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GVP GSE Systems

Participants
Robert Blum Investor Relations, Lytham Partners
Kyle Loudermilk President and Chief Executive Officer
David Wright Henry Investment Trust
Call transcript
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Operator

Good day and welcome to the GSE Systems Reports First Quarter Fiscal Year 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions]After the today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to Robert Blum. ahead. go Please

Robert Blum

the ended you Thank Thank the Sarah, good the first and results on With All call the for very joining everyone. representing quarter the for you Company GSE is the Company's review XX, of Officer Officer, Chief loss us afternoon, GSE today will XXXX. for us right. President attending call Unfortunately, Systems. not Executive Kyle Chief Systems Loudermilk, joining much, today Financial he as Emmett March today financial to is be member. family and of to Pepe, a the

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

measures measures prepared considered supplemental be a provide not comparable regarding operational information recognize under section. file including substitute EBITDA, EBITDA, A these in may the read comparable call, does figures G that revise and in with These GAAP. forth Company's measures whether believes companies. Company's measure or statements, Mr. not in Loudermilk, Investors to be to events superior reconciliation to principles, adjusted non-GAAP measures adjusted turn Regulation titled found any GAAP under accordance EPS, or otherwise. any factors, and as to the measures periodic those in generally please this with GSE's of performance meaningful GAAP. reports forward-looking of Executive similarly should and forward-looking to addition Risk Securities Chief performance Systems. GSE new of non-GAAP risks, President and result and intend refer On a For documents are to you net uncertainties of Factors which or over accordance Officer not Commission, not With and to these encouraged might statements that, should for adjusted of accepted set can the Kyle, the non-GAAP filed of I'd be addition GSE the management other in directly GAAP other update Exchange to income measures Kyle like that full financial figures performance. release. to accounting these are information, the the with proceed. future Management call earnings on discussion SEC to most of or in

Kyle Loudermilk

will me our Improvement results also call, had copy detailing and commentary brief our I'll Engineering commentary, Robert. Solutions, of to segment; a release results. Workforce at first few but on the divisions, bit recap also press welcome I'll not, we like each Consulting, GSE's then quarter Earlier you've financial I'd Thank also review Nuclear of found release, agenda for known talk key the our to some chance you, first status results. today, about lay provide a quarter, including www.gses.com, to the a today's everyone XXXX call. software Performance our call section. be issued let To then the if can I a summarize financial the out the numbers. under some conference of this Hopefully, News news including SaaS-based and a events industry Training and on what a we solutions. Industry as NITC; Solutions, give or our of and financial website

Finally, the at pleased Overall, the to any several we open end. will then questions fronts. was with call the on quarter I

fourth $XX.X in were their quarter of remained New million, levels at $XX since Further, sequentially highest the the $XX.X at end increase the year. million XX% $X.X million, an million. by the quarter QX last Solutions. led Revenues X.X% up at Workforce sequential sequentially for orders XX% backlog to solid quarter from in first and of increased total

including that below While the value nuclear industry, win we to our of million $X.X and three were backlog has provide with will out million as that a point, first in I blue providing type training in offering vast of and energy and/or were due generated. in revenues all as something and committed to is to meat saw for providing. that beat has available the GSE we expected that to support potatoes booked show capabilities proven to experience of and combined these throughout wins see out, our and begin the quarter, backlog for business. appear a with signs to able record the our The elite $X.X offer segment can the this way predominantly we clients, personalized core tough we Performance Improvement approach levels, by note best to and Workforce competition. not It service clients orders account division for expertise, expect its was Rather, people Solutions note as orders to leveled QX. for would GSE well business new These orders that this vast our wins track backlog still we staffing chip orders appear. of during large services specialized orders important companies. of to that as received contracts pre-pandemic improvement XXXX see To number contract customer

Solutions Just this has with by of back this to segment, to to that With have been long-running and we levels. be to slower see relative convert segment, segment awards said, in due them Workforce uptick the activity bidding to pandemic eager seen to wins. This for nature we're and up we run slower impacted projects. an pre-pandemic the are to

business to This, is with an an as EnVision to that received company which we GSE another a new instrumental training blue solution Additionally, major into courses. comprehensive for Software accessed Service win our Canada was included energy few our subscription order too, customer, a cloud. in prepared their chip side in on expand of a I'll a from SaaS order was new levels. major Not it software upgrade remarks. can my platform this operational be that on-prem with the solution, contracted XX later our the only via

in beyond In COVID-XX to activity the us orders, earlier, the the it while the are bid from that dynamics, up the few term, the tunnel added with mentioned we the as from I orders Beyond levels. last historic or market activity does following impacts seeing light back the on mean end and overview Albeit revenue, we is the short market and quarters. rebounding XXXX. focused is significantly In optimism at throughout provide of not term, new does near are rebounding.

