Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 13, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | GSE SYSTEMS INC | |
Entity Central Index Key | 944,480 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 19,183,968 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 21,625 | $ 21,747 |
Restricted cash | 1,140 | 1,140 |
Contract receivables, net | 13,897 | 18,863 |
Prepaid expenses and other current assets | 4,024 | 2,052 |
Total current assets | 40,686 | 43,802 |
Equipment, software, and leasehold improvements | 6,845 | 6,759 |
Accumulated depreciation | (5,648) | (5,527) |
Equipment, software, and leasehold improvements, net | 1,197 | 1,232 |
Software development costs, net | 894 | 982 |
Goodwill | 5,612 | 5,612 |
Intangible assets, net | 402 | 454 |
Other assets | 72 | 1,574 |
Total assets | 48,863 | 53,656 |
Current liabilities: | ||
Accounts payable | 587 | 923 |
Accrued expenses | 2,389 | 2,437 |
Accrued compensation | 2,015 | 2,624 |
Billings in excess of revenue earned | 18,192 | 21,444 |
Accrued warranty | 1,209 | 1,137 |
Current contingent consideration | 1,508 | 2,105 |
Other current liabilities | 750 | 716 |
Total current liabilities | 26,650 | 31,386 |
Other liabilities | 1,261 | 1,149 |
Total liabilities | 27,911 | 32,535 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock $.01 par value, 2,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock $0.01 par value, 30,000,000 shares authorized, 20,777,168 and 20,433,608 shares issued and 19,178,257 and 18,834,697 shares outstanding | 208 | 204 |
Additional paid-in capital | 75,120 | 75,120 |
Accumulated deficit | (49,693) | (49,427) |
Accumulated other comprehensive loss | (1,684) | (1,777) |
Treasury stock at cost, 1,598,911 shares | (2,999) | (2,999) |
Total stockholders' equity | 20,952 | 21,121 |
Total liabilities and stockholders' equity | $ 48,863 | $ 53,656 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
Common stock, shares issued (in shares) | 20,777,168 | 20,433,608 |
Common stock, shares outstanding (in shares) | 19,178,257 | 18,834,697 |
Treasury stock (in shares) | 1,598,911 | 1,598,911 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ||
Revenue | $ 16,342 | $ 12,976 |
Cost of revenue | 12,220 | 9,352 |
Write-down of capitalized software development costs | 0 | 0 |
Gross profit | 4,122 | 3,624 |
Operating expenses: | ||
Selling, general and administrative | 3,592 | 2,757 |
Research and development | 402 | 354 |
Restructuring charges | 45 | 125 |
Depreciation | 76 | 100 |
Amortization of definite-lived intangible assets | 64 | 73 |
Total operating expenses | 4,179 | 3,409 |
Operating income (loss) | (57) | 215 |
Interest income, net | 27 | 27 |
(Loss) gain on derivative instruments, net | (160) | (118) |
Other income (expense), net | (3) | 102 |
Income (loss) before income taxes | (193) | 226 |
Provision for income taxes | 73 | 88 |
Net income (loss) | $ (266) | $ 138 |
Basic earnings (loss) per common share | $ (0.01) | $ 0.01 |
Diluted earnings (loss) per common share | $ (0.01) | $ 0.01 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract] | ||
Net income (loss) | $ (266) | $ 138 |
Foreign currency translation adjustment | 93 | 49 |
Comprehensive income (loss) | $ (173) | $ 187 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Loss [Member] | Treasury Stock [Member] | Total |
Balance at Dec. 31, 2016 | $ 204 | $ 75,120 | $ (49,427) | $ (1,777) | $ (2,999) | $ 21,121 |
Balance (in shares) at Dec. 31, 2016 | 20,433,608 | (1,598,911) | 18,834,697 | |||
Stock-based compensation expense | 614 | $ 614 | ||||
Common stock issued for options exercised (in shares) | 31,726 | |||||
Common stock issued for options exercised | $ 1 | 61 | 62 | |||
Common stock issued for RSUs vested (in shares) | 311,834 | |||||
Common stock issued for RSUs vested | $ 3 | (3) | 0 | |||
Vested RSU shares withheld to pay taxes | (672) | |||||
Foreign currency translation adjustment | 93 | 93 | ||||
Net income | (266) | (266) | ||||
Balance at Mar. 31, 2017 | $ 208 | $ 75,120 | $ (49,693) | $ (1,684) | $ (2,999) | $ 20,952 |
Balance (in shares) at Mar. 31, 2017 | 20,777,168 | (1,598,911) | 19,178,257 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (266) | $ 138 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Write-down of capitalized software development costs | 0 | 0 |
Depreciation | 76 | 100 |
Amortization of definite-lived intangible assets | 64 | 73 |
Amortization of capitalized software development costs | 117 | 81 |
Change in fair value of contingent consideration, net | 254 | (69) |
Stock-based compensation expense | 596 | 247 |
Loss on derivative instruments, net | 160 | 118 |
Deferred income taxes | 0 | 36 |
Loss on sales of equipment, software, and leasehold improvements | 0 | (1) |
Changes in assets and liabilities: | ||
Contract receivables | 4,937 | 334 |
Prepaid expenses and other assets | (523) | (515) |
Accounts payable, accrued compensation and accrued expenses | (1,184) | 1,226 |
Billings in excess of revenue earned | (3,279) | (492) |
Accrued warranty | 67 | (101) |
Other liabilities | 325 | 465 |
Cash provided by operating activities | 1,344 | 1,640 |
Cash flows from investing activities: | ||
Proceeds from sale of equipment, software and leasehold improvements | 0 | 31 |
Capital expenditures | (44) | (18) |
Capitalized software development costs | (29) | (131) |
Restrictions of cash as collateral under letters of credit | 0 | (2) |
Releases of cash as collateral under letters of credit | 0 | 1 |
Cash used in investing activities | (73) | (119) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock on the exercise of stock options | 62 | 4 |
Payments on contingent consideration | (851) | (1,421) |
RSUs withheld to pay taxes | (672) | 0 |
Cash used in financing activities | (1,461) | (1,417) |
Effect of exchange rate changes on cash | 68 | 37 |
Net increase (decrease) in cash and cash equivalents | (122) | 141 |
Cash and cash equivalents at beginning of year | 21,747 | 21,747 |
Cash and cash equivalents at end of period | $ 21,625 | $ 11,225 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation The consolidated interim financial statements included herein have been prepared by GSE Systems, Inc. (the "Company," "GSE," "we," "us," or "our") and are unaudited. In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted. The results of operations for interim periods are not necessarily an indication of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 28, 2017. Certain reclassifications have been made to prior period amounts to conform to the current presentation. Subcontractor payables have been reclassified on the Consolidated Balance Sheets from Accounts payable to Accrued expenses. In addition, the Company reclassified research and development costs from Selling, general and administrative expenses and presented them as a separate caption within operating expenses on the consolidated statement of operations. The Company also reclassified the current portion of deferred taxes to noncurrent within other assets and other liabilities on the consolidated balance sheets. The Company has two reportable segments as follows: ● Performance Improvement Solutions (approximately 59% of revenue) Our Performance Improvement Solutions segment primarily encompasses our power plant high-fidelity simulation solutions, as well as engineering solutions and interactive computer based tutorials/simulation focused on the process industry. This segment includes various simulation products, engineering services, and operation training