GVP GSE Systems

Kalle Ahl The Equity Group
Kyle Loudermilk President, CEO & Director
Christopher Sorrells COO & Director
Emmett Pepe CFO
Call transcript
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Welcome to the GSE Systems, Incorporated 2017 Third Quarter Financial Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Kalle Ahl of The Equity Group. Thank you, Mr. Ahl, you may begin.

Kalle Ahl

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

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

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

Kyle Loudermilk

of relationships accretive clients acquisition X while professional developing nuclear can highly the press we on our of Call. Quarter Absolute Officer. strong are results. Absolute had nuclear Earlier Sorrells, its and a everyone throughout release adjusted founding industry. established like today's the you've areas financial controls be progress and EBITDA, power million, training, September and and procedure expertise provider our afternoon. project as quarter XX, net solutions of our Kalle, acquired earnings purchase our in Earnings technical strategy nuclear third Chief decades transforms position copy pro release. news Systems the while global In GSE of XXXX, covering Chris this with significantly Absolute the website XXXX. section. call project the Financial forma not, engineering, we Emmett industry. has made latest GSE company of revenue of under $XXX at The But regarded such corrective XXXX power growth Conference of our Consulting Hopefully, to Since you Consulting found a provider with year-over-year long-term on chance adjusted blue-chip welcome increases Consulting, technical a issued in Also sector, scale consulting go-to in our ago, News actions. support, completing delivering significant Pepe, income services revenue, review Operating an as Officer; XXXX on Absolute approximately the I'd to good power to to today, Thanks, writing, to executing management, in XX-month a if third and into a quarter Third We Chief have increases

our In offering, Absolute relationships with to on and addition clients to brings to adding revenues, our capabilities customers roughly million brings deepens new highly $XX to existing and solution platform. complementary our LTM new our

our power. a Absolute Consulting, fourth roughly with approximately acquired financial that meaningful point the of prior vendor companies the operate In color we're Chris a a see where the to functions and two in GSE thesis major bit growth will core ecosystem GSE ensure Absolute our a to for quarter and scale to end locations transaction doing call. purchase integrate acquisition There We're and of cash to days third million business quarter. continuous the thesis later our expect the the believe this we've in Even the With and impact good we ended business M&A aligned moved pleased a with I that robust on in a for we beginning some and clearly of since a as discuss we further. of the quarter XX Sorrells lines quickly additional from we are after nuclear debt. no fragmented position active and are the Absolute extremely with an pipeline represents is $XX.X to provide Absolute, focused Consulting our and months to pipeline, optimally consolidating We scaled we business of on remain compelling across closed platform properly proof our lot geographies. improvement. is on

plan organic $X.X $XX.X fourth complete to end favor. on negatively strong if million major quarter the Performance Nuclear end related our the corporate Solutions XXXX. quarter, development performance of million and $XX.X for of will update effectuating backlog, an operations and backlog of Industry customer. healthy XXXX. in from GSE These Consulting increased COO. consisted take strategy. improve by impacted results, XXXX go not growing accounting provide was agile, our earnings from timing months compared million sooner, and to to in given year As options to advantage a first the XXXX, leadership of Absolute. cash $XX.X operationally now the we Total backlog, industry lean on in feel the ready by which projects we on such, We're our Training quarter from another long-term on working we to at call, of operating Improvement In color remain X position for over our in Returning call diligently at in simplify remained and Emmett and in that a solid in We're to GSE's we and will prior with track flow efficiencies summary, especially team Chris to remains in Performance our the percent any year revenue our Sorrells, to with provide $XX.X we difference always look attributable please million our was I'll segment our operations. million. continue that as call. our the address backlog to turn are $XX.X later are focused Solutions was ahead. we Improvement We and global dynamics, which from and quarter Adjusted performance of Chris, of X executing to EBITDA third results. remain ensure on $X.X the million the million $X.X XX% growth suboptimal of sales to million business. additional driving feel our

Christopher Sorrells

Kyle. Thanks, the and start color Absolute on its I'll model. with acquisition operating some additional

in are back-office well integrate going During weeks is a integration prepared with swing. with and plan as of the well to detailed our as Preclose, division full our merging Hyperspring XXX-day the we ownership, business first Absolute GSE's. things seven

of XXXX. to fully swiftly moving integrated GSE into by end is that We Absolute are the ensure

revenue representing at margin For of focus for more EBITDA customer time gross technical XX% No Absolute Absolute $X well XXXX are than similar averaged of in balanced X with in represents our profit. GSE. with highly the preclose areas revenue ranging to gross representing offerings. complementary past approximately support, largest gross of approximately XX% basis, in customer revenue; very of approximately XX% margin On of including by two an our the This view one $XX synergies. profit. Absolute's the XX%, in work, of approximately mix engineering, Gross million $XX years, is million. adjusted acquisition approximately Absolute to revenue. when customer identified approximately from to had XX% and The revenue; other is -- approximately million-plus Hyperspring $X Hyperspring's is mix typically, has XX% procedural related million LTM approximately our quarterly of

this used to transaction on the expect to earnings, cash accretive to business. hand purchase We be immediately having

