GPX - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the GP Strategies First Quarter 2021 Earnings Call. All participants will be in a listen-only mode. [Operator instructions] Please note that this event is being recorded. I'd now like to turn the call over to Ms. Candice Hester, Vice President, Investor Relations. ahead. go Please

Candice Hester

afternoon, quarter Good welcome GP to Thank earnings everyone, call. first XXXX Strategies you. and

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

that including statements are Because results the I to would and expressed risks important Before COVID-XX management's expectations and of and of and statements our uncertainties, these about to results will our related statements. we different statements, remind operations. there by events potential begin, that on are be you upon based forward-looking forward-looking actual factors include are assumptions cause today's the or like pandemic effects could forward-looking materially comments subject these and to business from implied those

today's encourage file the gpstrategies.com. that our the documents website. our read earnings For to a time, will you website for the over of release's section of this complete call. quarterly to webcast with Stedham. posted available XX on SEC, be like to Investors I'd discussion The on which investors are section page the Adam replay of presented days at our on we our A of are today the At also on risks, website slides call following of available are turn being this these

Adam Stedham

you, and welcome, everyone. Thank Candice,

on share of updates execute continue I'll Q&A the first financials today's detailed a some strategy as pleased XXXX XXXX our the with on quarter followed strategic Mike the results we by call, XXXX, share followed company's will For forward, some We're highlights first of quarter initiatives. for to performance, our session. by going QX then

management control while impact sheet. quarter, pandemic improve of the us business margins time last enabled the discussed balance of we gross the the same the and company's the strengthening at active As to

the successfully give the to company's reflected to in performance. and data us navigate share some that efforts first global environment, XXXX going growth complex like through forward. in our confidence continue a opportunities quarter for We are I'd

quarter look changing. as became of But If to our in the COVID the quarter, later Late doing business first of and was customers swiftly began the impact business to it acted that the manage the in you quarter began usual. we world quarter, at see back on clear that XXXX, P&L. our the

Now, a shifting. environment that we later, year believe the is macro

Although our the about this Consistent due there believe environment, strong track. demand will And the year we period give for to for our plans QX several revenue recoveries, to XXXX economic overall is points below world be we are past the favorably, us global last are feel our as growth that services. confidence respond continues same on with data belief. there

indicator global that First, we is the the macro landscape trends in economy. a of seeing the we're of APAC region the believe leading

first XXXX, the business our to of back QX the During was APAC the be business in reaction negatively region customers to impacted by in pulled pandemic. who

QX QX QX this region rest XXXX the revenue world. is our APAC XX% than XXXX at the its of more with APAC ahead recovery Looking line In XXXX, the began trend, of above revenue. of our APAC

growth. the sales Second, economy with of third, XXXX levels XXXX. the and expect QX as XXXX QX QX with end QX historical ended our Axon the opportunities favorable of end total same up same divested the In view row, the our and of opportunity we provides XXXX. roughly combined at sales the sales backlog a is versus QX tracked a growth global XX% very for year. to to of excluding backlog our Comparatively, we versus recovers. backlog quarter last pipeline IC backlog was the QX up of is to the lower backlog The of of backlog XXXX backlog CRM prior the words, and both pipeline business, associated at return period quarter the the And was in significantly year. XX% our in other than QX second our equal XXXX view value

So well-positioned to we're and these in in and seeing positive opportunities the trends believe revenue we're marketplace summary, of take that advantage deliver growth.

balance operating with we're profile and a an gross margin Additionally, improved strong sheet.