systems delivered across the industries we serve: primarily nuclear and fossil fuel power generation, as well as the process industries. Our simulation solutions include the following: (1) simulation software and services, including operator training systems, for the nuclear power industry, (2) simulation software and services, including operator training systems, for the fossil power industry, and (3) simulation software and services for the process industries used to teach fundamental industry processes and control systems to newly hired employees and for ongoing workforce development and training. GSE and its predecessors have been providing these services since 1976. ● Nuclear Industry Training and Consulting (approximately 41% of revenue) Nuclear Industry Training and Consulting provides highly specialized and skilled nuclear operations instructors and other consultants to the nuclear power industry. These employees work at our clients' facilities under client direction. Examples of these highly skilled positions are senior reactor operations instructors, procedure writers, work management specialists, planners and training material developers. This business is managed through our Hyperspring subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the Company's product and service portfolio. Hyperspring has been providing these services since 2005. Financial information about the two business segments is provided in Note 15 of the accompanying consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. The Company's most significant estimates relate to revenue recognition on long-term contracts, product warranties, capitalization of software development costs, valuation of goodwill and intangible assets acquired, valuation of contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets. Actual results could differ from these estimates and those differences could be material. Revenue recognition The Company recognizes revenue through fixed price contracts for the sale of uniquely designed/customized systems containing hardware, software and other materials which generally apply to the Performance Improvement Solutions segment and time and material contracts for Nuclear Industry Training and Consulting support and service agreements. In accordance with Accounting Standards Codification (ASC) 605-35 , Construction-Type and Production-Type Contracts Uncertainties inherent in the performance of contracts include labor availability and productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to our revenue recognition as a significant change in the estimates can cause our revenue and related margins to change significantly from the amounts estimated in the early stages of the project. As we recognize revenue under the percentage-of-completion method, we provide an accrual for estimated future warranty costs based on historical and projected claims experience. Our long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to customized software embedded in the systems. Our system design contracts do not normally provide for post contract support (PCS) in terms of software upgrades, software enhancements or telephone support. To obtain PCS, the customers must normally purchase a separate contract. Such PCS arrangements are generally for a one-year period renewable annually and include customer support, unspecified software upgrades, and maintenance releases. We recognize revenue from these contracts ratably over the term of the agreements. Revenue from the sale of software licenses without other elements in the contract and which do not require significant modifications or customization for the Company's modeling tools are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable. We utilize written contracts to establish the terms and conditions by which product support and services are sold to customers. Delivery is considered to have occurred when title and risk of loss have been transferred to the customer, which generally occurs after a license key has been delivered electronically to the customer. We also recognize revenue from the sale of software licenses from contracts with multiple deliverables. These software license sales are evaluated under ASC 985-605, Software Revenue Recognition We recognize revenue under time and materials contracts primarily from the Nuclear Industry Training and Consulting segment and certain cost-reimbursable contracts. Revenue on time and material contracts is recognized as services are rendered and performed. Under a typical time-and-materials billing arrangement, customers are billed on a regularly scheduled basis, such as biweekly or monthly. Any unbilled amounts are typically billed the following month. Under cost-reimbursable contracts, which are subject to a contract ceiling amount, reimbursed for allowable costs and paid a fee, which may be fixed or performance based. However, if costs exceed the contract ceiling or are not allowable under the provisions of the contract or applicable regulations, may not be able to obtain reimbursement for all such costs. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements Not Yet Adopted | 2. Recent Accounting Pronouncements Accounting pronouncements recently adopted In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, Simplifying the Measurement of Inventory (ASU 2015-11). ASU 2015-11 requires that an entity measure inventory at the lower of cost and net realizable value. This ASU does not apply to inventory measured using last-in, first-out. ASU 2015-11 was effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We adopted ASU 2015-11 effective January 1, 20 In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Topic 718: Improvements to Employee Share Based Accounting Accounting pronouncements not yet adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU No. 2016-02, Leases In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting unit's carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. |
Basic and Diluted Earnings (Los
Basic and Diluted Earnings (Loss) Per Common Share | 3 Months Ended |
Mar. 31, 2017 | |
Basic and Diluted Earnings (Loss) Per Common Share [Abstract] | |
Basic and Diluted Earnings (Loss) Per Common Share | 3. Basic and Diluted Earnings (Loss) per Common Share Basic earnings (loss) per share is based on the weighted average number of outstanding common shares for the period. Diluted earnings (loss) per share adjusts the weighted average shares outstanding for the potential dilution that could occur if outstanding vested stock options were exercised. The number of common shares and common share equivalents used in the determination of basic and diluted earnings (loss) per share were as follows: (in thousands, except for share amounts) Three months ended March 31, 2017 2016 Numerator: Net (loss) income $ (266 ) $ 138 Denominator: Weighted-average shares outstanding for basic (loss) income per share 19,094,382 17,912,045 Effect of dilutive securities: Stock options and restricted stock units - 221,697 Adjusted weighted-average shares outstanding and assumed conversions for diluted (loss) income per share 19,094,382 18,133,742 Shares related to dilutive securities excluded because inclusion would be anti-dilutive 564,833 752,042 |
Contingent Consideration
Contingent Consideration | 3 Months Ended |
Mar. 31, 2017 | |
Contingent Consideration [Abstract] | |