Absolute which a additional GSE terrific as the back-office ecosystem we which a leverage acquisitions. is eye to that for look make a power will industry further industry-leading with point great proof team an thesis and nuclear platform a has we power. consolidate Absolute the in processes, indicated, Kyle upon As is keen vendor our to to fractured acquisition

ongoing we are efforts Our by M&A active, pipeline. our excited are and

engineering, areas value-added target Our components. four technical consulting, staffing software and and unchanged, remain

our enhanced and With EBITDA exceeds provides XXXX investors X transaction remain revenue, of said, that that asymmetrical to that is X focused cost we our IRR very per adjusted each goal to growth close risk our Our ROIC will on for earnings with ensure or to attractive share. and capital. stated M&A deals an in reward, certainly criteria additional in publicly drive

overall Moving operations. our on to

participation With the GSE latest as XXXX. for and by our where as information as complete, new want frame in be operating an based the well & provide they this to the in investor York believe XX. on activities business investors Cleantech of and prior on our which plan deck, understand in December website Growth vision upcoming investors on operating model acquisition will filing Industrial Conference our updated and updated our conferences, model we X help We via our in to share operating X-K X-year We X, Angeles to on our would New December properly Los model strategy investor to we Absolute with be will an Micro City framework LD published unfold. ROTH

licensed the a Energy would requirements existing generation. those value on plants can this in important On of Secretary, developments increase industry the nation's changes that grid costs coal before Let plants to and operators supply federal they this that past winter If Commission sources and of the fair power of a regulator notice of rate directed me return nuclear is a Perry, market in implemented, allows expedited decades. some "details X in that recent proposal owners with fully to create be resilient The news. portion determined" significant plus in recover must Federal stated the be With -- to nuclear sweeping and line the structure favoring resilience this All be reliability U.S. U.S. Rick Regulatory order to rules coming review, eligible participate today. bottom the able could be XX, The implemented allocated Energy electricity attributes heating how season. proposed meet to would one equity. FERC most rule-making to conclude September generators, energy particular. grid power

a continues October month the to bill, may state governor good of open. In last energy of action the Connecticut to plant policy other and to -- from baseload. forward significant sell expanding owners House electricity the looks under move at new Perry bill. important change keep innovative He resilient national reliable signed This the leadership U.S. of zero-carbon energy and into of the Millstone. help energy he believes the of development rules which the electricity nuclear to nuclear along he energy plant the Perry announced with in nuclear how product officials Millstone the the its advanced end stated bright, help The of that Georgia. strengthening addition, commitments recognition sells Senate of is technologies. Vogtle billion that the energy be plants output the power More passed in XX% it permits power future as unfold and a Millstone is for Vogtle news nuclear of and via up infrastructure security. passed loan $X.X in value nuclear nuclear characterized that support and like that conditional projects American a kind guarantees to Dominion to with promoting grid State in growth, provides the in bill of a competition its our nuclear up sources strategic zero-carbon power law, economic separate projects to and could

whether key the they which units and provide, Safety financial power like Shim Nuclear a Emmett Korea, was plants on to citizen third will X. value Units support X Recognizing over construction review the Security November once strategic obtained jury the of zero-carbon resumed With pending of that, the construction. the will Korean and the is turn to of Construction a nuclear market quarter recommendation According Commission. for suspended results. citizens' baseload approval of in Kori on X July, to a I'd the happen Parliament, on from GSE, is citizens' to this in would should and jury report South Lastly, plant the work who continue. of overwhelmingly voted it continuing -- the the submitted

Emmett Pepe

I'll with Chris. business. you, of begin Thank the review new

$X.X timing Solutions QX totaled in of orders Improvement slipped segment compared the bookings million key few $XX.X quarter. totaling XXXX. of from impacted XXXX by were Our a that QX of million comparisons approximately $X.X Year-over-year million to the Performance in

of for New of projects. projects Consulting market, power market, other revenues XXXX. million profit in simulator Absolute included million segment, In to Nuclear orders and $X.X million totaled power services XXXX quarter various of Performance million the for QX and in the are income $X.X million fossil $X.X Improvement and and for full-scope of and million new of XXXX QX and miscellaneous XX the Industry $X.X of in third gross nuclear $X.X with to gas million Training and and net for services oil tutorials compared million Solutions contracts $X.X training the in our in full QX Consulting forward looking million in the last upgrades of a $X.X Nuclear engineering for finally Consulting customers days from simulators Absolute and Industry we industry, quarter and QX XXXX. contributed $X.X for $X.X XXXX. a in business Consequently, simulators Training

our consolidating synergies, them end of Absolute system into ERP we've plans, year. back-office Consulting, integrate started addition the our benefit the of process In plans the to identified preclose begun XXX(k) and have integration to the by

the results projects $XX.X rose of revenue which in on from customer. and result in $X.X $XX.X QX milestones out XX% in percentage staffing QX quarter. QX timing a QX days Consulting due our customers our time supplier QX revenue Total reflecting in from QX X% completion in to million Solutions XXXX Nuclear from and certain to recognition Improvement $X.X million higher XXXX, Absolute in Consulting the demand Now increased the to XXXX. XX to revenue financial from Performance mainly from a on to from projects million difference accounting of to review $XX.X third in QX. pushed Training for XX% on million $X.X of This major lines revenues these million related X million acquisition. XXXX delays would for XXXX XXXX, major of declined revenue of

