Conference Call Scheduled for
today, August
14, 2023 at
4:30pm ET
COLUMBIA, Md., Aug. 14,
2023 /PRNewswire/ -- GSE Systems, Inc. ("GSE
Solutions", "GSE", or "the Company") (Nasdaq: GVP), a leader in
advanced engineering and workforce solutions that support the
future of clean energy production and decarbonization initiatives
of the nuclear power industry, today announced financial results
for the second quarter ("Q2") ended June 30, 2023.
Q2 2023 and Recent
Highlights
- Strong revenue growth from Performance Engineering, with a 30%
increase over Q1 of 2023 and 16% improvement from Q2 of 2022.
- Software and support sales were $1.1
million in Q2 of 2023 bringing our YTD total to $2.3 million, an increase of 20% over the six
months ended Q2 2022.
- Backlog at June 30, 2023, was
$34.4 million, including $26.9 million of Performance Improvement
Solutions backlog, and $7.5 million
of Workforce Solutions backlog.
- Ended Q2 with cash, cash equivalents and restricted cash of
$3.4 million, including restricted
cash of $1.6 million.
Management Commentary
"I am pleased with the progress made during the second quarter,
whereby we made meaningful improvement in our operational
execution. We are particularly pleased by the improvement in the
revenue growth in the quarter, achieved through improved
engineering utilization and focus on higher margin business. The
continued pace of license revenue in the quarter is also a positive
sign", commented Kyle J. Loudermilk, GSE's President and Chief
Executive Officer. "Orders in Q2 were lighter than desired, as we
had nearly $5M in orders that slipped
from Q2 into Q3. All of these orders have closed in early Q3. We
have a robust pipeline of new business opportunities to pursue and
are keenly focused on working with customers to get these orders
booked. We are focused on what we can control, such as continued
project execution; conversion of the order book to revenue through
optimal resource utilization; meeting with customers to help
advance the business and capture new logos, such as the win at the
uranium purification customer; and other actions. While the
industry is still not at pre-pandemic spend levels, we nevertheless
have opportunity to see growth in our business and are focused on
that growth. Longer term, the macro trends towards grid stability,
energy security and decarbonization are creating strong
tailwinds for the industry. As the economic benefits of the
Inflation Reduction Act and Infrastructure Act start to flow into
the industry, we believe this will also contribute towards
continued and growing demand for GSE's solutions moving
forward."
Emmett Pepe, CFO of GSE Systems,
added, "The company's cost containment measures have started to
deliver benefits during the quarter with operating expenses
reflecting significant improvement over prior quarter. We expect to
continue to trend favorable as initiatives enacted during the
quarter will continue to keep costs under control while we execute
on our sales growth strategy. I am encouraged by our improved
revenue and combined with our expense management positions us for
improved cash flow in the second half of 2023."
Q2 2023 FINANCIAL RESULTS
Revenue during Q2 2023 was $12.4 million an
increase of 13.9% compared to $10.9 million in Q1 2023,
and revenue was $12.7 million in Q2 2022. The sequential
improvement in revenues was driven by large simulator build and
upgrade projects in Engineering, offset by a sequential decrease in
Workforce Solutions. The year over year decrease of $.03 million was primarily due to the wind down
of large projects resulting in a reduction of staffing from our
major customers, which continues to affect the power industry.
Engineering revenue was $9.0 million in Q2 2023 compared
to $6.9 million in Q1 2023, and $8.0 million in Q2 2022. The sequential and
year-over-year increases were largely due to several
significant simulator upgrade projects which began later in
2022 with continued work performed in the first six months of
2023.
Workforce Solutions revenue was $3.3 million in Q2 2023 compared
to $3.9 million in Q1 2023, and
$4.8 million in Q2 2022. The
sequential and year-over-year decreases are mainly due to the
reduction in workforce requirements.
Gross profit in Q2 2023 was $3.2 million, or 26.0% of revenue. This
compared to gross profit of $3.2 million, or 24.9% of revenue in
Q2 2022, and $2.4 million,
or 22.0% of revenue in Q1 2023. The increase in
gross margin was primarily related to an increase in
larger simulator build and upgrade projects awarded this
year.
Operating expenses in Q2 2023 were $4.0
million compared to $4.9
million in Q2 2022. Operating expenses were $5.2 million in Q1 2023. Operating expenses were
lower due to an improved corporate cost structure. The Company
continues to maintain tight expense controls despite inflationary
pressures.
