GPX - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the GP Strategies, Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Ann Blank, Vice President of Investor Relations. ahead. go Please,

Ann Blank

morning, Quarter Good welcome GP to Thank Earnings everyone, Call. Second XXXX Strategies, you. and

On today Financial Stedham, President; the Officer; and Executive call Mike are Scott Dugan, Chief Officer. Chief Greenberg, Adam

like be Before we will forward-looking expectations. materially cause and different which statements our remind risks that subject certain that today's from include to to are uncertainties begin, comments you actual would I could results to

we which encourage file For posted you read a these complete section on SEC, discussion our at Investors with the risks, the website gpstrategies.com. are of on documents our to of

available A today's our website. replay Investors of are also this webcast slides earnings The the for will being following the be releases days on of today of are on available section XX our that presented website call. quarterly page

turn I'd the over time, Greenberg. to Scott this like our call CEO, At to

Scott Greenberg

presentation. to Thank second includes continue use you, Strategies. our our quarterly we analysis presentation of in quarter GP your XXXX WebEx you'll and Good which will morning call. Today informative and to Hopefully Ann. format, useful find this welcome conference a

Adam's on overview global then call, Adam, with in-depth I'll President, brief quarter and will updates typical provide summary give a we of results analysis; our presentation, our conclude Dugan, the the Mike will initiate the present session. key the To XXXX, for After I'll then initiatives. CFO, financial of will second our an provide a Q&A

quarter reported reinforces second future. Strategies This our the GP for XXXX results. morning outlook The before market the second positive its financial company's quarter opened,

currency gross and by These results revenue significant despite pleased U.S. negatively in gross both second respectively. We decline exchange $X.X quarter. profit profit and impacted which a to reported our revenue and million achieved rates, dollar report $X.X million are in foreign record were the

of in service XXXX. results software quarter million these of of sale In engineering technical $X.X license and in the achieve lack we were able the which a group, had agreement to occurring despite second our addition, a

addition, seeing revenue. significant and structure opportunities, new are for our In future with sales we new traction our increased backlog gaining

approximately the corresponding period which Our up is million, over at is backlog $XXX of XXXX. June XX% from

is basis, stream major of stream year-to-year that XX% attribute over that our and a is our the A typically revenue over recurring we've considered of derived from on prior revenue positive our in is had year. customers company XX%

new expand company. XXX While our Global wallet to always customer approximately winning primary We have is a of clients currently customer our share as strategy with is of base. the XXX positive, the corporations

said, With that the turn being over I'll Adam. to call

Adam Stedham

Thank you, Scott.

the sales about made strategy. our optimistic be we've changes to to continue We

not Our growth but growth to our growth is will that increases the backlog pipeline. continue level, in the and up both the rate still with at We're desired we're and further. organic ramp pleased expect experiencing we

acquisition to cost Strategies a shared us. very three of growth Now, new a synergies we acquisitions. acquisitions, implementing integrating we're pro forma functioning calls the and acquisitions couple the need to realizing strategy. more progress We in we're expectations, positive. into that completed cross-selling make This still well within organizations approach GP revenue above historical are between their well generating the company is on for The XXXX revenues experiencing and our we is acquisitions ago, integration very but

services Heading contracts third positively into previously managed announced the learning quarter the beyond. QX, and will to contribute

in skills turning reached quarter. the will year year we've third addition, which job point the in growth In versus the experience U.K.

a last had wins to couple of our that call. announce I'm pleased we've additional since

revenue the million a support Strategies launch will the $X of engineering million GP been We selected approximately as in be technical years. services over mobile in This project to NASA effort in for estimated generate team platform Our to the XXXX. effort. has five $XX anticipate and development part is organization next revenue approximately

for contract platform $X services years We've approximately world's provider. also social build the over learning managed the million leading for to media experiences two next a custom learning won

and months, frequency multi-million last several the wins dollar XX past the of Over well we're multi-year, years. number above experiencing the is

begin trajectory compound these that to GP to desire. wins realize all the help we Looking should forward,

our effort business, services we're Now, we making Americas. Strategies automotive and GP Between automotive to within market. European into APAC and and expand significant the a TTi, significant customers have legacy across the capabilities