Contingent Consideration | 4. Contingent Consideration Acquisitions may include contingent consideration payments based on future financial measures of an acquired company. Under ASC 805, Business Combinations As of March 31, 2017, and December 31, 2016, the contingent consideration totaled $1.5 million and $2.1 million, respectively. During the three months ended March 31, 2017 and 2016, the Company made payments of $0.9 million and $1.4 million, respectively, related to the liability-classified contingent consideration arrangement. |
Contract Receivables
Contract Receivables | 3 Months Ended |
Mar. 31, 2017 | |
Contract Receivables [Abstract] | |
Contract Receivables | 5. Contract Receivables Contract receivables represent balances due from a broad base of both domestic and international customers. All contract receivables are considered to be collectible within twelve months. Recoverable costs and accrued profit not yet billed represent costs incurred and associated profit accrued on contracts that will become billable upon future milestones or completion of contracts. The components of contract receivables are as follows: (in thousands) March 31, December 31, 2017 2016 Billed receivables $ 5,971 $ 13,325 Recoverable costs and accrued profit not yet billed 7,944 5,555 Allowance for doubtful accounts (18 ) (17 ) Total contract receivables, net $ 13,897 $ 18,863 During April 2017, the Company invoiced $1.6 million of the unbilled amounts related to the balance at March 31, 2017. As of March 31, 2017, the Company had one customer that accounted for 21% of the Company's consolidated contract receivables. As of December 31, 2016, the Company did not have any customers that accounted for more than 10% of the Company's consolidated contract receivables. |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets | 3 Months Ended |
Mar. 31, 2017 | |
Prepaid Expenses and Other Current Assets [Abstract] | |
Prepaid Expenses and Other Current Assets | 6. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: (in thousands) March 31, December 31, 2017 2016 Inventory $ 2,158 $ - Income taxes receivable 380 446 Prepaid expenses 583 422 Other current assets 903 1,184 Total prepaid expenses and other current assets $ 4,024 $ 2,052 At March 31, 2017, prepaid expenses and other current assets are comprised primarily of inventory that is being purchased to support the construction of three major nuclear simulation projects related to a significant contract that was executed during the first quarter of 2016. Inventory is recorded at the lower of cost or market value in accordance with ASC 330, Inventory. |
Software Development Costs
Software Development Costs | 3 Months Ended |
Mar. 31, 2017 | |
Software Development Costs [Abstract] | |
Software Development Costs | 7. Software Development Costs, Net Certain computer software development costs are capitalized in the accompanying consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. Capitalization ceases and amortization of capitalized costs begins when the software product is commercially available for general release to customers. Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the remaining estimated economic life of the product, typically three years. On an annual basis, and more frequently as conditions indicate, the Company assesses the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the product. If the undiscounted cash flows are not sufficient to recover the unamortized software costs the Company will write-down the carrying amount of such asset to its estimated fair value based on the future discounted cash flows. The excess of any unamortized computer software costs over the related fair value is written down and charged to operations. Software development costs capitalized were approximately $29,000 and $131,000 for the three months ended March 31, 2017 and 2016, respectively. Total amortization expense was approximately $117,000 and $81,000 for the three months ended March 31, 2017 and 2016, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets [Abstract] | |
Goodwill and Intangible Assets | 8. Goodwill and Intangible Assets The Company's intangible assets include amounts recognized in connection with business acquisitions, including goodwill, customer relationships, contract backlog, and software. The Company reviews goodwill for impairment annually as of December 31 and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company tests goodwill at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. After the acquisition of Hyperspring on November 14, 2014, the Company determined that it had two reporting units, which are the same as our two operating segments: (i) Performance Improvement Solutions; and (ii) Nuclear Industry Training and Consulting (which includes Hyperspring). As of March 31, 2017, and December 31, 2016, goodwill of $5.6 million related to the Nuclear Industry Training and Consulting segment. No events or circumstances occurred during the current reporting period that would indicate impairment of such goodwill. Amortization of intangible assets other than goodwill is recognized on a straight-line basis over the estimated useful life of the intangible assets, except for contract backlog and contractual customer relationships which are recognized in proportion to the related projected revenue streams. Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. The Company does not have any intangible assets with indefinite useful lives, other than goodwill. There were no indications of impairment of intangible assets other than goodwill during the current reporting period. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments | 9. Fair Value of Financial Instruments ASC 820, Fair Value Measurement The levels of the fair value hierarchy established by ASC 820 are: Level 1: inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. A Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: inputs are unobservable and reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company considers the recorded value of certain of its financial assets and liabilities, which consist primarily of cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at March 31, 2017, and December 31, 2016, based upon the short-term nature of the assets and liabilities. For the three months ended March 31, 2017, the Company did not have any transfers between fair value Level 1, Level 2 or Level 3. The Company did not hold any non-financial assets or non-financial liabilities subject to fair value measurements on a recurring basis at March 31, 2017. The following table presents assets and liabilities measured at fair value at March 31, 2017: (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Money market funds $ 12,145 $ - $ - $ 12,145 Foreign exchange contracts - 71 - 71 Total assets $ 12,145 $ 71 $ - $ 12,216 Foreign exchange contracts $ - $ (36 ) $ - $ (36 ) Contingent consideration - - (1,508 ) (1,508 ) Total liabilities $ - $ (36 ) $ (1,508 ) $ (1,544 ) The following table presents assets and liabilities measured at fair value at December 31, 2016: (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Money market funds $ 16,435 $ - $ - $ 16,435 Foreign exchange contracts - 141 - 141 Total assets $ 16,435 $ 141 $ - $ 16,576 Foreign exchange contracts $ - $ (20 ) $ - $ (20 ) Contingent consideration - - (2,105 ) (2,105 ) Total liabilities $ - $ (20 ) $ (2,105 ) $ (2,125 ) The following table provides a roll-forward of the fair value of the contingent consideration categorized as Level 3 for the three months ended March 31, 2017: (in thousands) Balance, January 1, 2017 $ 2,105 Payments made on contingent liabilities (851 ) Change in fair value 254 Balance, March 31, 2017 $ 1,508 |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments [Abstract] | |