Operating loss was approximately $(0.8) million in Q2 2023,
compared $(1.7) million in Q2 2022. Operating loss was
$(2.8) million in Q1 2023.
Net loss in Q2 2023 was $(1.5) million or
$(0.06) per basic and diluted share, compared to net loss
of $(1.4) million or $(0.07) per basic and diluted share
in Q2 2022. Net loss was $(3.0) million or
$(0.13) per basic and diluted share in Q1 2023.
Adjusted net loss1 totaled $(1.3) million,
or $(0.05) per diluted share in Q2 2023, compared to
adjusted net loss of $(1.2) million, or $(0.06) per
diluted share, in Q2 2022. Adjusted net
loss1 totaled $(2.6) million, or
$(0.11) per diluted share in Q1 2023.
Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for Q2 2023 was approximately
$(0.4) million, compared to $(0.7) million in Q2 2022.
EBITDA for Q1 2023 was approximately
$(2.4) million.
Adjusted EBITDA1 totaled $(0.4) million in Q2
2023, compared to $(0.7) million in Q2 2022.
Adjusted EBITDA1 totaled $(2.2) million in
Q1 2023.
Backlog at June 30, 2023, was
$34.4 million, including $26.9 million of Performance Improvement
Solutions backlog, and $7.5 million
of Workforce Solutions.
1 Refer to the non-GAAP reconciliation tables at
the end of this press release for a definition of "EBITDA",
"adjusted EBITDA" and "adjusted net income".
CONFERENCE CALL
GSE Systems has scheduled a conference call for today,
August 14, 2023 at 4:30 p.m. ET (1:30 p.m.
PT) to review these results. Interested parties can access
the conference call by dialing (833) 974-2453 or (412) 317-5784 or
can listen via a live Internet webcast at:
https://app.webinar.net/GoqX0AE0bPn. Access to the link is also
available in the Investor Relations section of the Company's
website at: https://www.gses.com/about/investors/.
A teleconference replay of the call will be available for seven
days at (877) 344-7529 or (412) 317-0088, confirmation # 2953239. A
webcast replay will be available in the Investor Relations section
of the Company's website at https://www.gses.com/about/investors/
for 90 days.
ABOUT GSE SOLUTIONS
Proven by more than 50 years of experience in the nuclear power
industry, GSE knows what it takes to help customers deliver
carbon-free electricity safely and reliably. Today, GSE Solutions
leverages top talent, expertise, and technology to help energy
facilities achieve next-level power plant performance. GSE's
advanced Engineering and Workforce Solutions divisions offer
highly specialized training, engineering design, program
compliance, simulation, and technical staffing that reduce risk and
optimize plant operations. With more than 1,100 installations and
hundreds of customers in over 50 countries, GSE delivers
operational excellence. www.gses.com.
FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. These statements reflect our
current expectations concerning future events and results. We use
words such as "expect," "intend," "believe," "may," "will,"
"should," "could," "anticipates," and similar expressions to
identify forward-looking statements, but their absence does not
mean a statement is not forward-looking. These statements are not
guarantees of our future performance and are subject to risks,
uncertainties, and other important factors that could cause our
actual performance or achievements to be materially different from
those we project. For a full discussion of these risks,
uncertainties, and factors, we encourage you to read our documents
on file with the Securities and Exchange Commission, including
those set forth in our periodic reports under the forward-looking
statements and risk factors sections. We do not intend to update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Company
Contact
|
|
Investor
Contact
|
Kyle
Loudermilk
|
|
Lytham
Partners
|
Chief Executive
Officer
|
|
Adam Lowensteiner, Vice
President
|
GSE Systems,
Inc.
|
|
(646)
829-9702
|
(410)
970-7800
|
|
gvp@lythampartners.com
|
GSE SYSTEMS, INC.
