GVP - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the GSE Systems Second Quarter 2019 Financial Results 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.

I would now like to turn the conference over to our host Devin Sullivan, Senior Vice President of The Equity Group. you. Thank

begin. may You

Devin Sullivan

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

begin, events would call of Securities we Section as during current forward-looking Before amended I reflect within XXXX. XXA the and statements everyone statements concerning XXE Act expectations course These made of that and the statements of of meaning Section Act this the may results. Securities considered like be future of to XXXX remind the of

will, could but may, are are a risks believe, or achievements could, does intend, cause are not statements anticipate from future of used to expressions expect, as subject be These not such mean similar materially should, words to and and Words performance forward projected. not is other to statement and different identify and their are that actual looking. uncertainties that forward-looking those statements, performance guarantees factors absence important

Forward-Looking future of under to Commission, factors, set discussion section. whether or and and a reports Exchange in these including uncertainties documents full statements GSE the new any the Securities with intend periodic GSE's otherwise. a to file forth filed Risk update read and For does revise U.S. of risks, encouraged those are you result as events, forward-looking Statements or information, not Factors on

principles, provide the adjusted accounting other income On accepted to not this financial operational call, information non-GAAP meaningful management GAAP. adjusted under figures, EBITDA, EPS, supplemental regarding that which these GAAP generally and are addition adjusted may net refer performance. to Management of in performance EBITDA, measures, company's believes measures or

for and GSE evaluating results measures results. as make may operating facilitates operating GSE's its and allocation. of that management budgeting, Since such these non-GAAP believes GSE's decisions GAAP comparisons well these measures by information the both the of non-GAAP useful, planning, finds competitors. uses results to employee businesses and internal This performance to certain to investors as Management compensation management's resource as historical operating benefit evaluate

to any a similarly measures measure considered in superior substitute to measures Investors A can SEC directly non-GAAP be Regulation should as recognize of measures comparable These these their in in most that of GAAP. measures performance be and titled not reconciliation non-GAAP be addition not to prepared accordance for GAAP or other comparable with to company's companies. figures might release. the found accordance with of G earnings should in

ahead. the Kyle With turn Officer call of that Chief now go Mr. Loudermilk, said, I'd like GSE Executive to to Kyle, please over Systems.

Kyle Loudermilk

Conference I'd XXXX GSE you, Systems Officer; everyone like Pepe, Chief today's Operating Emmett our Quarter to to Financial Thank on Devin. call Second Officer. Financial Chris and Chief welcome Results Call. are our Also Sorrells,

covering press news to a Earlier not, but you release this second have News you've our at quarter if today, we review our issued www.gses.com website Hopefully, be chance had under results. copy a section. can financial XXXX on a the release, found

later approximately update work on second Chris to GSE's XXXX a up quarter reduced significantly in XXXX quarter and work We was but the Engineering. million DP respectively. call. suspension of reported the QX EBITDA DP $X.X the revenue adjusted provide from $XX.X $XX.X an continue with will this EBITDA the in million, as $X.X previously down XXXX. Adjusted million customer through of by prior year first year-to-date and in disclosed from below DP our we $X.X of slightly million $XXX,XXX million, bit revenue quarter, $XXX,XXX in

as issue staffing year-over-year business to QX, in as acquisition improvement a we While by we combined well added costs saw EBITDA in in field customer at on basis. NITC with our adjusted continue SG&A impacted the professionals Engineering lower sequential of our be of strong DP DP the

business our be major swing should fluctuation nature any in full-scope of we of puts and without typical are continued deals and to nature. projects, episodic deals For quarter-to-quarter revenue as series on In and meat-and-potato bid orders, given a quarterly such expected QX, takes. lumpy simulator the which

orders in Solutions compared the In to $X.X segment, quarter. totaled million year $X.X QX prior million our Performance

were lumpy Performance we than the would the Our business. bidding working out have several to deals lower QX, simulation any having reflecting aware Solutions, orders of projects in not we of North we businesses. but for close are Rather which quarter, nature like meaningful were of for again our on the lost slipped True are or

new Performance an we Reconciliation solution nuclear the is Data company approximately which Solutions reactors nuclear large won utility's will and at $X.X six sites. a contract for deliver already a DVR QX order XX in One operating Validation of with for closed million that we or

project For through instrumentation models be reduce GSE make age, building using uncertainty calculations software. plant plant performance. XXXX, helping runs third-party innovative customized decisions to will validate this readings optimize operating sensors plants which These will November as better and