Our first in of percentages gross gross we've past highest But during quarter XX like the the vary in years. margin quarter percentage margin to that is out to the XXXX year. first any quarter I'd quarter year from across the achieved point our

Now improve this lowering further G&A that these continue on EBITDA with margin focus resulted have in initiatives a percentages. our improvement to costs will this year

with has call, while engaged of complexities managing in that earnings QX objective call. organizations to look the G&A impact we on and expansion helping in you our next business this the is we to specific we and our model, address transform forward announced remain with next on we global this associated simplifying environment. mid-XXXX costs project track call their that earnings During to during the complete expertise challenge sharing a of the The firm a the

our will earnings employees we focused creates overhead represent focused call. to lastly, decreasing strategy our assets our industries. our by from assets fourth to sale shareholders. our assets during industries, potentially strategy, clients, we costs that we that for committed remain divestiture the We're our drive enable and would targeting value held increased unlock reduce A company our Now value in specific sales the divestiture are outside of which our focus these making our performance complexity by of on last that progress announced for believe and

and integration shareholder improvement allocation and summary, we're forward strategy. During an In focused to capital growth our our strategy deliver confident has the our Strategies GP in for opportunity our long-term of margin call, earnings strategy with ability to look next we our discussing value.

turn quarter. details this he'll and current point, So our you with provide at some call Mike, I'll to regarding over the

Mike Dugan

everyone. Thanks, Adam, afternoon, and good

note is in of million, $XX.X year. or and company The linked the revenue reported $XXX.X calculate the Slide are; COVID-XX. to $X Turning in on of cancellation the drivers revenue XX.X%, a revenue for be impact million, that revenue primary due million which to A down profit the QX decline last reported QX to COVID-XX. from we of how decline we of on directly can gross the and/or X, quick revenue postponement revenue of

the for impact volumes. COVID-XX. have revenue business earnings recall If are or can contracts million prior you decline how variance directly repeat on clients multi-year This we directly that we calls, have COVID-XX related year-over-year, that from expected of in from quantify nature the that is to calculated $X contract based

Our overall calculate since in contract caused disruptions. other in But decreases this by based shorter-term streams conditions COVID-XX the on quantify up expected our declines also by area impacted show impact duration can't macroeconomic specifically this volumes, project-based revenue or are as MD&A. we

North divestiture a to due a Now was a moving due shift business net revenue on. in due our of decrease impact conditions publication in million materially into and of shipment cycle. COVID-XX and timing QX and the million Axon America a to short-term, IC $X.X its is the macroeconomic overall There of to XXXX revenue $X.X APS on decline project-based partially the caused that by

increase offsetting rate the these to $X.X million FX in changes. declines due Finally, revenue in quarter exchange the were partially

resulted of and gross $XX.X The gross profit XX.X%, in gross margin of percent, terms reported QX reported of profit the from or company focus to XXXX our of margin and In improved profit reduced million, up have the operating million, in the implemented in $X.X first last quarter and primarily restructuring is due gross which is company year. gross the XXXX. year fiscal that margin expansion costs in margins improvement initiatives

a there in profit to is of further positive XXXX, QX of comparison the In gross terms comparative. addition,

development publication disaster within $X.X the $X.X million $X.X partially business quarter contract primarily And in with recovery divestitures reduction Solutions Solutions due X, Slide QX drivers directly America are; to of completions. was or shift material segment was a reported a to government in sudden into $X.X North revenue content the work. last decline segment, revenue As and Primary you million, we customer. which offset of Technical Performance period implement due impact; may an actions decline learning that of revenue contract net global of year. and due at a an of offerings recall, America in the decline previously saw due that and Solutions we on to in cost-cutting automotive decline economy segments The revenue out million, the $X.X experienced primarily in of due gross top QX XXXX that saw as certain with align to managed reporting million the Performance in end to or of service in the The $XX.X cost-scaling $XX.X a deliverables with shut in cancellation second million, service XXXX. due to due a million, of of the revenue COVID-XX down Organizational is took QX a of our new along of Performance from could revenue North to increase increase by revenue IC by the QX Axon decline the saw decrease a the services lower million Breaking from the the announced an regional the services, COVID-XX line an last the service to down due primarily revenues. offerings time before drivers to fully postponement decrease increase offerings Automotive XX.X%, a revenue of year, profit services of the

on of QX publication the $X.X For our from previously additional due of which America into was mentioned million XXXX XXXX. revenue down North APS, reported QX of publication QX XXXX color million, in revenue the to publication moved was being $X.X in

