GVP - Earnings call transcript Q1 2019

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Operator

Greetings, and welcome to the GSE Systems First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure Group. your my with Kalle now Equity The is to host, introduce Ahl, It ahead, go Please sir.

Kalle Ahl

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

should, expressions that a expectations remind of materially during Before could risks from and Section that achievements expect, statements XXE future amended are used their results. are Act Securities within anticipate, concerning Section factors Securities statements call like is Act I will, of and may, we statements, forward-looking to or of to be does future of performance uncertainties Words absence meaning could, statements of These begin, maybe and guarantees considered statement are the words statements but course not reflect to forward-looking the and important identify XXXX. similar and projected. cause subject XXA not that other mean as made the different of of performance this would as current and not everyone actual events forward-looking. These such the to are believe, XXXX those intend,

Principles, superior results, allocation. comparisons the by Since This believes measures comparable performance benefit On forward-looking otherwise. measures decisions and measures of useful, as of historical with results Risk or both as operating non-GAAP or provide management whether evaluate non-GAAP measures operating statements Securities a any call, for to GSE's to Generally can a factors, operating figures performance of intend be their information you meaningful future not and a be are GAAP any substitute to believes to measure recognize management's prepared GAAP that as employee resource the read result GSE's income, most to reconciliation measures the uncertainties, net these measures to non-GAAP SEC competitors. Management with full risks, company's well directly Regulation G file refer to these accordance be make those investors documents information revise business its events, certain to under other as compensation, accordance finds GAAP. Statements forth Commission, addition Exchange Forward-Looking and found which addition performance. to in in new or not non-GAAP EBITDA, on A in Kyle Accounting other of figures, and over comparable reports Mr. in discussion should as the or with the and to like similarly GSE's non-GAAP I Loudermilk, Factors to encouraged such For filed under Investors to evaluating turn internal budgeting, and including section. GSE measures, results. are would not company's call supplemental in please now Kyle, these ahead. of management These the of Chief facilitates GSE go operational GAAP. companies. uses and GSE performance planning, update financial of set information, the these may and does GAAP to regarding periodic Management Executive that should Systems. not these of EBITDA, measures adjusted in Officer that titled considered release. Accepted of EPS, adjusted earnings adjusted might may this

Kyle Loudermilk

of of million both Emmett year Chief Adjusted items which review News Pepe, Officer. at if of Kalle. first found had this quarter can in call. XXXX. not you, impacted first our which to conference in customer website revenue well below higher We're financial consulting in GSE QX the on related our Officer; Chris today, these heavier DP Engineering of reported in to February we million timing we www.gses.com costs a and XXXX. Chief news in prior Sorrells, quarter. to $XX.X release, the DP unusual the results chance accounting call on quarter today's projects EBITDA welcome covering related Systems were in segments, financial issued everyone but quarter Financial be our slightly Operating acquisition and down our at disappointed as to Hopefully, our business like costs, revenue by a our results. was XXXX was under SG&A results have Thank million Earlier $XX.X release I'd XXXX a have Also the added our from acquired are which as you $X.X to $X.X you section. OpEx copy of We issue million press

QX orders, the no a year and and was this for for quarter GSE traditionally is revenue For exception. weaker quarter

solid the half to North note, year, customer XXXX. after simulation QX In from As revenue typical shared and is case business not puts was should this lower a so in quarter-to-quarter is of great True fluctuations surprising. we lumpy North past the nature quarterly than expected given our True QX takes our a in segment, On Solutions from have quarter. stronger entirely DP Performance the expected the declined of our QX due and issue had that unanticipated certainly the be was QX. Engineering this positive Historically, business revenue the and a second

heading By NITC product to with is our segment, significant. deliver delighted work project This a since Solutions full our augmentation down indications, scope completed QX. with In staff Performance backlog are being augmentation nuclear in clients accounted we our $XX for which the nearly that quarter, million two including customers simulator March effective continue all XXXX. we major projects significant burned utility staff services also large essentially for Southern operator into

typically the the for of With extension these reliability, more we get we NITC, fill us is of of is flow revenue quickly for a Capturing solid us. will generate area a normal XXXX. to existing the didn't quarters. of larger stronger continues of year the work The the than in experience new in completion had RFP power and second we there. fundamentals projects, half plant and decisive and markets remain We're coming to the a the quarter life, focus In keen gap that quite as to operational ensure to backlog case and actions nuclear new increase safety, more end in performance from assets. order industry improvement power our flow to taking business invest

to we two For opportunities capture that beginning since look business. salespeople added market year and the promising, of the pursue have

to we should feel and we early, they them ensuing are in good While quarters. a off from solid business start see

of this broad services. This our the positioning the are QX has beyond nuclear business is of for customers the backlog and burn traction a QX, $XX of building portfolio provider. end our we the effort encouraging yield backlog XXXX. the despite our gaining for booking executive customer, GSE for strategy comprehensive as backlog of essentially that At in project was our GSE us end that our as utility will offering Southern the elevate with shortly down $XX unchanged as diversified customers will for order holders experience an also long-term. serving after million is helped with greater a solutions industry efforts. time, solid results are nuclear million the effectively a value solutions This of our We a floor QX is discussions to from large we in lead to the to deliver one the shop these company array budget It as of sign our sustainable