Derivative Instruments | 10. Derivative Instruments The Company utilizes forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates. It is the Company's policy to use such derivative financial instruments to protect against market risk arising in the normal course of business to reduce the impact of these exposures. The Company minimizes credit exposure by limiting counterparties to nationally recognized financial institutions. As of March 31, 2017, the Company had foreign exchange contracts outstanding of approximately 281.4 million Japanese Yen, 0.2 million Euro, 0.4 million Australian Dollars, and 0.3 million Canadian Dollars at fixed rates. The contracts expire on various dates through December 2018. At December 31, 2016, the Company had contracts outstanding of approximately 281.4 million Japanese Yen, 0.1 million Euro, 0.6 million Australian Dollars, and 0.5 million Canadian Dollars at fixed rates. The Company had not designated the foreign exchange contracts as hedges and recorded the estimated net fair values of the contracts on the consolidated balance sheets as follows: March 31, December 31, (in thousands) 2017 2016 Asset derivatives Prepaid expenses and other current assets $ 27 $ 57 Other assets 44 84 71 141 Liability derivatives Other current liabilities (36 ) (20 ) (36 ) (20 ) Net fair value $ 35 $ 121 The changes in the fair value of the foreign exchange contracts are included in loss on derivative instruments, net in the consolidated statements of operations. The foreign currency denominated contract receivables, billings in excess of revenue earned and subcontractor accruals that are related to the outstanding foreign exchange contracts are remeasured at the end of each period into the functional currency using the current exchange rate at the end of the period. The gain or loss resulting from such remeasurement is also included in loss on derivative instruments, net in the consolidated statements of operations. For the three months ended March 31, 2017 and 2016, the Company recognized a net loss on its derivative instruments as outlined below: Three months ended March 31, (in thousands) 2017 2016 Foreign exchange contracts - change in fair value $ (86 ) $ (183 ) Remeasurement of related contract receivables, and billings in excess of revenue earned (74 ) 65 Loss on derivative instruments, net $ (160 ) $ (118 ) |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | 11. Stock-Based Compensation The Company recognizes share-based payment expense for all equity-based awards issued to employees, directors and non-employees that are expected to vest. Share-based payment expense is based on the fair value of awards as of the grant date. The Company recognized $614,000 and $247,000 of share-based payment expense related to equity awards for the three months ended March 31, 2017 and 2016, respectively, under the fair value method. Offsetting this expense during the three months ended March 31, 2017, was a reduction in the fair value of cash-settled RSUs totaling approximately $18,000. During the three months ended March 31, 2017, the Company granted 223,802 time-based restricted stock units (RSUs) to employees with an aggregate fair value of $783,000, of which a portion will vest quarterly in equal amounts over the course of eight quarters and the remainder will vest annually in equal amounts over the course of three years. During the three months ended March 31, 2016, the Company granted 129,824 time-based RSUs to employees with an aggregate fair value of $286,000, which will vest quarterly in equal amounts over the course of eight quarters. The fair value of the time-based RSUs is expensed ratably over the requisite service period, which ranges from two to three years. During the three months ended March 31, 2017, the Company did not grant performance-based RSUs. The Company granted 160,000 performance-based RSUs with an aggregate fair value of $282,000 during the three months ended March 31, 2016. These RSUs vest upon the achievement of specific performance measures. The fair value of the performance-based RSUs is expensed ratably over the requisite service period, which ranges between one and four years. The Company did not grant stock options during the three months ended March 31, 2017 and granted 40,000 stock options for the three months ended March 31, 2016. The aggregate fair value of the granted options at the grant date was $46,000. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Long-Term Debt [Abstract] | |
Long-Term Debt | 12. Debt Line of Credit Citizens Bank The Company entered into a new three-year, $5.0 million revolving line of credit facility (RLOC) with Citizens Bank on December 29, 2016, to fund general working capital needs, including acquisitions. Working capital advances bear interest of LIBOR plus 2.25% per annum and letter of credit fees are 1.25% per annum. The Company is not required to maintain a restricted cash collateral account at Citizens Bank for outstanding letters of credit and working capital advances. The maximum availability under the RLOC is subject to a borrowing base equal to 80% of eligible accounts receivable, and is reduced for any issued and outstanding letters of credit and working capital advances. At March 31, 2017, there were no outstanding borrowings on the RLOC and six letters of credit totaling $1.7 million. The amount available at March 31, 2017, after consideration of the borrowing base, letters of credit and working capital advances was approximately $1.8 million. The credit facility agreement is subject to standard financial covenants and reporting requirements. At March 31, 2017, the Company was in compliance with its financial covenants. BB&T Bank At March 31, 2017, we had four letters of credit with BB&T totaling $1.0 million, which we expect to terminate during the second quarter of 2017. At March 31, 2017, and December 31, 2016, the cash collateral account with BB&T totaled $1.1 million and was classified as restricted cash on the consolidated balance sheets. |
Product Warranty
Product Warranty | 3 Months Ended |
Mar. 31, 2017 | |
Product Warranty [Abstract] | |
Product Warranty | 13. Product Warranty The Company accrues for estimated warranty costs at the time the related revenue is recognized based on historical experience and projected claims. The Company's long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to customized software embedded in the systems. The portion of the warranty provision expected to be incurred within 12 months is classified as current within accrued warranty and totals $1.2 million, while the remaining $0.4 million is classified as long-term within other liabilities. The activity in the accrued warranty accounts is as follows: (in thousands) Balance, January 1, 2017 $ 1,478 Current period provision 235 Current period claims (62 ) Currency adjustment 2 Balance, March 31, 2017 $ 1,653 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes [Abstract] | |