AND SUBSIDIARIES
Condensed
Consolidated Statements of Operations
(in thousands,
except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
ended
|
|
|
Six Months ended
|
|
|
|
|
June
30,
|
|
|
June 30,
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Revenue
|
|
$12,387
|
|
$12,745
|
|
$23,260
|
|
$25,020
|
Cost of
revenue
|
|
9,172
|
|
9,573
|
|
17,650
|
|
19,421
|
Gross profit
|
|
3,215
|
|
3,172
|
|
5,610
|
|
5,599
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
3,653
|
|
4,410
|
|
8,441
|
|
8,917
|
Research and
development
|
|
154
|
|
182
|
|
335
|
|
324
|
Depreciation
|
|
53
|
|
72
|
|
101
|
|
144
|
Amortization of
definite-lived intangible assets
|
|
131
|
|
231
|
|
292
|
|
491
|
Total
operating expenses
|
|
3,991
|
|
4,895
|
|
9,169
|
|
9,876
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(776)
|
|
(1,723)
|
|
(3,559)
|
|
(4,277)
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(767)
|
|
(358)
|
|
(1,053)
|
|
(506)
|
Change in fair value
of derivative instruments, net
|
|
171
|
|
695
|
|
240
|
|
114
|
Other income,
net
|
|
(98)
|
|
(72)
|
|
(88)
|
|
(56)
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(1,470)
|
|
(1,458)
|
|
(4,460)
|
|
(4,725)
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit
from) income taxes
|
|
28
|
|
(57)
|
|
(11)
|
|
110
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$(1,498)
|
|
$(1,401)
|
|
$(4,449)
|
|
$(4,835)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
per common share - basic
and diluted
|
|
$(0.06)
|
|
$(0.07)
|
|
$(0.19)
|
|
$(0.23)
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic and
diluted
|
|
24,188,265
|
|
21,033,447
|
|
23,564,133
|
|
21,006,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands,
except share and per share data)
|
|
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(unaudited)
|
|
(audited)
|
ASSETS
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,775
|
|
$
|
2,789
|
Restricted cash,
current
|
|
500
|
|
|
1,052
|
Contract receivables,
net of allowance for credit loss
|
|
10,190
|
|
|
10,064
|
Prepaid expenses and
other current assets
|
|
830
|
|
|
2,165
|
Total current
assets
|
|
13,295
|
|
|
16,070
|
|
|
|
|
|
|
Equipment, software and
leasehold improvements, net
|
|
682
|
|
|
772
|
Software development
costs, net
|
|
646
|
|
|
574
|
Goodwill
|
|
6,299
|
|
|
6,299
|
Intangible assets,
net
|
|
1,395
|
|
|
1,687
|
Restricted cash - long
term
|
|
1,080
|
|
|
535
|
Operating lease
right-of-use assets, net
|
|
609
|
|
|
506
|
Other assets
|
|
42
|
|
|
53
|
Total
assets
|
$
|
24,048
|
|
$
|
26,496
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
liabilities:
|
|
|
|
|
|
Current portion of
long-term note
|
|
851
|
|
|
3,038
|
Accounts
payable
|
|
1,719
|
|
|
1,262
|
Accrued
expenses
|
|
2,490
|
|
|
2,084
|
Accrued
compensation
|
|
1,842
|
|
|
1,071
|
Billings in excess of
revenue earned
|
|
3,157
|
|
|
4,163
|
Accrued
warranty
|
|
276
|
|
|
370
|
Income taxes
payable
|
|
1,731
|
|
|
1,774
|
Derivative
liabilities
|
|
1,718
|
|
|
603
|
Other current
liabilities
|
|
483
|
|
|
1,286
|
Total current
liabilities
|
|
14,267
|
|
|
15,651
|
|
|
|
|
|
|
Long-term note, less
current portion
|
|
1,670
|
|
|
310
|
Operating lease
liabilities noncurrent
|
|
358
|
|
|
160
|
Other noncurrent
liabilities
|
|
214
|
|
|
144
|
Total
liabilities
|
|
16,509
|
|
|
16,265
|
|
|
|
|
|
|
Commitments and
contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Preferred stock $0.01
par value; 2,000,000 shares authorized; no shares issued
and outstanding
|
|
-
|
|
|
-
|
Common stock $0.01 par
value; 60,000,000 shares authorized, 26,401,207 and
24,046,806 shares issued, 24,802,296 and 22,447,895 shares
outstanding,
respectively
|
|
264
|
|
|
240
|
Additional paid-in
capital
|
|
84,641
|
|
|
82,911
|
Accumulated
deficit
|
|
(74,433)
|
|
|
(69,927)
|
Accumulated other
comprehensive income
|
|
66
|
|
|
6
|
Treasury stock at
cost, 1,598,911 shares
|
|
(2,999)
|
|
|
(2,999)
|
Total stockholders'
equity
|
|
7,539
|
|
|
10,231
|
Total liabilities and
stockholders' equity
|
$
|
24,048
|
|
$
|
26,496
|
EBITDA and Adjusted EBITDA Reconciliation
(in thousands)
References to "EBITDA" mean net (loss) income, before
considering interest expense, (benefit from) provision for income
taxes, depreciation and amortization. References to Adjusted EBITDA
excludes stock-based compensation expense and the impact of the
change in fair value of derivative instruments. EBITDA and Adjusted
EBITDA are not measures of financial performance under U.S. GAAP.