variety critical a ongoing for purposes an as these of array value-added delivery models preventative customers plant to as for solution, provide the and systems, Subsequent to will are addition we one. maintenance expanded client to of the optimizing our In enhanced offering instruments of testing. maintenance solutions of software such such this analysis useful by

engineering and industry. We nuclear solutions staffing the go-to solidifying position of our as expert are provider the in power specialized

compared that the we'll year million contract NITC XXXX domestic plant reactors XX were the operator, this to business. to DVR year. more to X.X orders million that be NITC fleet QX with roughly DVR X.X totaled replace into not We large did prior $X.X of announced completion. in that broadly quarter. January The year project over carry revenue impacted solutions unable last we comparison work negatively in a our upon year-over-year in and U.S. segment, the In leading providing project was or a nuclear the million ended Including by one-fourth

realizing QX the keeping business. expect QX keen on QX, NITC development seasoned are We made start return track eye our During investments success. investments in adding on to we respected by three professionals enhance and of a efforts, business to targeted these with records would and

We to we as targeted these combined that head for solutions in into rebound investments XXXX. nuclear results with demand the industry better are will our staffing optimistic lead

backlog at XX once-in-a-generation burn customer to lack the approximately Our the down the new and full-scope This from to we what DP million. end Southern of of Nuclear significant orders simulator reflects with delivered weakness largest of QX three backlog projects; NITC. totaled in due the happened the

safety, existing that power plant extension the me nuclear of permit remain reiterate life reliability, invest market from more of and operational solid to the performance Let assets. longer-term continues our end fundamentals industry for power to and as generate

advantage major trends vendor GSE these in nuclear, the in serving to industry. is the leader a As ecosystem take uniquely positioned of

systems. we medium-term centered the cycle as of around significant potentially Looking nuclear signs emerging see a of such ahead, in power plant trends, CapEx digitalization nuclear the industry

to to may up equity us Finally, This a an I basis. to tap at-the-market S-X shelf intend the with the raised GSE either comment of registration through opportunistic afternoon that offering would Form shelf $XX into we provides statement to optionality be is file like markets on the million, an SEC. with which stock. The traditional this on for statement registration or

indebtedness best be and corporate manage near interpreted not term, shelf sale the acquisitions, that of but as repayment practice We us general outstanding The to a growth sheet as that will flexibility use securities we over the filing strategy indication of our initiatives, greater capital the provides growth with from seeking time. to to the an be in should rather of and/or any would proceeds fund expect purposes. balance net the

I'll Chris the Sorrells, please go now call ahead. over turn to Chris, our COO.

Chris Sorrells

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

affected our of following largest customer disclosed, location the that XXXX previously As suspension at acquisition occurred in in six DP an operations, for to project of from new plant event resulting a up awards customer February months. DP's

was its of work notified under by accordance the engineer of DP this open that respected the in X, orders. August any orders Accordingly, choice will contract terminating with DP terms be customer On was contract completed contract.

We this by work expect to up year-end. finish

Given the and the next current impact and by goodwill reduce swiftly thoughtfully to of analysis match that plan work call. to are level earnings acted to We workforce intangibles. news evaluating DP's our our we to complete and

strategy. comment our briefly me M&A on Let

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

see increasing targeted to potential we dilutive from current significantly core share debt impact We very the of deals, in and issuing of price. cognizant our our currently and remain We in are continue selective markets. but levels the present envision don't cautious equity

the XXXX revenue Vision strategy, to ago goal we our unveiled $XX and XXXX. EBITDA by of approximately on Regarding in adjusted end two years run million basis a over rate of $XXX an annual million achieve

and this recent issues reach those milestones, at timing remain pushed fundamentals While strategy long-term have DP made likely while the our good back for -- we objective. the toward the to of us intact progress Engineering

zero-emission and short-medium that on plants state's long-term. the clean nuclear a XX% produce than According month Program of law Ohio some This reactors power nuclear to provides helps NEI industry more nuclear Ohio's favorable credits plants. now energy remain power the seeing Air clean touch we're producers Ohio developments to establishes operation. state's which the in Clean the in to energy. power including enacted law Last I'll

decades. remaining are earlier Power base than Act the Pennsylvania relief generators. life reactors, which Powering trends be of to from lawmakers would existing fall power Keep the for nuclear could -- domino introduced the year next this known or nuclear similar Bill positive more Pennsylvania average country's Keeping an state provide House as two legislation which XX, The very have as state's of

importance bills. value decades to We're GSE years, existing of asset. if new potentially In many be plants licenses GSE get serving other for to XX even highlighting without years and four come will extended the words,

company existing succeed have to We the by the positioned deliberately serving fleet.