Income Taxes | 14. Income Taxes The following table presents the provision for income taxes and the effective tax rates: Three months ended March 31, ($ in thousands) 2017 2016 Provision for income taxes $ 73 $ 88 Effective tax rate (37.8 %) 38.6 % The Company's movement in effective tax rate for 2017 as compared to 2016 resulted mainly from an increase in pre-tax loss in the U.S. The Company's income tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. Tax expense in both years is comprised mainly of foreign income tax expense, Alternative Minimum Tax, state taxes, and deferred tax expense relating to the tax amortization of goodwill. Because of its net operating loss carryforwards, the Company is subject to U.S. federal and state income tax examinations from the year 1997 forward. The Company is subject to foreign tax examinations by tax authorities for years 2010 forward for Sweden, 2012 forward for China, and 2014 forward for both India and the UK. An uncertain tax position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not ( i.e. The Company recognizes deferred tax assets to the extent that it is believed that these assets are more likely than not to be realized. The Company has evaluated all positive and negative evidence and determined that it will continue to assess a full valuation allowance on its U.S., Swedish, U.K., and Chinese net deferred assets as of March 31, 2017. The Company has determined that it is more likely than not that it will realize the benefits of its deferred taxes in India. In 2016, the Company paid income taxes in India and expects to do so again in 2017. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information [Abstract] | |
Segment Information | 15. Segment Information The Company has two reportable business segments. The Performance Improvement Solutions segment provides simulation, training and engineering products and services delivered across the breadth of industries we serve. Solutions include simulation for both training and engineering applications. Example training applications include turnkey and custom training services, while engineering services include plant design verification and validation. The Company provides these services across all market segments. Contracts typically range from 9 months to 24 months. The Company and its predecessors have been providing these services since 1976. The Nuclear Industry Training and Consulting segment provides specialized workforce solutions primarily to the nuclear industry, working at clients' facilities. This business is managed through our Hyperspring subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio. Hyperspring has been providing these services since 2005. The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated income (loss) before income taxes: (in thousands) Three months ended March 31, 2017 2016 Revenue: Performance Improvement Solutions $ 9,670 $ 8,843 Nuclear Industry Training and Consulting 6,672 4,133 $ 16,342 $ 12,976 Operating income (loss): Performance Improvement Solutions $ (738 ) $ (42 ) Nuclear Industry Training and Consulting 935 188 Change in fair value of contingent consideration, net (254 ) 69 Operating (loss) income (57 ) 215 Interest income, net 27 27 Loss on derivative instruments, net (160 ) (118 ) Other (expense) income, net (3 ) 102 (Loss) income before income taxes $ (193 ) $ 226 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 16. Commitments and Contingencies Westinghouse Electric Company ("Westinghouse") filed for Chapter 11 Bankruptcy protection on March 29, 2017. Westinghouse is a customer in our Performance Improvement Solutions segment. At March 31, 2017, the Company had approximately $0.5 million in billed and unbilled pre-petition receivables attributable to Westinghouse. The Company has assessed the recoverability of these amounts and concluded that the likelihood of loss is not probable, and therefore, none of the outstanding amounts have been reserved at March 31, 2017. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated interim financial statements included herein have been prepared by GSE Systems, Inc. (the "Company," "GSE," "we," "us," or "our") and are unaudited. In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted. The results of operations for interim periods are not necessarily an indication of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 28, 2017. Certain reclassifications have been made to prior period amounts to conform to the current presentation. Subcontractor payables have been reclassified on the Consolidated Balance Sheets from Accounts payable to Accrued expenses. In addition, the Company reclassified research and development costs from Selling, general and administrative expenses and presented them as a separate caption within operating expenses on the consolidated statement of operations. The Company also reclassified the current portion of deferred taxes to noncurrent within other assets and other liabilities on the consolidated balance sheets. The Company has two reportable segments as follows: ● Performance Improvement Solutions (approximately 59% of revenue) Our Performance Improvement Solutions segment primarily encompasses our power plant high-fidelity simulation solutions, as well as engineering solutions and interactive computer based tutorials/simulation focused on the process industry. This segment includes various simulation products, engineering services, and operation training systems delivered across the industries we serve: primarily nuclear and fossil fuel power generation, as well as the process industries. Our simulation solutions include the following: (1) simulation software and services, including operator training systems, for the nuclear power industry, (2) simulation software and services, including operator training systems, for the fossil power industry, and (3) simulation software and services for the process industries used to teach fundamental industry processes and control systems to newly hired employees and for ongoing workforce development and training. GSE and its predecessors have been providing these services since 1976. ● Nuclear Industry Training and Consulting (approximately 41% of revenue) Nuclear Industry Training and Consulting provides highly specialized and skilled nuclear operations instructors and other consultants to the nuclear power industry. These employees work at our clients' facilities under client direction. Examples of these highly skilled positions are senior reactor operations instructors, procedure writers, work management specialists, planners and training material developers. This business is managed through our Hyperspring subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the Company's product and service portfolio. Hyperspring has been providing these services since 2005. Financial information about the two business segments is provided in Note 15 of the accompanying consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. The Company's most significant estimates relate to revenue recognition on long-term contracts, product warranties, capitalization of software development costs, valuation of goodwill and intangible assets acquired, valuation of contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets. Actual results could differ from these estimates and those differences could be material. |