Management believes EBITDA and Adjusted EBITDA, in addition to
operating profit, net income and other U.S. GAAP measures, are
useful to investors to evaluate the Company's results because it
excludes certain items that are not directly related to the
Company's core operating performance that may, or could, have a
disproportionate positive or negative impact on our results for any
particular period. Investors should recognize that EBITDA and
Adjusted EBITDA might not be comparable to similarly-titled
measures of other companies. This measure should be considered in
addition to, and not as a substitute for or superior to, any
measure of performance prepared in accordance with U.S. GAAP. A
reconciliation of non-U.S. GAAP EBITDA and Adjusted EBITDA to the
most directly comparable U.S. GAAP measure in accordance with SEC
Regulation G follows:
|
|
|
|
|
|
|
Three Months
ended
|
|
|
Six Months
ended
|
|
|
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net loss
|
|
$(1,498)
|
|
$(1,401)
|
|
$(4,449)
|
|
$(4,835)
|
Interest expense,
net
|
|
767
|
|
358
|
|
1,053
|
|
506
|
(Benefit from)
provision for income taxes
|
|
28
|
|
(57)
|
|
(11)
|
|
110
|
Depreciation and
amortization
|
|
267
|
|
387
|
|
560
|
|
802
|
EBITDA
|
|
(436)
|
|
(713)
|
|
(2,847)
|
|
(3,417)
|
Stock-based
compensation expense
|
|
246
|
|
693
|
|
531
|
|
1,101
|
Change in fair value of
derivative instruments, net
|
|
(171)
|
|
(695)
|
|
(240)
|
|
(114)
|
Adjusted
EBITDA
|
|
$(361)
|
|
$(715)
|
|
$(2,556)
|
|
$(2,430)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Net (Loss) Income and Adjusted EPS
Reconciliation (in thousands, except per share
amounts)
References to Adjusted Net Loss excludes the stock-based
compensation expense, the impact of the change in fair value of
derivative instruments, and amortization of intangible assets.
Adjusted Net Loss and Adjusted Loss per Share (adjusted EPS) are
not measures of financial performance under U.S. GAAP. Management
believes Adjusted Net Loss and Adjusted Loss per Share, in addition
to other U.S. GAAP measures, are useful to investors to evaluate
the Company's results because they exclude certain items that are
not directly related to the Company's core operating performance
and non-cash items that may, or could, have a disproportionate
positive or negative impact on our results for any particular
period, such as stock-based compensation expense. 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
U.S. GAAP. A reconciliation of non-U.S. GAAP Adjusted Net Loss and
Adjusted Loss per common Share to U.S. GAAP net loss, the most
directly comparable U.S. GAAP financial measure, is as follows:
|
|
|
|
|
|
|
Three Months
ended
|
|
|
Six Months
ended
|
|
|
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Net
loss
|
|
(1,498)
|
|
(1,401)
|
|
$(4,449)
|
|
$(4,835)
|
Stock-based
compensation expense
|
|
246
|
|
693
|
|
531
|
|
1,101
|
Change in fair value of
derivative instruments, net
|
|
(171)
|
|
(695)
|
|
(240)
|
|
(114)
|
Amortization of
intangible assets related to acquisitions
|
|
131
|
|
231
|
|
292
|
|
491
|
Adjusted net
loss
|
|
(1,292)
|
|
(1,172)
|
|
$(3,866)
|
|
$(3,357)
|
|
|
|
|
|
|
|
|
|
Adjusted loss per
common share – Diluted
|
|
(0.05)
|
|
(0.06)
|
|
(0.16)
|
|
(0.16)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding – diluted(1)
|
|
24,188,265
|
|
21,033,447
|
|
23,564,133
|
|
21,006,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) During the three and six
months ended June 30, 2023, we reported a U.S. GAAP net loss and an
adjusted net loss. Accordingly, there were no dilutive shares from
RSUs or other dilutive instruments that are included in the
adjusted net loss per share calculation, as all shares were
considered anti-dilutive when calculating the net loss per
share.
|
(1) During the three and six
months ended June 30, 2022 we reported a U.S. GAAP net income
and an adjusted net loss. Accordingly, there were no dilutive
shares from RSUs or other dilutive instruments that are included in
the adjusted net loss per share calculation, as all shares were
considered anti-dilutive when calculating the net loss per
share.
|
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SOURCE GSE Systems, Inc.