in the XX% many than suggest reducing to can estimates according over facilities, investments while next million to term, and modernize to Regarding that more cost justify the plants of initial U.S. developments decade near is plant. non-fuel $XXX by per nuke EPRI medium that

reliability, more accelerate processed allows analog We over will predictive nuclear power also machine years. The expect reducing optimizes industries of data the be for while next performance us artificial to opportunities moved or from analyzed and to costs. digital plants digitalization intelligence. the learning safety five and for creating It analytics significant that for providing opportunities

month, is OEMs work University Indiana computerized analog, is all plants. Reactor Nuclear of related components to rector the for aging, GSE to incorporate nuke U.S. slow, This modern last major Purdue controls. the RFPs in together digital with in digitalization swapping involves to power equipment. the first which One to university starting put The digital project, completed the the

we've before reactors advancement the Finally, technology. is or SMR modular of a long-term small that trend about talked

in for to commercialization. player toward customer major space a important progress Scale and make New rapid an the GSE continues

Phase by of two XXXX. the of the design for track September process three Commission's NRC application on and complete New a Nuclear it Scale review cleared keeping review Regulatory certification

planning customer a is by the XX SMR operation modular first commence Scale's to New for plant mid-XXXXs.

will who the financial results. Emmett, that, I'd second to review like turn With to it over quarter

Emmett Pepe

of Thank than segment our was you, million winding acquisition in which $XX.X QX which QX our decrease Chris. compared to increase quarter's of driven in increase primarily Total NITC XXXX to DP Performance $XXX,XXX Performance of partially in XXXX, The revenue $X.X as international our offset a Engineering the our of $X.X was Improvement million our more by reflecting million of this totaled in a been revenue. $XX.X decrease in revenue, revenue result a offset down Improvement in segment of revenue subsidiaries. by contributed $X.X revenue million QX by a XXXX, million

due NITC quarter. from during was primarily to decline the augmentation in customers revenue lower staff needs The

forward this segment, of excited beyond. in touched the can development XXXX seeing and we what the and to previously about impact second to are on, half Kyle new As looking they hires are drive business

million Gross improved profit by profit gross approximately the driven Performance XXXX acquisition primarily XXXX. DP of $XXX,XXX by $X.X million totaled in compared $X.X Engineering. million QX in $X.X Improvement QX to of to

the margin $XXX,XXX lower $X.X result customer. gross decreased of year-over-year work a the percentage profit by Gross decline driven margin was $X.X NITC major from decline million. year-over-year million primarily revenue approximately to of

costs with million SG&A keep QX of $X.X in having in figure We've year most been our expenses to QX from comparable SG&A of line prior two the full acquisitions. totaled additional slightly million the of recent two costs able below despite quarters in XXXX $X.X of XXXX.

total million our $X.X of Non-GAAP XXXX.We $X.X QX approximately earnings with cash in $XXX,XXX totaled of EBITDA, And QX includes position which in XXXX in in release, losses $X.X million. a XXXX, DP, QX defined approximately from compared concluded million. $XX.X approximately as adjusted debt million to

our with that in us to We favorable fee, advantage out proactively Finally, greater I'd sheet took improved markets point QX a very balance like nominal of debt for XXXX. flexibility. and covenants providing

us XXXX. Of This business. times note, and greater total cap we management optionality our of grow covenant increased times EBITDA debt prudent the from sheet under to to provides the March balance to through X.X X.XX manage

back I'll now turn the conversation Kyle. to,

Kyle Loudermilk

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

Operator

over to conference the closing you. remarks. Thank turn moderator for back I'll

Devin Sullivan

joining resolve very issue at us. everyone York, Thanks for to Sidoti closing, We're we're New GSE's much working Well. build the our And of company Okay. customer conference DP. in In representing business. XX. on the book hard September at

hope attending, Thank those I you again time. thank in, you GSE to see of And there. For for you interest you. Systems. your And

Operator

All today's great Ladies parties may Have and day. gentlemen, concludes a conference. this disconnect.

Gse Systems (GVP) 14 Aug 192019 Q2 Earnings call transcript