Revenue Recognition | Revenue recognition The Company recognizes revenue through fixed price contracts for the sale of uniquely designed/customized systems containing hardware, software and other materials which generally apply to the Performance Improvement Solutions segment and time and material contracts for Nuclear Industry Training and Consulting support and service agreements. In accordance with Accounting Standards Codification (ASC) 605-35 , Construction-Type and Production-Type Contracts Uncertainties inherent in the performance of contracts include labor availability and productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to our revenue recognition as a significant change in the estimates can cause our revenue and related margins to change significantly from the amounts estimated in the early stages of the project. As we recognize revenue under the percentage-of-completion method, we provide an accrual for estimated future warranty costs based on historical and projected claims experience. Our long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to customized software embedded in the systems. Our system design contracts do not normally provide for post contract support (PCS) in terms of software upgrades, software enhancements or telephone support. To obtain PCS, the customers must normally purchase a separate contract. Such PCS arrangements are generally for a one-year period renewable annually and include customer support, unspecified software upgrades, and maintenance releases. We recognize revenue from these contracts ratably over the term of the agreements. Revenue from the sale of software licenses without other elements in the contract and which do not require significant modifications or customization for the Company's modeling tools are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable. We utilize written contracts to establish the terms and conditions by which product support and services are sold to customers. Delivery is considered to have occurred when title and risk of loss have been transferred to the customer, which generally occurs after a license key has been delivered electronically to the customer. We also recognize revenue from the sale of software licenses from contracts with multiple deliverables. These software license sales are evaluated under ASC 985-605, Software Revenue Recognition We recognize revenue under time and materials contracts primarily from the Nuclear Industry Training and Consulting segment and certain cost-reimbursable contracts. Revenue on time and material contracts is recognized as services are rendered and performed. Under a typical time-and-materials billing arrangement, customers are billed on a regularly scheduled basis, such as biweekly or monthly. Any unbilled amounts are typically billed the following month. Under cost-reimbursable contracts, which are subject to a contract ceiling amount, reimbursed for allowable costs and paid a fee, which may be fixed or performance based. However, if costs exceed the contract ceiling or are not allowable under the provisions of the contract or applicable regulations, may not be able to obtain reimbursement for all such costs. |
Recent Accounting Pronounceme25
Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements | Accounting pronouncements recently adopted In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, Simplifying the Measurement of Inventory (ASU 2015-11). ASU 2015-11 requires that an entity measure inventory at the lower of cost and net realizable value. This ASU does not apply to inventory measured using last-in, first-out. ASU 2015-11 was effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We adopted ASU 2015-11 effective January 1, 20 In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Topic 718: Improvements to Employee Share Based Accounting Accounting pronouncements not yet adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU No. 2016-02, Leases In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting unit's carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. |
Basic and Diluted Earnings (L26
Basic and Diluted Earnings (Loss) Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Basic and Diluted Earnings (Loss) Per Common Share [Abstract] | |
Number of Common Shares and Common Share Equivalents Used in the Determination of Basic and Diluted Income (Loss) per Share | The number of common shares and common share equivalents used in the determination of basic and diluted earnings (loss) per share were as follows: (in thousands, except for share amounts) Three months ended March 31, 2017 2016 Numerator: Net (loss) income $ (266 ) $ 138 Denominator: Weighted-average shares outstanding for basic (loss) income per share 19,094,382 17,912,045 Effect of dilutive securities: Stock options and restricted stock units - 221,697 Adjusted weighted-average shares outstanding and assumed conversions for diluted (loss) income per share 19,094,382 18,133,742 Shares related to dilutive securities excluded because inclusion would be anti-dilutive 564,833 752,042 |
Contract Receivables (Tables)
Contract Receivables (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Contract Receivables [Abstract] | |
Components of Contract Receivables | The components of contract receivables are as follows: (in thousands) March 31, December 31, 2017 2016 Billed receivables $ 5,971 $ 13,325 Recoverable costs and accrued profit not yet billed 7,944 5,555 Allowance for doubtful accounts (18 ) (17 ) Total contract receivables, net $ 13,897 $ 18,863 |
Prepaid Expenses and Other Cu28
Prepaid Expenses and Other Current Assets (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Prepaid Expenses and Other Current Assets [Abstract] | |
Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consist of the following: (in thousands) March 31, December 31, 2017 2016 Inventory $ 2,158 $ - Income taxes receivable 380 446 Prepaid expenses 583 422 Other current assets 903 1,184 Total prepaid expenses and other current assets $ 4,024 $ 2,052 |
Fair Value of Financial Instr29
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value of Financial Instruments [Abstract] | |
Assets and Liabilities Measured at Fair Value | The following table presents assets and liabilities measured at fair value at March 31, 2017: (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Money market funds $ 12,145 $ - $ - $ 12,145 Foreign exchange contracts - 71 - 71 Total assets $ 12,145 $ 71 $ - $ 12,216 Foreign exchange contracts $ - $ (36 ) $ - $ (36 ) Contingent consideration - - (1,508 ) (1,508 ) Total liabilities $ - $ (36 ) $ (1,508 ) $ (1,544 ) The following table presents assets and liabilities measured at fair value at December 31, 2016: (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Money market funds $ 16,435 $ - $ - $ 16,435 Foreign exchange contracts - 141 - 141 Total assets $ 16,435 $ 141 $ - $ 16,576 Foreign exchange contracts $ - $ (20 ) $ - $ (20 ) Contingent consideration - - (2,105 ) (2,105 ) Total liabilities $ - $ (20 ) $ (2,105 ) $ (2,125 ) |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments [Abstract] | |
Estimated Fair Value of the Contracts in the Consolidated Balance Sheets | The Company had not designated the foreign exchange contracts as hedges and recorded the estimated net fair values of the contracts on the consolidated balance sheets as follows: March 31, December 31, (in thousands) 2017 2016 Asset derivatives Prepaid expenses and other current assets $ 27 $ 57 Other assets 44 84 71 141 Liability derivatives Other current liabilities (36 ) (20 ) (36 ) (20 ) Net fair value $ 35 $ 121 |
Net (Loss) Gain on Derivative Instruments | For the three months ended March 31, 2017 and 2016, the Company recognized a net loss on its derivative instruments as outlined below: Three months ended March 31, (in thousands) 2017 2016 Foreign exchange contracts - change in fair value $ (86 ) $ (183 ) Remeasurement of related contract receivables, and billings in excess of revenue earned (74 ) 65 Loss on derivative instruments, net $ (160 ) $ (118 ) |
Product Warranty (Tables)
Product Warranty (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Product Warranty [Abstract] | |