our of We manufacturers automotive XX of plan the Strategies. With to largest to the and combination leverage us GP capability. relationships a give now truly two expand clients the European are coverage these global companies,

manufacturer. a Recently, car won training leading million $X project development German luxury we with a

the submitted in as In proposals within we market. efforts track. expansion $XX are currently very At our European on specifically we automotive automotive speak, have European addition, million much point, this

conversation bit them a them within give Now, want gross business overall I'd put Mike to is discuss but the plan. context the I to details, QX. into influences margins just discuss more a and on to shift like bit of to going

number a and license From for of property. quarter During was software comparison had XXXX low of very we perspective, year-versus-year abnormally license a sales intellectual the revenues. quarter QX strong an for

occurs margins when During between license timing the the year can gross shift quarters. sales of

or quarter-versus-quarter of the by licensed a year. timing the influenced, As result, when comparisons could positively be deals occur negatively simply in

on Scott currency influence changing quarter. Now, Scott already further profit already bit a of the mentioned explaining mentioned $XXX,XXX the little the gross margin. in gears gross negative

profitability confident, to we're we're slightly margin profile but TTi GP's the than margin confident match the the shifting end more profile, by GP's the of addition, be schedule will margins In to year. aligned ever, behind on that

like will old business QX compared per year-versus-year, program reduced items this business, quarter, audit that discussing, all to to in $X The QX an our look are margin out, but has been very the we've to skills revenues a to continues that The percent for of These this going a million strong be cost continuing GP close and up the our growth business for for and forward. business sales new ramp. slightly model. higher additional job and operating rolled expense sales

opportunity the we're TTi we for shareholders, arisen more losses we're associated of part QX. in and QX GP want In in approximately that opportunity a to about $XXX,XXX acquisition. our that's we mention within to significant the investment, information I this has share positive plans automotive But incurred Lastly, has very opportunity. why making this finalizing as a industry, believe with opportunity that this possibility and the offers

at point now, turn So over detailed to Mike this I'd like analysis. more to a the for call financial

Michael Dugan

$XXX.X QX last Starting the year. $XX.X is eight Thanks revenue Adam $XXX.X with and million which reported everyone. up in revenue slide or million, QX million XX.X% presentation, morning of and good profit gross on of of reported revenue from we of

exchange million, million or X.X% revenue down Workforce the due $X foreign segment. in headwinds to a segment, decrease out of as $X.X which foreign currency result is two rates. the revenue by for of practices reported these Breaking offsetting revenue $XX.X modest Partially in the a revenue million the of increases in QX in The from QX was Excellence this is reported changes decline segment currency of each revenue XXXX.

$X.X learning government, million skills in decrease million to in increase for and development The MLS offset practice managed a training training was U.K. the by from a increase acquisition, provided a net a due $X.X was million content services. million, of XXXX, which Axon and services the primarily contributed partially vocational net completed decrease increase IC $X.X and this X, revenue to May $X.X

engineering in The primarily U.S. recovery disaster million, were million demilitarization increase $X.X repeat ETS due increase services, to $X.X not QX revenue in million due XXXX, $X.X in by of did a practice net services and of partially these technical to contributed a $X.X and services a energy a million that sale for services. net a decrease 'XX, our $X.X increases decrease offset that Government, increase chemical in during in training of other business, in software the million license and

segment revenue of which the the in $XX.X BTS million The Business reported or drivers is up from QX revenue million, $XX.X of the Transformation revenue segment. 'XX, XX.X% QX Services in bridging reported