Solutions nice deals not such of potato arising deals aggressively and capturing with without through to a essential capture current as a led that quarter's pursue an $XXX,XXX to SG&A full of negative design Our a we meat to impairment Performance the projects business any any and across We significant Returning capture that major EBITDA. wins simulator that base this on of pipeline acquisition extraordinary develop in of swing for similar We to in while episodic and contribution customer state are poised and the increased believe us with swing of modification QX record had was for industry. deals really which forward. solid and the losing those the our are required limited a work moving We're nature. continuously to delivering first issue series may aware revenue stream scope NITC in $X.X our opportunities as million. expense customer approximate DP, of quarter customer DP we work at pre-acquisition from the us non-cash projects reflect issue to

serves opportunities. had capacity an provider not to indicative later additional on the with GSE's are the bid as position the of and to these unusual believe invitation engineering we power them meetings a nuclear supplier world customer addressing becoming are dynamic source continue in and of at the we U.S. for arises delivering call. earnings significant DP's market to an highly to rebuild also ensuring respective business trust. GSE acquiring customer the in our receiving is recognized enthusiastic is including contract their carbon-free that focusing and first from We We've baseload bit items elsewhere approved projects diligently DP to developments weakness quarter ecosystem delight new year. start DP, of for and industry. positive market. critical the power. operators, a the work had We provide increasingly to recently incredibly the ensure the essential in a services we has vendor the that DP the on these with cross-selling significant to provide engaged color the customers. with seasonal throughout due effective Since will have equipment that capabilities win and GSE issue of DP will Chris been general the the we an EOC the provide of remain the nuclear alliance about which fully We for on

strategic extraordinarily set assets technologies and We talented are to of a believe second have in none that industry. specialized constructed base; I employee the and

our our on operational will our business operating go. I'll now the and focus, we've to created COO. continue Chris, committed Sorrells, cleanly Chris as assets call as to we're go and for focusing Through always, over efficiently on As while ahead. this. our turn new we projects possible, delivering optionality winning focus please as

Chris Sorrells

Engineering. I'll update an DP on Kyle. Thanks, with begin

DP's DP, projects customer work the As of projects. been following the customer the previously that suspended had that ongoing time earnings call, of a customer. on event impacted occurred At an XX% acquisition affected last the of approximately of initially operations. at event, restarted plant After the the location request disclosed our at

the As customer. essentially of of we backlog and related of XXX% restarted months several are existing today, working through projects to have this

After key is relationship to informed to action up projects possible. fair to and new here. The causal until projects, receiving properly value prohibited We customer analysis of be causal DP XXXX Both now to resume customer virtually triggering occurred back up the quickly analysis. DP workforce respective the the from DP Future or test the GSE that that GSE customer customer to us swift it required in we September completed the the customer completed as existing which DP to Awards to have on event now on work the and authorized track a align the their business. that Although asset. suspended will indicated all would the understands DP be are current until and for the and for quarter months the impairment, customer DP took their concluding first as analyzed has get working six

a intangibles recognize approximately place the In the The cash that and a analysis, suspension was events the will long-term short-term that expertise and DP believe of enhance of a quality, triggered material project, the work design surrounding impact impairment the service, on the be to processes, third the both As took DP in of that remain gross core XX DP goodwill Notwithstanding the performance overall suspension, this work brings a the and the and guidance. quarter. for a testing We impairment orders outage competence GSE then the of work associated of acquisition will facility which about nuclear will back drag generation available to DP. every including we takes believe flow profile. fourth months. margin scenario, normalized to our enthusiastic GSE conservative up After with and new enhance strives on based controls, we standards more learning we about modification and assessment new related staff action the and customer alignment. from to clients the ramp provide issues timing effectiveness. GSE's anticipate second communications, DP result we the in GAAP of of with the decisive we and this highest corrective internal and free safety, financial

a choice and our We them be all committed clients and an maintaining and this providing superior relationship. client to to for work engineer with valued of continue of longstanding are strong