$XX.X X%, the pub of QX, EMEA total in QX, the million of remainder the XXXX, in QX $X.X $X.X by this last of million, from revenue increase segment is revenue forecasted The last QX are million $X.X EMEA QX be XXXX which OPS the down impact. revenue postponement QX of APAC, revenue which FX as $XX.X APS emerging are forecasted a Primary in primarily the revenue reported $X.X The of by in million, million, favorable increase the year. decline in revenue $XX EMEA a first in due revenue the in offset of in in in $X.X or that impacted directly QX for drivers drivers million impact. $X.X was $X year. COVID-XX or is a cancellation For $X.X early were more due reported a due services, primarily from decrease region of body X%, XXXX. declines strategic small revenue is to up markets to revenue in million publication decline of in or to business; to start to this million, and showing automotive were in primarily signs of million and normal offsetting closure segment $X.X in and the our OPS, million. there due decrease the shop to of Thailand return the Partially And activity LATAM million our a within region. million primarily consulting a in to due an revenue increase by business within in is COVID, being increase and to our COVID-XX segment, directly in to first was Primary quarter of

In and margin expansion a terms is of profit gross across percent our results gross segment margin at on three delivering and cost-reduction segments. level, strategy all dollars focus

TPS $X.X in In fee business North America in $X.X leadership addition, by a license and sale also QX our sale a services the license our profit practice. XXXX favorably fee OPS million of segment within gross the million impacted was energy

consistent which sales, in license was a gross XX.X%. basis, still Excluding don't North typically segment the the recur on America these margin

due not offsetting Axon the and legal other IC two SG&A the XX. of outside QX of from of $XX.X Slide the divestiture assets Partially G&A associated decrease of decreases sale in was administrative $X.X held for million these bad million, General are $X.X of million that cost-reduction net is $X.X amortization, decrease expense with QX costs labor primarily initiatives; in business. for a $X.X million in primary debt expenses various or and to continue a reserve up million, and is which was the was to investment million and XXXX marketing global million, million reduction on basis. for resources. a expense and $X.X on going-forward $X.X a drivers sales in restructuring XXXX. on change down due to a Moving QX expected Sales of adjustments; The are; due expenses XX.X% million to increased $X.X which primarily $X.X to

were to business decreased on the million the the XXXX, Interest division certain division there for in is of $X.X certain QX on and tax no being alternative totaled Slide on of of is items. by XX few, $X.X The aimed of in upon contingent which to a and the achieved. in our a efficiencies the Gain to restructuring This to loss zero. touch QX where to fuels million not Moving transformation in quarter, at other sale of also XXXX. to million, consideration There items was mid-year were resulted initiative increasing million alternative the contingent income milestones expected the which expense of relates G&A charges $X.X for expense P&L on a function. inventory down $X.X loss associated of restructuring XXXX. within initiative Change our million to in body discrete divestitures in relates due impacted accounting the by million rate in fuels based debt a sale automotive now Thailand. reduced effective complete QX on fair value be was $X.X divestiture shop with the QX to our related of of sale closing $X.X

rate XXXX tax be the of the the is XX%. For to in XX% forecasted to year, effective range

the summary was $X.XX Adjusted QX we last of adjusted adjusting Moving QX which special earnings than up $X.X on million, million XXXX. reported the which $X.X EBITDA adjusted reported EPS is more XX. year. in from $X.XX, Slide on adjusted for QX reported for to After QX is of share earnings in the for items, EBITDA per