$XX were a new contributed in to practice a which primarily due acquisitions, a in revenue increase million completed XXXX, to and due in $X.X training launch Global enablement vehicle net sales net automotive TTi sales services, for of increase Europe and largely to million due automotive $XX.X the events TTi a The to a clients, increase segment increase partially changes million was implementation decrease in rates. consulting capital due which system increases management net practice, currency an development in $X.X offset by $X.X to by human were in revenue our primarily partially the BTS exchange due in increase The services, in decline million services. offset foreign million, strategic organizational a

sales $X.X million segment, Within revenue, included the had the publication than enablement of in XXXX revenue more this year. QX $X.X was of recorded in of QX million that last which practice publication revenue

publication year, in in into $XX.X is publication delivery of $X.X revenue publication projecting million $X.X QX. XXXX. of of to are compared We $XX.X fall in QX XXXX million million, shifting to to forecasted is million for versus XXXX, Overall as the the be a be QX revenue

up terms X.X% reported million, from In down XX.X% we is which in 'XX. gross reported QX $XX.X of million profit gross $X.X of $XX.X The which reported profit, QX profit of 'XX. Workforce million gross the QX million, is of Excellence profit in or from million reported segment of in gross profit $X.X or gross the $XX QX

well in are Primary that $X.X the in the revenue sale a in million in software to changes as due decreases discussed million gross due in gross the foreign in due to our the exchange did gross a drivers a decrease practice as profit recur energy decrease XXXX, primarily in ETS previously rates. profit $X.X not of decrease noted, in to practice, license in profit currency previously MLS

million the profit $X.X above. of were and reported Services of The profit increases by million up profit Gross which noted the TTi segment is to in gross QX due Business contributed $X.X segment gross this from in $X.X of acquisition reported increases QX profit revenue the or gross primarily XX.X% Transformation in 'XX. the million,

above on Moving on stripping year-to-date revenue for in was financial organic the from forma insight the currency some approximately recent impact statements pro foreign and revenue, X.X%. the slide of our of headwinds the projected growth is nine, performance year-to-date the what at purchase, time our out acquisitions to after including

not QX at at our has in of XXXX X.X% rate the XXXX. Investor we a year-to-date for year, and trend a growth in positive Day organic QX X.X% the is that organic While from targeted growth rate yet a flipped the of announced last increase negative X% of to

move backlog towards to growth look targeted to trend As strong our organic pipeline would rate. the contract forward, continue we support and our proposal

quarter per from expense continued and decrease QX We expenses news are Primary Offsetting SG&A to approximately G&A, the QX million million including to a legal QX to $X.X amortization non-recurring includes in on increase seek a million administrative related finalize platform. QX X.X% $X.X of during or G&A optimization ERP expenses. and net these ERP on expenses $X.X million expense are other in incur plan to financial incurred XX, acquisition. our million $X.X of general was million expect slide up Moving $X.X ERP support G&A TTi quarter-over-quarter. for increases the drivers for stabilization of system. optimization do and we as $X.X the and

expense sales and being inside Sales in million QX $X.X quarter-over-quarter, and the program. centralization account marketing was up the management business with investment the our personnel, driver development for of

slide the the to TTi integration. Moving in million. gain $X.X on items was initiatives. and P&L XXXX, change savings with prior year-to-date other charges year-to-date is cost fair we've in In on XXXX, This related of restructuring consideration compares QX, of million million with $X.X XX, which $X.X contingent in to on connection reorganization incurred value associated

balance there sheet. no consideration As our on XX, June XXXX of more are contingent liabilities

$X.X rates million due QX million Interest expense non-recurring credit with XXXX. expense interest VAT-related and of reversal $X facility higher a a is in of $X.X up interest the to to borrowings due under contingent million, and

currency XXXX. is in $X.X a foreign what with million line losses projecting effective tax quarter-over-quarter, due the year-to-date primarily of income And we the has improvement XX.X%, year. for which income rate are QX to Other was finally, in lower

income to on last $X.X per of summary net for to QX $X.XX QX was share earnings the million QX for compared year, diluted was in to on and $X.XX in $X.X Moving XX, million of compared earnings year. last QX slide

end the adjusted on adjusted refer EPS presentation. this of the appendices to details you and can For at EBITDA,

step some related sheet year-to-date cash primary slide in disruption flow balance billings Moving negative calls, as mentioned $X.X been is Free prior has earnings The unbilled on at financial $XX.X from a driver in $X.X QX compared cash, million delay to XX the new AR down June one launching XXXX, and this is year-end we Oracle to system. as In is revenue up million. drivers the to to XX. on million. delay moved closer

the While did June convert QX, was balance the approximately to in cash XX our of XX. million, as billings which million of from not as push in $XX cash July is QX up $XX.X balance

cash of on confident behind and amount the to minor QX. impact bulk system as will cash a up be AR, be the related still financial flow tied and feel in into may certainly end we we there the QX While new of us delayed going billings that

