant engagement and we're talking mutually about what are the needs and how can we help them accelerate accomplishing their goals.
Great great.
Now, let's go back to the more of the legacy nuclear can you give us a sense of what youre seeing in the industry. I know you voiced theres a lot of activity in terms of maintenance.
As well as expanding the life of some of these older reactors what are you seeing out there and more importantly.
Give us a sense of what could be potentially announced.
In terms of future contracts in terms of them.
Well first of all.
As we stated.
The industry is really investing quite heavily in itself too.
Keep its plants evergreen.
Debottleneck themselves are upright themselves to produce more power over time from outage to outage, bringing in the capital investment.
Pumps pipes heat exchangers turbine upgrades et cetera, and all this overtime accomplishes a couple of things Bill.
Extend the lifetime of the plant it keeps its evergreen operating safely and efficiently but also.
Certain investments can help plant produce incrementally more power as time goes on and so our services that we provide particularly our workforce development solutions, most notably the solutions that we've provided historically through our true North consulting group at our GP group.
Are really geared towards just that helping these plants facility.
Safe operations as well as.
Produce more power from existing plants overtime and extend our lifetime, there's a lot of investment that goes into that and those lines of business are.
Right in the Venn diagram of need and ability to spend and desire to execute quickly and I think that explains much of why we're seeing a nice solid performance in those lines of business and we expect that to continue and grow as we move forward.
That's good to hear my final question is just on the international front versus the domestic if we had to take a step back.
And book over the next year.
Where do you see more activity or is there sort of is.
Is there a certain trend that youre seeing that sort of surprising you as we go through this year.
Well.
Talk about what everyone can read in the headlines are situated in this industry is very exciting although the reasons for it.
The compelling reasons for why it's moving so quickly are unfortunate with the Russian invasion of Ukraine. It highlights a number of things such as.
They need to defund despotic regimes.
By not consuming their energy, but rather becoming energy independent and achieving energy security. So we're seeing that mindset shift rapidly in western Europe and as a result, you see all the farmer frontier countries Eastern frontier countries.
The European Union and in Europe to really talk quite openly about the desire to accelerate investment in nuclear power. So they can stand up and be independent from imported power from.
An adversarial for forward to their east.
So Poland has been very open about looking to invest in <unk> traditional technology assets, the Czech Republic and Chuck.
And Slovakia, which is already well underway with an investment program, Romania has been very open about wanting to get a new scale plant up and running by the end of this decade.
And there is more to speak of along along throughout Europe , The United Kingdom is looking to renew at synergy program.
France is extending the lifetime of its plants, Germany is still a question mark but.
Spoken ultimately about embargo in Russian oil and eventually decoupling from.
The consumption of gas, which is astonishing compared to where we were a year ago.
So with that said that's the international.
Perspective that only.
Highlights the importance of nuclear for energy security and independence.
To the United States, we've already had a program underway, mostly driven by the need for zero carbon power, but now with gasoline prices above $5 a gallon in the us.
More power, we generate from nuclear at the less dependent we are upon fossil fuels and it can be diverted to other things such as.
Gasoline and diesel oil production that type of thing so again.
Providing an emphasis in the United States to further its energy security and getting back to energy independence.
If not get to be an energy export or to help our allies out in Europe .
So.
That nuclear power is a key part of that and.
This was a long time building and it's only accelerated as a result of what's happening between Russia and Ukraine.
So.
<unk> is well positioned for that we are excited about where we are.
And look we feel as I've said in the script, we have a robust pipeline of business. That's out there we have better visibility than we've had in a long time.
The drive towards energy security and <unk>.
Independence is helping clarify that and we're just pushing and pushing to start getting these deals to come in.
Euro unfolds.
Well thank you.
Well said and should be interesting times ahead.
Yes, Thanks, Bill I appreciate the questions.
This concludes our question and answer session I would like to turn the conference back over to Kyle Loudermilk for any closing remarks. Please go ahead Sir.
Well I'd like to thank everybody for joining us. We appreciate your time and interest in GSE and remain excited about what's ahead of us as I've said repeatedly in the call.
Do want to note, we will be presenting at the Lytham partners Summer 2022 Investor Conference on June 21 to 'twenty two.
We'll be looking forward to speaking with many of you at that time were also open to attend other investor call. So any ideas from our investor community as we hear Thats. Please reach out.
And let us know.
Where we should be looking and suggestion that things that we have in place.
So if you have any questions. Please reach out to Adam loan center from Lytham partners, and we'd be happy to schedule, a follow up call and thanks again, everyone and wish everyone have a great day. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Okay.
Sure.