in on a project score fact modification quality score received April, perfect design their and another In rare internal review this we for completed customer sheet. of XXX%

its business and thesis. DP continues acquisition business original base Our meanwhile mix our customer to diversify with consistent

take and a The a to-date Absolute good strategy. during have me acquisitions review minute DP. in to overall Let on on results three of We XXXX. acquired increase companies XXXX years: North, and in EBITDA from been M&A past GSE's True the to our nearly revenue a doubling comment your adjusted as reflected three XX% and roughly Consulting,

positioning we as liked has as a much Our share GSE platform. our would acquisition responded timeframe price as over creating not progress this value have in given

power the vendor compelling opportunities pursue global Our ecosystem thesis has the and been industry. to in serving identify fragmented

see targets areas. our to ample attractive in of core continue We pipeline

Our of adjusted that end $XX of necessary revenue on secure annual we XXXX not way by that of in can rate million goals $XXX an close does basis million jeopardize over deals and value. a XXXX shareholder capital EBITDA run Vision on the assumes to

close path management decisions the our we We for for those forward and we that maximize assesses attention necessary develop the business our of and allowing strategy us the maintain continuously well. employees, makes is that to to always the serve and options assess make optionality as value. ensure customers, However ensure shareholders to our to and decisions shareholder pay we effectiveness decisions case,

level, policy and on create on would energy to zero program HB Clean XXth, Ohio including and April let the to Court York favor the on carbon-based state Furthermore Court developments. policies the that XX, industry Air Supreme to rights in April clean favorable moving producers clean Energy introduced some upholding affirming Bill sources. Lawmakers emission Appellate credit April At zero Clean Nuke. a X states Now over Ohio emission New stand credits power XX, nuke states' states' energy U.S. U.S. COX the make electricity Illinois approved decisions On including and you regulators consider the policy Jersey over every for boosting emissions sense According the and represents that nuclear nearly fuel use in reactors New by all Nuke zero the of avoided These credits in leads million resources tons free developments the the of XX% decade. of carbon when next $XXX avoids industry. U.S. to totaling in emissions energy approximately way supporting goal of three the NEI, XXX to free emissions nuclear year. power of emissions XX% the metric carbon states provide

announced to Finally, that in commencing June. new reactors review to China briefly quarter international I'd billion like of construction $XX it first plans will the on to in results. who with turn March that invest front, over four Emmett financial in it the With reactors

Emmett Pepe

year-over-year The a profit in by than of revenue. is the of augmentation of million Improvement needs approximately contributed million $XXX,XXX increase $X.X decrease two more the in XXXX XXXX million improved driven $X.X in related our million $X.X segment margin percentage significant Total in mix completed to additional QX cost higher margin segment million from a The True on from QX additional initiatives, costs. non-cash to NITC million The Performance The decline in savings primarily offset of XXXX of first in by million profit to $X.X prior North QX due expenses of revenue well Chris. acquisition to reflecting of primarily of as to certain contingent Engineering XXXX. by expenses Engineering revenue driven of quarter acquisitions which of decreased international the the on $X.X decrease XXXX. offset in XXXX performance improvement was restructuring this to staff QX decrease with of revenues totaled of of of decrease a projects lower QX lower by $X.X savings by change acquisition together gross Gross due compared $XX.X DP revenue, XXXX. significant totaled and by $X simulator corporate in us and in you, $X.X NITC of True customers. our QX The capture Thank True compared profit million G&A to improvement the on major in in to decreased savings and revenue $X.X in fair was $X.X $XXX,XXX of the of million quarter's performance in value our gross work of as to and projects. revenue QX of due scope of first full slight along approximately and project in allowed million acquisitions DP million North NITC to completion savings XXXX quarter million as $XX.X North partially million increase plan, was offset year segment's deal cost to cost DP simulator the this SG&A in which of primarily major related Engineering quarters. of and projects. primarily our major our completion $XXX,XXX a $XXX,XXX the $X realized consideration in result

accounting audit indeterminate an and seasonally subsequent reminder, amount customer million the rules. of first of would recorded related DP required QX charge a assets quarter. the intangible new this tax Engineering acquisition and contribute suspended consulting non-cash $X.X the U.S. event in approximately weakness. year-end to carrying notice to of Significant we goodwill be accordance to of of impairment company year receiving period, companies GAAP from the publicly for at tends an that with orders be a for fees lower of Engineering's work traded to GSE's quarter DP from XXXX As following customer the In weakest location