QX the end XX, backlog million, million up to page $XXX or on $XXX.X million Turning $XX is to backlog backlog at compared which XX% XXXX as of of QX XXXX. of was

of our as the backlog of TTi recognized backlog up backlog XX.X% million of over the $XX.X Excluding months. or within is QX XX% revenue XXXX. next Approximately be $XX XX will million,

the concludes the This to update. financial call Scott. I'll turn back

Scott Greenberg

you, Thank Mike.

you we from heard Adam, are in long-term As achieving Mike objectives. and progress making our

trend expenses in integration of TTi generating that XXXX and beyond. and awards outsourcing G&A of revenue expect details continued future. also new the second about impacting half will and we heard the the begin how gave Mike to of You've it in

our priority generating accomplished three year. the ratios. to our ways: the of would flow assets to balance cash improving with free to is enter as and increasing balance the strengthening EBITDA; going two, and into major will This XXXX stronger far selected objectives, a sheet be sheet reduce One, like reduce non-core debt; company’s three, We leverage debt. As overall sale in

the With that moderator, it over turn Q&A I'll session. to

Operator

comes Instructions] Jeff with The first from Martin go Please Capital. Roth question [Operator ahead.

Jeff Martin

How are Thanks. morning, guys. Good you?

Scott Greenberg

Good morning.

Adam Stedham

Good morning.

Jeff Martin

on project win. Congratulations the NASA

Adam Stedham

Say, thank you.

Jeff Martin

project give profile us It's to that's roll how but how next give what – or it this that – gross you year, affect some of like will into that us could seems the margin ramp insight your it is going out you XXXX? a how impact margins? in will small and relatively year, Could Adam,

Adam Stedham

no. So, yes and

know profile of all is that's it margin The is project a and the doesn't another. that that, planning. put now of it end So with GP design margins; we're the design year the and between of stream the you of out we revenue direction one of aligned traditional plan or together how because stand the is beginning doing and the nature

press not to release The understand hit. need flow, revenue is press need reason design feel we a revenue better, really because we that have and us give little stream because understanding looking will will released we the we and that yet the we where – before forward that this this, plan that

So we're at position way to a not now or say another. one right

specifically work we phase one lumpy. have the I will how be It's is some hit say of length the you it one and land, going those expect place. we'll not there divided of very, going more over project, it’s this, all to efforts to where going that's very but in I that's know this to quarter. do after design of this into mean

Scott Greenberg

it should a be spread evenly quarterly on once up, ramps it basis. Yeah,

Jeff Martin

in during margin you of on of scale. like improvement balance of that then versus terms it you're this terms and curious half the of comment the the out margin TTi just that. and great, I pushing was and if improvements, the some year margin with for are sounds in could delays by seems of like impacting expectations timing Okay, terms year, the end it the towards in second the

Michael Dugan

yeah. Well,

mentioned, we're line and transition the the TTi we through that Adam to year, by end rolling of be of with rest As expect in with margins. the the the

Scott Greenberg

results. when they Jeff, Hey to our year the we about the a that run we were a of revenue, announced of expected TTi, million rate $X.X acquisition plus $XX million adding EBITDA based Yes. upon of

be to QX expect contribution We of at on that by that. type

you last the could that of results see license to million, $X.X about far deal directly as went As of margins, other that talk being we year's when the in margin.

X% impacted positively license. was margin their close profit year's to from by last So

will some but our our of impact general be margin should mentioned as and well, initiatives profile improving in how the our Depending overall TTi improves, license as falls, on an Adam the business fourth roll have by on that how – quarter.

Jeff Martin

Do Okay, next visibility the leads question front. potential deals have and into to the then that my quarter? magnitude on and deal and third any of fourth license you timing license for

Scott Greenberg

quarter. But that's we're $XXX,XXX hit in of our anything? We again, already in others. we're mean you license we closing, groups to to as of starting as and going of far the working the want add Adam, quarter, do of know QX. $XXX,XXX one just I Yes. deals know on

Adam Stedham

No. exactly right. That's

Jeff Martin

my Thanks taking great. Okay, questions. for

Scott Greenberg

Thank you, Jeff.