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

our on debt flow ago XX item deferred March two of process ship remainder QX the COVID of things, $X.X as and cash QX when to will XXXX million. on is $XXX.X Moving on sheet work was Slide on XXXX was deferred XXXX. million in to XX, for million related than increase just flow relief. less payment XX. balance by, to tax Cash considering the the the year, publications XXXX June year-end of of Operating balance $X.X sheet had COVID-XX liability note was in months impacted liability related $X.X a some XX, is with the performance Debt million. to an zero One we XXXX flow drivers QX associated of that the among other current cash relief in for in and

held is million, $XX.X sheet the for of the which comprised $X for non-target year remainder will has now to million, pay sale sale accounts point mostly right-of-use to I pending update. goodwill, the expect call a assets the deferred XXXX. Adam. this that million businesses operating balance are assets. that We The unbilled by with approximately which X/XX liabilities. revenue, concludes now of financial being balance carve-out and sale I two is are in revenue would receivable And for mostly the industries. of paid lease out our end held our and the of $X.X back turn liabilities This serve

Adam Stedham

Mike. you, Thank

with the and And no recovery facility margin have we an debt, our a so pleased first significant availability our we macroeconomic we're believe to blow. quarter And that under that higher economic that finished credit industry focused profile. a during wins are the historically pushed strategy, beginning

we'd answers. point, like call for up and this to at the So open questions

Operator

go First instructions] of question from Jeff [Operator ROTH Please comes Martin ahead. Capital.

Jeff Martin

Adam How morning, are you? Good Mike. Thanks. and

Adam Stedham

Great, are Jeff. How you?

Jeff Martin

America, was Doing geographies specific of we're of mean, if in think of back But terms reopening. give on push-outs things Thank APAC. Do you. a you starting path well. cancellations? Are specifically a you sense waning COVID North the of us I open there are impact you I wondering touched and progressing to could in geographies? up. how on terms

Adam Stedham

to different slower general, start faster we Europe in of you North have answer little Japan, a to that think paces, answer Geographically, us. up. markets open are really, different In up it seeing reschedule, two us. so are Parts for America slower. to ways. have that at for to been the been I start So China opening question, still has

by So APAC as ahead mentioned. of it's the case. overall the rest case of world, we is

chip se definitely is or slow for the that's say if we're negatively eye case. industry, impact things It's per potentially, keeping believe be would different industry. The That paces. not an that right not The bounce not you second it we're any look in is could thing on. we're seeing it now impact. that. different to eye back keeping this At a it to will on an COVID And us by up is impacting see but do at the you faster, call could something shortage it to have point, that if now, We don't have something down. due industries But non-COVID a I indication. we even automotive right ramping

long feel government, was Our our like on industry as the We during recovering aerospace trends. that's not high-tech industry well. negatively COVID doing And impacted and global defense is crisis.

at our think isn't same to geographic much going also And shifts. speed geographic were that is organizations pretty obviously trends. with one rebounding I it So then as it's very other impacted. services much business that by financial line the in overall, But ramp-up the is influenced

I long But looking gave So answer, it's hopefully, what you're you a Jeff. for.

Jeff Martin

on you great. was that's No, touched And going auto ask. to question the I

Okay.

the help In kind if activity across the build, in could that of the board? it's most parcel you you're out? of Which this pipeline seeing terms areas or

Adam Stedham

calls then, encouraging our What's very having We activity. it's able to for is a year-over-year anticipate training hope to Leadership we development that's to that's very strong is updates automotive that it's recovering of business smaller And strong as line continuing. growth, is service our training; And now, rebound. us, automotive well. but is a an the an area optimistic area about. industry beginning us we're be across around So some give see that that. for on board. future But outsourcing the right

of the slow going challenges we recovery. Just facing currency see down to industry the is to are that be now, clear, don't that right as

Jeff Martin

you. Thank me. for it That's great. Okay,

Adam Stedham

Thank you, Jeff.