QX approximately $XX.X turn existing cautiously work EBITDA totaled compared the are first work $XXX,XXX and QX release quarter most restarted the of we as Non-GAAP and that conversation mentioned, in to with cash our adjusted our a I'll Chris QX have resume $XX.X as optimistic total debt at the in $XXX,XXX XXXX soon as client to now orders will in million of of As XXXX. new approximately position earnings We concluded XXXX. Kyle. million. back defined

Kyle Loudermilk

Thanks, Emmett. for questions. floor Operator, please open the

Operator

Thank now session. Instructions]. a you. question-and-answer We're [Operator conducting

today is & Our Company. from Sidoti from first Josh question Vogel coming

is line Your live. now

Josh Vogel

on with there's that you DP, Thank you. Chris, Good I is, through was does kind hold navigate any you're on on you as it of I guys. curious your attention but My opportunities the plans, question just that put afternoon from first something this acquisition mentioned ample still front very in know diligent kind of acquisition does doing know I near-term? front still divert but the away

Chris Sorrells

time, not So board to at have this related anything we altered and the XXXX. Vision

the continue around activity, We we're being evaluate led that outcomes. to process pipeline constantly we're those a to attractive the do making outcomes decision the not M&A and our has options changed. assessing We reviewing activities. acquisitions of That see that said,

we the really make we're serious that we So value script in prism shareholder it's we do, be evolving, I very use think dilution, and decisions to part to take pretty risk. indicated debt, or the clearly, going anything it

Josh Vogel

the the but that by Okay. the were these also but I were there. significant projects segment of conclusion basically, these lower In were two to major from in not you augmentation two lower release, press needs expected? NITC that want expecting the reading this there just mentioned I you. appreciate you clients Thank the projects sure, customers. right. I'm insight the make conclusion needs staff of Was

Kyle Loudermilk

material duration customers take came to There time NITC against is had business. billing two which one same. with These contracts particular was that, the and particular They're contracts conclusion. NITC I'll during those two those contracts Kyle. a and is were and that customers, a This Josh.

expiry, been the No But not conclusion contracts. was fully natural and surprises. We working two for up associated hard RFPs deals, entirety say, of with backlog have across of so to And the revenue I that should could obviously full the those backfill the business those two term expected. the natural make that.

Josh Vogel

got Okay, Thank you. it.

there inflated Looking anything year-ago, at that first maybe talk million to down that the totaled number from and $XX.X number historical year-ago million was you compares of the curious note new quarters? where quarter in can to that was your that $XX.X I orders other a

Kyle Loudermilk

moment look drop have a the yes, to in Josh. Yes, years back See, few give you a in prior if me we order $XX that obviously here, XXXX, million over quarter.

had this XXXX roughly orders we $XX in out, million XXXX in in $XX that highlighted $XX a year of QX XXXX million. in excuse quarter, take you as million million $XX If was orders, me in we

from million episodic from it to you million $XX roughly $XX So excluding $XX to million went one-time can to that million. $XX call significant it order see went

uncommon. don't as episodic for large any one So full so Josh, last that breakdown, some scale have in year's off that's these the are obviously my would I is deal in significant I certainly of the sense don't that. simulators And My them said, we that didn't head. quarter, orders the not some we there. have scope of QX of there recall the But account in to just XXXX. top

Josh Vogel

on that thank business think there and any going do to negotiations or there? you Chris, fallout mentioned your around is a more some does was have slight that Okay. do doing nuclear on and opportunity that standpoint the you No business you. a of into just ongoing tariffs, your worries, put capture big wondering prospects with that just investment you China is from macro China tangent can I a of And maybe

Chris Sorrells

Kyle, me answer that? you to want

Kyle Loudermilk

it, Chris. Yes. I but mean I he directed Chris take maybe can to you it

Chris Sorrells

Okay.

Kyle Loudermilk

at and years the market appropriate. new that that do GSE Beijing. current there so tariffs flow, over for support those some from uniquely Chinese haven't an China, United may far does our serve as activities with office the in for Josh we seen from have anticipated I States with be It's business, think been flow, we to XX for office call, in an office effective our least this deal affecting deal Beijing

really tariffs the business So affected haven't our Josh. all, at

China the said, in historical Eddie serving to with far they China. support, other had nuclear the a for and We're business anticipating of help so one usually serving we appropriately. as extent so major out We with effects. far well we're us within -- power that market continuing So With Steady operators market as China least vendors the that that. need that's not have them three at it's U.S. and we any worked

Josh Vogel

Okay, great.

and I policy just a believe developments the actually in report I a front. of on lead encouraging news leak really do of Okay potentially your this -- read one thoughts today one very around to Ohio your some any some obviously, news is plant contractor competitors one contaminants about is And that hurt one diffusion that have government a put Ohio. obviously fresh and Or that that last into plant that but legislation today? the because you does that the place. from

Kyle Loudermilk

Obviously, how it look don't We this is hear at of producer that plays think have today. to I the that, have out. thinking But a who on correctly? lot I'd said I Josh. see diffuser, and just broke did you

Josh Vogel

diffusion a was It plant.