Activities in the Product Warranty Accounts | The Company accrues for estimated warranty costs at the time the related revenue is recognized based on historical experience and projected claims. The Company's long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to customized software embedded in the systems. The portion of the warranty provision expected to be incurred within 12 months is classified as current within accrued warranty and totals $1.2 million, while the remaining $0.4 million is classified as long-term within other liabilities. The activity in the accrued warranty accounts is as follows: (in thousands) Balance, January 1, 2017 $ 1,478 Current period provision 235 Current period claims (62 ) Currency adjustment 2 Balance, March 31, 2017 $ 1,653 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes [Abstract] | |
Schedule of Income Taxes | The following table presents the provision for income taxes and the effective tax rates: Three months ended March 31, ($ in thousands) 2017 2016 Provision for income taxes $ 73 $ 88 Effective tax rate (37.8 %) 38.6 % |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information [Abstract] | |
Reconciliation of Revenue and Operating Results to Consolidated Income (Loss) Before Income Tax Expense | The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated income (loss) before income taxes: (in thousands) Three months ended March 31, 2017 2016 Revenue: Performance Improvement Solutions $ 9,670 $ 8,843 Nuclear Industry Training and Consulting 6,672 4,133 $ 16,342 $ 12,976 Operating income (loss): Performance Improvement Solutions $ (738 ) $ (42 ) Nuclear Industry Training and Consulting 935 188 Change in fair value of contingent consideration, net (254 ) 69 Operating (loss) income (57 ) 215 Interest income, net 27 27 Loss on derivative instruments, net (160 ) (118 ) Other (expense) income, net (3 ) 102 (Loss) income before income taxes $ (193 ) $ 226 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details) | 3 Months Ended |
Mar. 31, 2017Segment | |
Summary of Significant Accounting Policies [Abstract] | |
Number of reportable segment | 2 |
Term of warranty | 1 year |
Period of post customer support service (PCS) | 1 year |
Revenue [Member] | Performance Improvement Solutions [Member] | |
Revenue by major customers [Abstract] | |
Percentage of revenue contributed by major customers | 59.00% |
Revenue [Member] | Nuclear Industry Training and Consulting [Member] | |
Revenue by major customers [Abstract] | |
Percentage of revenue contributed by major customers | 41.00% |
Summary of Significant Accoun35
Summary of Significant Accounting Policies, Revisions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ||
Revenue | $ 16,342 | $ 12,976 |
Cost of revenue | 12,220 | 9,352 |
Write-down of capitalized software development costs | 0 | 0 |
Gross profit | 4,122 | 3,624 |
Operating loss | (57) | 215 |
Loss before income taxes | (193) | 226 |
Net loss | $ (266) | $ 138 |
Basic loss per common share (in dollars per share) | $ (0.01) | $ 0.01 |
Diluted loss per common share (in dollars per share) | $ (0.01) | $ 0.01 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS [Abstract] | ||
Net loss | $ (266) | $ 138 |
Comprehensive loss | (173) | 187 |
Cash flows from operating activities [Abstract] | ||
Net income (loss) | (266) | 138 |
Changes in assets and liabilities [Abstract] | ||
Contract receivables, net | (4,937) | (334) |
Prepaid expenses and other assets | 523 | 515 |
Billings in excess of revenue earned | (3,279) | (492) |
Net cash provided by operating activities | 1,344 | 1,640 |
Net decrease in cash and cash equivalents | $ (122) | $ 141 |
Basic and Diluted Earnings (L36
Basic and Diluted Earnings (Loss) Per Common Share (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator [Abstract] | ||
Net income (loss) | $ (266) | $ 138 |
Denominator [Abstract] | ||
Weighted-average shares outstanding for basic earnings per share (in shares) | 19,094,382 | 17,912,045 |
Effect of dilutive securities [Abstract] | ||
Stock options and restricted stock units (in shares) | 0 | 221,697 |
Adjusted weighted-average shares outstanding and assumed conversions for diluted income (loss) per share (in shares) | 19,094,382 | 18,133,742 |
Shares related to dilutive securities excluded because inclusion would be anti-dilutive (in shares) | 564,833 | 752,042 |
Contingent Consideration (Detai
Contingent Consideration (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Contingent Consideration [Abstract] | ||||
Contingent consideration accrued, current | $ 1,508 | $ 2,105 | $ 2,105 | |
Payments on contingent consideration | $ (851) | $ (1,421) |
Contract Receivables (Details)
Contract Receivables (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Apr. 30, 2016USD ($) | Mar. 31, 2017USD ($)Customer | Dec. 31, 2015 | Dec. 31, 2016USD ($)Customer | |
Contract Receivables [Abstract] | ||||
Maximum term of contract receivables | 12 months | |||
Components of contract receivables [Abstract] | ||||
Billed receivables | $ 5,971 | $ 13,325 | ||
Recoverable costs and accrued profit not yet billed | 7,944 | 5,555 | ||
Allowance for doubtful accounts | (18) | (17) | ||
Total contract receivables, net | $ 13,897 | $ 18,863 | ||
Unbilled contract receivables billed during October 2016 | $ 1,600 | |||
Contract Receivable [Member] | ||||
Concentration Risk [Line Items] | ||||
Number of customers accounting for contract receivables | Customer | 1 | 0 | ||
Percentage of contract receivables accounted by major customers | 11.30% | 10.00% |
Prepaid Expenses and Other Cu39
Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Prepaid Expenses and Other Current Assets [Abstract] | ||
Inventory | $ 2,158 | $ 0 |
Income tax receivable | 380 | 446 |
Prepaid expenses | 583 | 422 |
Other current assets | 903 | 1,184 |
Total prepaid expenses and other current assets | $ 4,024 | $ 2,052 |
Software Development Costs (Det
Software Development Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Software Development Costs [Abstract] | ||
Economic life of product | 3 years | |
Additions | $ 29 | $ 131 |
Capitalized software amortization | $ 117 | $ 81 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets [Abstract] | ||
Goodwill | $ 5,612 | $ 5,612 |
Fair Value of Financial Instr42
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Assets and liabilities measured at fair value [Abstract] | ||
Money market funds | $ 12,145 | $ 16,435 |
Foreign exchange contracts - Assets | 71 | 141 |
Total assets | 12,216 | 16,576 |
Foreign exchange contracts - Liabilities | 36 | 20 |
Contingent consideration | 1,508 | 2,105 |
Total liabilities | 1,544 | 2,125 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance, January 1, 2017 | 2,105 | |
Payments made on contingent liabilities | (851) | |
Change in fair value | 254 | |
Balance, March 31, 2017 | 1,508 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | ||
Assets and liabilities measured at fair value [Abstract] | ||
Money market funds | 12,145 | 16,435 |
Foreign exchange contracts - Assets | 0 | 0 |
Total assets | 12,145 | 16,435 |
Foreign exchange contracts - Liabilities | 0 | 0 |
Contingent consideration | 0 | 0 |
Total liabilities | 0 | 0 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Assets and liabilities measured at fair value [Abstract] | ||
Money market funds | 0 | 0 |
Foreign exchange contracts - Assets | 71 | 141 |
Total assets | 71 | 141 |
Foreign exchange contracts - Liabilities | 36 | 20 |
Contingent consideration | 0 | 0 |