Operator

line Barrington Next ahead. Alex from of question Research. comes from Please Paris the go

Chris Howe

in Good sitting Alex. Chris morning, This everyone. for is

Scott Greenberg

Chris. Hi,

Chris Howe

Hi.

questions had quick Just some here.

Following this the about last would the up experiencing how as your to deal, remainder backlog you're NASA there, ramp contract or the question convert? the of what on in as the the length far the as of of it the contract, starts to you're compare size what seeing contract,

Adam Stedham

next Yes. putting you long-term currently is backlog, us backlog our the backlog XX-month in it this an backlog, at revenue than many like just funded, measures A occurring would XX% is mean and in be backlog we over a when of compared our would unusual though funded even other the that's Strategies mean, contracts, more have contract our and I government job like of how amount of typically period. commercial GP most to so longer-term funded look in industries. our for we're outlier more

Scott Greenberg

And that not year the even award. of of our announcement just We QX, clear, backlog. be have do contract numbers portion contract in reported that backlog one for an is to in

Chris Howe

year then And we should Oh to accrue learning $X expect contract, that as remainder makes managed services far revenue okay, and that the for how into as of sense. the XXXX? million the

Adam Stedham

is flat. It's just It basically straight line.

Scott Greenberg

content about – of development, do learning that we you work. in hope of able different one the thing services one contract nature. the that managed of expand you're the customer to things learning leadership this managed bring to – GP The a managed areas that is and at into hope get that if is Strategies, look learning training, Now, history when is thing The service yeah, the you services.

that just their able large our lot is of most revenue iceberg, a like arena. service learning to we'll customers entree our grow contracts, be it hoping, we're the tip the managed just of this the this client and So of and into like significantly in

Chris Howe

And question in share XX% Okay, you over time, as wallet you then how Can in to that the a on that you some did should existing reoccurring grow, revenue, correct? of And provide that's the that about share. helpful. within accounts? expanding wallet me brings color quarter grow

Adam Stedham

The well more Yes. doing time. wallet overall services for wallet that a over financial terms improvement -- to we're that aggressively The most say area across to industries. is from that we're grow well looking it focus is on I share there. in perspective, goal doing would share we're one of

getting wallet we we've not making the and shifting that that to we're We're strategic some growth changes so key our getting, our doing in markets share in hoped wallet the within services is that and improvement plan, strategy But there. financial key and share segments we're other our planning get on identified well.

Scott Greenberg

is why you the the industry fact the largest that's our brought And which automobile up single Adam know industry, in company. in

everything We at by overall expand with of obviously it's spend volume money largest amount them, we're doing Motors are all a XX their practice percentage we Supplier Year of the the that we're doing the we're as unit look with wallet to well. award, in in now only small General this and And there, won currently dealing the if world. of manufacturing of including hoping you really with manufacturers

Chris Howe

That's all color. now. I you. have the Appreciate questions Thank for the

Operator

FBR. B. line The Cummins Please comes Riley next from ahead. Instructions] of the from question [Operator go Zach

Zach Cummins

morning everyone. Hi, good

Scott Greenberg

Good morning.

Zach Cummins

you you’re of when trying be more getting at what into million decisions some these expand really maybe just proposals us and you Yeah, automotive stage to on to start right an on at on proposals expanding this Can give the Europe proposals? over in sector, $XX so some these you'll point, on in update your now. focus

Adam Stedham

stages. various it's So

of slip are by anticipate point, all once various but They're quarter. slip, the its those proposals; There's decision So actually quarter, proposal deadline decisions – all hearing of on in them. stages. we we they're are all if on they the at multiple hearing anticipate couple a a within the within the that they so could all the

specific are have In proposal, say if addition to have and have a business done have requesting already that activities. some they specific or that that they submitted means we that, scope to looking that. quotes us project a complete done, to job that looking they development that we to to upfront are we for have on tender a put out a there's But have tender a

the of results majority we the So the proposals. I that, this of quarter end of know would expect would by for those