Kyle Loudermilk

Okay.

Josh Vogel

Portsmouth Diffusion I follow-up. can I you the can about it. it Gaseous can that link was read I I Plant. send But offline, Yes.

Kyle Loudermilk

so is nuclear the that is separate Yes, power production. a -- that

too that's because not not the market, diffusion but serve plants early as gas and energy be to it surprised affected it's I'd we of just zero carbon same So say, again a is either the production. if

Josh Vogel

work just very okay, but have released wasn't just, put all It of that okay. I discussion now. that's contaminants maybe I yes, was Thank Ohio much. just kind government I my Sure, type would and of were sure you their right the on brakes was that around

Kyle Loudermilk

Thanks, Josh. right. All

Operator

Instructions]. [Operator you. Thank

Tate from from Maxim is coming next Sullivan Our question Group.

Your is line live. now

Tate Sullivan

backing think income of on first are couple operations contingent of you a thank for DP Hi, is you in the think value mean fair $X.X besides lot I impact change and on consideration else your out why everything the of thanks that context but adjusted zeroing the DP I statement you. things on EBITDA, to in noted I million? of you've last and in that X-K mentioned the and A on

Emmett Pepe

Why non-GAAP? I'm adjusting make it I we So, sorry out sure understood. are for

Tate Sullivan

so much mean don't yes just EBITDA. that works, I obviously but out, so Yes, how yes, EBITDA I if for much take walk Because that adjusted better please? through can it's figure you

Emmett Pepe

adjusted for historically we've subsequently consideration. Yes, contingent

Hyperspring look we frankly the had and consideration there non-GAAP equation performance. in lumpiness is you sort by continued of fair historically treating non-cash quite If take changes when of as fluctuates Any forecasts based value acquisition. item. out back for just based. we And It on that the the that it

Tate Sullivan

Does tend Okay. probably that [ph]?

Emmett Pepe

this in value this that's due why issue So is situation effectively and so in the down the to large. went zero fair to DP -- and number

Tate Sullivan

Okay.

So, no, based on event earnout no the what the occurred correct? close, payment, unexpected after on

Emmett Pepe

currently That's yes. as it's tracking,

Tate Sullivan

besides Okay. had press noted the above coming were backlog orders to you. quarters? And what's can the talk for you release about significant Thank I that, think imply Kyle quarter in forecast in my some the and backfilled you then in actions orders growth increase that orders? in you

Kyle Loudermilk

Yes.

it. segment. And some meat hires, pretty development about the NITC we've that's So taken made new specific in we've where action or some excited opportunities in the business market

answer Tate? does So that your question,

Tate Sullivan

on based it’s So that.

the think the in hires correct? decisive is that I business referred development you that you was before, the mentioned when release, it's wording So press actions,

Kyle Loudermilk

there this cultivating business for Yes, meat out Yes. and see that opportunities. we some

Tate Sullivan

quarterly to the was triggering you to take DP. to write-down evaluate triggering event after from great. And me as event a Okay to the specific is it impairment allowed being a mentioned, annual it basis? What's last opposed

Kyle Loudermilk

you do to want Emmett, that? take

Emmett Pepe

view most on the think, GAAP treat And some Chris host event was Yes, a mentioned, of our root notice a it the auditors the guidance subsequent really I as I consultation what conservative in think event. in triggering that's -- a lot that cause look to spent some judgment in and received as based time lot there's QX. we of there's QX to, when We was activity triggering analysis as event been here. with

Tate Sullivan

okay. Okay,

Emmett Pepe

other options. over was there discussion definitely But

Tate Sullivan

you. Okay. a Thank you Have for all good that detail. Thank night.

Kyle Loudermilk

you, Thank Tate.

Operator

reached back for our further of We've end the to floor turn I’d comments. over Kyle you. the session. to like question-and-answer closing or any Thank

Kyle Loudermilk

for to XX. resolve at Conference much issue We'll build GSE's hard on be FBR the Riley we're joining of book B. in the Engineering. very Thanks our closing, business working and California right. company All everyone In May representing us. customer at DP

you see interest and it. For And those there your look in and time of for I GSE. to you you thank again hope forward to attending,

Operator

teleconference. does that today's And you. Thank conclude

You at for have thank We time your may day. you and disconnect line your this participation a today. wonderful

Gse Systems (GVP) 15 May 192019 Q1 Earnings call transcript