Mike Dugan

Jeff. Thanks,

Operator

Zach comes instructions] B. go Riley with next The from Cummins ahead. question Thank you. FBR. Please [Operator

Zach Cummins

Yes. don't had quarter-to-quarter. at the Is that I it could day, you see on to call, you expectation provide and the trends still to XXXX Hi, But congrats continued to normal in QX. the the juncture? Adam. typically Mike seasonal guidance. progress make likely the It's in return and from I good that here this nice last during we see you, assumptions know here fair think business those

Adam Stedham

lowest normal over quarters, QX frequent if So the say, took and which you quarters. our would would QX is, years, most trend, be, QX our the be XX and be highest last trend would a QX

single typical trend. been that hasn't year, most case is that Now the the but every

because this more that For going little I it surprise to see from think bit it'll it's QX, not and QX of likely as be year, be from quarter-over-quarter where impact that not much a much a we of wouldn't is QX trend recovery that that jump drop likely trend increase. impacted the to anticipate to me in global QX will the as flatten more

happen Now result if we're we of in on normal are that's or you happen guidance that think as the to that. way no of the that. I a view look may going recovery that's and of realistic you our pattern, predicting a that at what giving superimpose environment point But quarterly macroeconomic

Zach Cummins

of demand virtual sessions? you Understood. and seeing was some curious for That's your for Or type you've people these have in-person in that Are helpful. know is there And structured-led training. the in terms seen still for just training I strong to a then, events? outsourced Adam, the traction engagements. of lot more of a demand mix were referencing uptick for you I of

Adam Stedham

the of to virtual seeing the is are is not emergence addition the what down, but going we training. training, training in – there virtual So face-to-face we're seeing

trainings but so to training, virtual face face, are far, up from away virtual moving are virtual and for to the face. – So are us, not involve that people they ramping both new back to face people

Zach Cummins

make investments the Understood. into environment, marketing. to forward into how it improving pace more of And investment think to continue demand improving seems you then, sales and about we economic that you move I as conditions? mean, with started should

Adam Stedham

strategy, we into focus we talked call I are how our stabilized to giving our earnings a moving So allocation forward expansions, into our a level. some and more next what capital margin I margin to level, our strategy. about is look on expansion plays insights it earlier think

In addition really give think to that is. information what expectation is that, cost on strategy our we'll our I more sales

level. more sales of or in stable, more as coming modeling and Looking I on up do are forward, what a moving total through to percentage cost you of But terms – think of defined, cost how think of we're a that having as should stable percentage revenue. that budgetable sales that. We're we revenues a long-term

Zach Cummins

And period then, anywhere you fair performance, Mike, progress mean, generally, the EBITDA on that the the should financial a think some terms appreciate in we for from historically, you've Understood. the think I one I tax outlining flow. of deferred of flow liabilities. I as and to XX% of year? of cash question converted XX% payroll payback adjusted through free really about Is side. just assumption this? cash this still And to kind we But

Mike Dugan

Yes.

But converted that higher growth. our think be we're lower I headwinds there's with bit cash assumption. and that interest, might that the capital also of up little as That's back associated like been that the to growing perhaps and the with is a have flow be revenue lower we're offset debt. a to might a It declines think model. the through than we that as in going interest working capital to revenue lower into an historical of with I Much cash fair flow. terms positive the cash, bit starting had little we working build that

XX% leave EBITDA then, conversion XX% flow I – metric. that to good. XX% And good that that as a think I is cash So probably to probably of would

Zach Cummins

Understood. questions, again a of taking strong and That's start year. for on my thanks congrats the progress and helpful. Well,

Mike Dugan

Thanks.

Adam Stedham

Zach. Thanks,

Operator

question-and-answer This concludes our session.

to closing Mr. ahead. Please go Stedham over remarks. to call Now Adam the I'd like turn back for

Adam Stedham

you. Thank

everybody year we areas continuing through where disciplined we able of over tied along competitive the excited a that we been we specific are that shareholder we're last a on we related the opportunities win. a navigate there And happy of We're some not Once unique to to to So we've focusing that appreciate fairly call. to where again, our ways other And be enable value we that to are. path, the are joining strategy advantage think and that that a in I have and are we strategy. time in half. ways, can strategic believe believe assets

we look quarter. next So forward call earnings our to

Operator

has presentation. for The Thank attending now conference concluded. today's you you. Thank

You may disconnect. now

GP Strategies (GPX) 8 May 212021 Q1 Earnings call transcript