Zach Cummins

that at this or then into you chance nature of in the is And did coming just helpful. E&TS Is software there just sales, some that that pipeline had year? so license that to potential coming that's repeat million point later one-time Understood, was a a this back business the of in portion back year. is not $X.X this XQ

Adam Stedham

So They abnormally happen year, quarter license that when are which large I in those that large had and every of positive difficult predict it's hit, would last when they QX don't it's we happened last and very license say positive they a in. sale, year. the to sales and will come of quarter

that With a year track record a that many does come sale in, right. said, license have large we

size know, that it's the have is is time in. that a up. Most causes to of It's of track software out you're of price going the looking record one, to really go the big big come nature that the a you you fishing. the to don't So a one but our facility there you implement of really catch kind

difficult So is there predict to just marketplace still other are in. many size. there. going when rich of they available to opportunities licensed out with It's The that are customers sales come for

Scott Greenberg

the if Zach, look the The history to – are if sales you normal range. normalize the $XXX,XXX of would to had had one it, or more quarters thing license we say in $XXX,XXX I when most you though they at the

you one million, that large, strategies. $X.X GP looked was that the abnormally when at So

would in $XXX,XXX minimal is typically and not very not transaction, the $XXX,XXX it $X.X expect to million of while quarter, So type as well. a we reoccurring

Zach Cummins

how year-over-year return job skills QX QX, growth can and bit inflection Got here that should it, that's more and structure the gross but changes practice, the U.K. in it of helpful. little and we the at about the the to cost incremental there you about in a in year? like margin of And thinking the be contribution point the should terms half talk hit second in both sounds

Adam Stedham

a has so so to cost change third-party is externally, – structure have you Sure, adds simply the is new fund we requirement cost to you happen audit the that that audit structure. a that in have included to that the there's that

addition to the with In team added that, we've sales that. now business a to

really the we're So most cost sales of our and our XX% what looking a at probably audit this gross margins. between before. net-net shift This function, impact profitable currently experiencing on we're XX% – line was

this in the whole have still the place gross margin impact level gross down We company. It won't plans one that margin maybe of at a X% on at point say in to gross of highest number, our be the businesses just get margins, which to before. was the lower be will it

Scott Greenberg

things healthcare get them, then which to offering revenue our back what's And you from childcare. and XXX% derived to into like close if smaller the go where an accomplished. did large if two of something pay and home of make had to XX%, we rules our I overall companies and the companies when years, we've skills could and funding to occurred, revenue, small changed was XXX% add they And for pivot companies go we

today now, derived of derived XX% companies XX% being So is by by and companies. revenue large is our approximately small being

but in to yet, lowered companies, have not however X% co-pay they X%. because small X%. lowered uptick It's to it the XX% in at We they from from have XX% April an seen

now that's well, pretty of what with small those combination start the feel a the confident will are is traction third our beyond. we seeing stream that offering back, but gaining growing coming as providers we So that we're have and of and a providers new together, lot revenue two quarter a why now through in

Zach Cummins

what comfortable would that's leverage question seems talk year you Can And really about kind for second half sheet. the long-term helpful. like final your balance operating going strengthening of of the to of ratio this bigger Scott, me. forward? where thinking of we then for business, is should one priorities in just you a the sort Understood, be feel It

Scott Greenberg

one Yes, below get down agree XXX% it I would to two mean on or below. I Mike like this and long-term and we two;

Zach Cummins

Understood, for questions this helpful. half of of the my and in thanks that's Well, best luck second year. taking

Scott Greenberg

Okay, thank you.

Adam Stedham

Thanks Zach.

Operator

This concludes go remarks. presenters the like the conference for the closing ahead. question-and-answer to would turn back session. I any over to Please

Scott Greenberg

do We conferences look call and moderator. and the investor joining at quarterly appreciate today to both our we forward you updating you on next Thanks call.

thank very again, So you much.

Operator

now The you presentation. Thank attending conference today’s for is concluded.

You may now disconnect.

GP Strategies (GPX) 4 Aug 192019 Q2 Earnings call transcript