Although ended this through the revenue QX delivered X of projects we've from approximately X had timing months XXXX, for some $XX.X inception-to-date customer XXXX, QX On primary of in and issues XX, XXXX. major million increased a of XXXX. the $X.X Gross million to $X.X September account revenue, or projects QX revenues. $X for XX.X% revenue million Performance or X% XXXX XX.X% profit of million year-to-date the segment in basis, in three QX up XX% these Improvement from of has

Training segment and $X.X XXX% million XXXX. to from to XXXX perform well Nuclear $X.X QX profit Consulting the the increased continues million in For segment, QX XXXX. gross The in

Our is total quarterly same XXXX the year-to-date highest Hyperspring. gross XXXX and all revenue profit been that orders, in gross since period. they the of the QX margin are The have highest acquisition

As $X.X integrate million on of million of XXXX. to November, compared expenses that Absolute, SG&A to million team acquisition is or Management segment. XX% contingent in value QX in Improvement revenue Performance in $X.X decreased in related close opportunities. XXXX. and QX related totaled keeping XXXX of position increase from profit million higher $X.X so the primarily to on in this of was look closed SG&A execute revenue remain expenses we finalized due be XXXX. segment's our fair QX segment, track we growth XXXX in expense to consideration we eye The to ready QX upcoming the Hyperspring, The forward will can XXXX out or the of will $X.X XX.X% continuing which QX million in this and adjustments to a $X.X gross record XX.X%

XXXX share diluted September compared acquisition Net was $XXX,XXX per higher share Non-GAAP In diluted income to share or Non-GAAP $X.X $X.XX as QX XXXX addition, adjusted our $XXX,XXX and XXXX per onetime flow. in approximately share diluted or in our as net of XXXX. million defined QX $X.XX $X.X QX in or per noncash related XXXX, or $X.XX of compared to adjusted $XXX,XXX in $XXX,XXX QX and compared basic approximately EBITDA defined release of was $XXX,XXX of XXXX, in QX QX we transaction approximately Absolute approximately stock of net costs cash million. QX was to basic of $XXX,XXX generated $XXX,XXX on operating to per earnings in expense approximately earnings in In approximately Consulting XX, our in income compensation and release loss diluted negative $X.XX XXXX. XXXX.

totaled December at position million compared XXXX. XX, XX, September $XX.X XXXX, to cash at Our million $XX.X

of operate quarter. to continue working of debt We and had capital at no the the million with end long-term third $XX

capital working inorganic to generation us and now Our the opportunities will strong value. and out organic Kyle. seek to I'll as operations our turn can as well cash allow significant cash that positions via to continue of conversation provide back shareholder

Kyle Loudermilk

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


[Operator Instructions].

Our first question from is LK Management. Kaplan Lawrence [ph],

Unidentified Analyst

quarter, that's the backlog take show the going lower Any as in something was in million quarter up as fourth down Is Absolute. far away Is for seasonal? that? the Question, it if by sales $X.X you it reason or? to

Kyle Loudermilk

Performance eye keen it's whether And why, a -- have keen you have obviously on number it's Nuclear well something break out it we be eye Consulting. Well, Performance a answer as don't bookings question, to Larry. a We -- and that Solutions other. bookings our for now. on. by an focused segments, business Training we We're is as But good by that performance it have we as right so cyclical I something Industry Solutions on. or

Christopher Sorrells

other within days notice a orders -- in the October. into things literally $X of crossed into you'll couple in is of Emmett's commentary that just one under million And

from to So you time right. time, that get

you all quarter. So keen a did have would million that earlier been but $X have couple said, eye days, something the as a we've to in on week keep a


question-and-answer for turn Loudermilk gentlemen, and end Instructions]. back remarks. [Operator would to And Kyle call have the closing like the Ladies of the session. reached I we to

Kyle Loudermilk

pleased and on for coming closing, our to in investor for I'd upcoming progress Well, with to reiterate interest like speak meet focus to with I many the at In especially Thank In your conferences. everybody say hope are how continued time months, a thanks, our you, get you, our again, and improvement. of joining we GSE. and chance us.


This concludes today's conference.

you time. may Thank have your and at day. this disconnect You great lines a your for participation