Total liabilities | 36 | 20 |
Significant Unobservable Inputs (Level 3) [Member] | ||
Assets and liabilities measured at fair value [Abstract] | ||
Money market funds | 0 | 0 |
Foreign exchange contracts - Assets | 0 | 0 |
Total assets | 0 | 0 |
Foreign exchange contracts - Liabilities | 0 | 0 |
Contingent consideration | 1,508 | 2,105 |
Total liabilities | $ 1,508 | $ 2,105 |
Derivative Instruments, Foreign
Derivative Instruments, Foreign Exchange Contracts (Details) - Foreign Exchange Contract [Member] € in Millions, ¥ in Millions, CAD in Millions, AUD in Millions | 3 Months Ended | |||||||
Mar. 31, 2017CAD | Mar. 31, 2017EUR (€) | Mar. 31, 2017JPY (¥) | Mar. 31, 2017AUD | Dec. 31, 2016CAD | Dec. 31, 2016EUR (€) | Dec. 31, 2016JPY (¥) | Dec. 31, 2016AUD | |
Derivative [Line Items] | ||||||||
Foreign exchange contract outstanding | CAD 0.3 | € 0.2 | ¥ 281.4 | AUD 0.4 | CAD 0.5 | € 0.1 | ¥ 281.4 | AUD 0.6 |
Expiration date of contract | Dec. 31, 2018 |
Derivative Instruments, Fair Va
Derivative Instruments, Fair Values Derivatives, Balance Sheet Location (Details) - Foreign Exchange Contract [Member] - Not Designated as Hedging Instrument [Member] - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Estimated fair value of the contracts in the consolidated balance sheets [Abstract] | ||
Asset derivatives | $ 71 | $ 141 |
Liability derivatives | 36 | 20 |
Net fair value | 35 | 121 |
Prepaid Expenses and Other Current Assets [Member] | ||
Estimated fair value of the contracts in the consolidated balance sheets [Abstract] | ||
Asset derivatives | 27 | 57 |
Other Assets [Member] | ||
Estimated fair value of the contracts in the consolidated balance sheets [Abstract] | ||
Asset derivatives | 44 | 84 |
Other Current Liabilities [Member] | ||
Estimated fair value of the contracts in the consolidated balance sheets [Abstract] | ||
Liability derivatives | $ 36 | $ 20 |
Derivative Instruments, Gain (L
Derivative Instruments, Gain (Loss) On Derivative Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Foreign exchange contracts- change in fair value | $ (86) | $ (183) |
Remeasurement of related contract receivables, billings in excess of revenue earned, and subcontractor accruals | (74) | 65 |
(Loss) gain on derivative instruments, net | $ (160) | $ (118) |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) | 3 Months Ended | |
Mar. 31, 2017USD ($)Quartershares | Mar. 31, 2016USD ($)Quartershares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 614,000 | $ 247,000 |
Granted performance-based RSUs (in shares) | shares | 0 | 160,000 |
Aggregate fair value for performance-based RSUs | $ 0 | $ 282,000 |
Granted time-based RSUs (in shares) | shares | 223,802 | 129,824 |
Aggregate fair value for time-based RSUs | $ 783,000 | $ 286,000 |
Shares granted under stock options (in shares) | shares | 0 | 40,000 |
Fair value of shares granted under stock option plan | $ 0 | $ 46,000 |
Restricted Stock Units [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of quarters RSU's will vest quarterly | Quarter | 8 | 8 |
Period in which RSU's will vest annually in equal amounts | 3 years | |
Restricted Stock Units [Member] | Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Requisite service period | 1 year | 2 years |
Restricted Stock Units [Member] | Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Requisite service period | 4 years | 3 years |
Long-Term Debt (Details)
Long-Term Debt (Details) | 3 Months Ended | |
Mar. 31, 2017USD ($)Letter | Dec. 31, 2016USD ($) | |
Long-Term Debt [Abstract] | ||
Long-term debt | $ 0 | $ 0 |
Performance Bond [Abstract] | ||
Restricted cash, current | $ 1,140,000 | 1,140,000 |
Citizen's Bank [Member] | Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility term | 3 years | |
Principal amount of the line of credit | $ 5,000,000 | |
Percentage of letter of credit fees per annum | 1.25% | |
Percentage of borrowing base equal to eligible accounts receivable | 80.00% | |
Outstanding borrowings | $ 0 | |
Number of letters of credit | Letter | 6 | |
Letters of credit, amount outstanding | $ 1,700,000 | |
Line of Credit Facility, Remaining Borrowing Capacity | 1,800,000 | |
Fair value of amount outstanding | $ 0 | |
Performance Bond [Abstract] | ||
Number of standby letters of credit | Letter | 6 | |
Citizen's Bank [Member] | Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, basis spread on variable rate | 2.25% | |
BB&T Bank [Member] | Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Number of letters of credit | Letter | 4 | |
Letters of credit, amount outstanding | $ 1,000,000 | |
Restricted Cash and Cash Equivalents | $ 1,100,000 | 1,100,000 |
Performance Bond [Abstract] | ||
Number of standby letters of credit | Letter | 4 | |
Restricted cash and investments | $ 1,100,000 | $ 1,100,000 |
Product Warranty (Details)
Product Warranty (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Product warranty provision [Abstract] | |
Warranty terms for long-term contracts | 1 year |
Activities in product warranty account [Abstract] | |
Balance, January 1, 2017 | $ 1,478 |
Warranty provision | 235 |
Warranty claims | (62) |
Currency adjustment | 2 |
Balance, March 31, 2017 | 1,653 |
Accrued warranty, current | 1,209 |
Accrued warranty, noncurrent | $ 444 |
Minimum [Member] | |
Product warranty provision [Abstract] | |
Warranty provision terms | 1 year |
Maximum [Member] | |
Product warranty provision [Abstract] | |
Warranty provision terms | 5 years |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Taxes [Abstract] | ||
Federal corporate income tax rate | 35.00% | |
Provision for income taxes | $ 73 | $ 88 |
Effective tax rate | (37.80%) | 38.60% |
Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Probability of uncertain tax position to be recognized | 50.00% | |
Percentage of tax position realized upon ultimate settlement | 50.00% | |
Sweden [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 2,010 | |
China [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 2,012 | |
India [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 2,014 | |
UK [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 2,014 | |
Federal [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 1,997 | |
State [Member] | Minimum [Member] | ||
Income Tax Examination [Line Items] | ||
Income tax examination, year under examination | 1,997 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017USD ($)Segment | Mar. 31, 2016USD ($) | |
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | ||
Number of reportable business segments | Segment | 2 | |
Segment Reporting Information, Profit (Loss) [Abstract] | ||
Total revenue | $ 16,342 | $ 12,976 |
Change in fair value of contingent consideration, net | (254) | 69 |
Operating income (loss) | (57) | 215 |
Interest income, net | 27 | 27 |
(Loss) gain on derivative instruments, net | (160) | (118) |
Other income (expense), net | (3) | 102 |
Income (loss) before income taxes | $ (193) | 226 |
Minimum [Member] | ||
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | ||
Contract term | 9 months | |
Maximum [Member] | ||
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | ||
Contract term | 24 months | |
Performance Improvement Solutions [Member] | ||
Segment Reporting Information, Profit (Loss) [Abstract] | ||
Total revenue | $ 9,670 | 8,843 |
Operating income (loss) | (738) | (42) |
Nuclear Industry Training and Consulting [Member] | ||
Segment Reporting Information, Profit (Loss) [Abstract] | ||
Total revenue | 6,672 | 4,133 |
Operating income (loss) | $ 935 | $ 188 |