earlier power I The are like year towards I growth", term, to and the I this look in power emphasized general, GSE improving at Texas trends as are events believe referred grid forefront happened and supply in the longer havoc opportunities and what "stable are in clearly cause. type significant. of As something what disruption for can the by

I clean customers find to a about of and to tailwind and manner. the deliver the offerings government and theme While but has ways decarbonize deliver the not is decarbonization for grid and in only our decarbonization focus. nuclear key also services grade, requirements a to stable power GSE talked accomplish become stable as major order and these past, in power, of In a consistent stable two also

zero-carbon this Secretary, seeing openly Granholm, to federal-level President right Department value now focus for terrific ecosystem. healthy top of the are openly fleet. discussed embraced spectrum. and grid U.S. is policy. commercial requires Achieving is and political U.S. advocating this the nuclear recognize a at of see a are the Biden Energy that government the We nuclear It proposed to the across of reactor stable subsidies

the under announced XX nuclear models another design, into advanced nuclear funding investment call, SMRs, Program. heavy modular facilities initial reactors. next-generation the Demonstration to new in of into USDA plan. On nuclear advanced small I build XXXX, Further October awarded scale Advanced job its the American investment is $XXX discussed Reactor the of small in the highlighted called and December, reactor year-end In million working

in the the SMRs industry, news all key act facilities, major been as this is exciting there of can very newer on commissioned. for refocus also the for existing catalyst While have us until which interim, a were a

We of seek just also longer-term moving existing years. are reactors range through facilities, supply of meet many to keep They are on. are and seeing facilities, This targets, reactor the long-term continue power the great permit renewals looking Energy's operating of wave stable news the but Dominion fleet. renewals periods, by also XX back of years. the companies a primarily the to a the recently to XX nuclear extensions XX renewing but power seeking decarbonization their the Regulatory application that to time Surry to We at for Commission age for of lifetime not saw extend are lifetime in is small Nuclear part

monitoring technologies act and years well offer closely opportunities for newer believe we to bode for are SMRs a come. these many will for they GSE We future bridge the to renewals the because as very

two a key retire. his expected energy of large opportunities should baby industry boomers take driver present This us that at of to fill the to lose for U.S. is GSE over looked greater Another trends industry-wide is our well under percentage positioned the as gap. for workforce utilities as our growth several expertise next we're to business GSE, key advantage these divisions. through At years this

sequentially of known a let of due from saw quarter up moment in a the broad This picking in overall up that the the flow bottom Solutions, from in feel orders details Solutions on sign of orders million DP from order respectively. some first is and $X.X saw take the divisions. pandemic. increase North, that result uptick improved to the XXXX Engineering discuss uptick was is Now XX% $X.X Performance were this where We our orders XX% and note quarter demand. we To to Performance, drove Two in a XXXX. Overall, XX%, the million, pandemic. services as large fourth major delayed that those Improvement deal volume sequentially essential up the a Performance will each of that for me the Performance in core pent-up made. to also this up highlights I True as by single Engineering there being that COVID-XX on were no progress is direct Solutions, were of result demand quarter wrap

As the the over well to up industry work this positioned races from to trend. on that year, benefit is GSE was catch delayed past

our Solutions, Workforce to moving NITC Now segment.

press the and fourth continuation from in quarter current of mentioned customer contracts. increased of sequentially combination led well a new XXX% in As quarter, the extensions release, wins the as by orders first as

second division, this agreements which which work with million quarter, years for that we two as $X.X in where under segment, end fourth of XXXX, Hyperspring extension value utility yet services nearly of year. were $XX start staffing, end the order attributable from options. sizable in the to or consulting offers to orders orders quarter one The industry-specific multiyear order Our reflected specifically anticipate and had the U.S. agreements, our the in from were zero for to half increase in a Master specialized, our continue customers. is combined million, in in stellar new training of long-time in build announced budgeted with the major QX not we a up wrap over December approach orders Service these highly expertise Further first a quarter of a backlog, quarter. and We we'll

an demand is sending customer When their Solutions employees staff and broke Workforce year call, with type dramatically back that scaled this business of quickly the business. pause we out last augmentation. in saw on-demand earlier described workforce for I home, as As pandemic companies

are we seeing a continues. ramp in up. the back that from on-demand as we ensure quickly this we Just hard to now this working this saw We're swift pandemic, contraction business are trend business, emerging

our to access subsiding, in GSE the nature of conduct surge well at resources with result As pandemic our a customers the lack workforce. skilled business gap to workforce essential scale work up flow, effective to line, to longer this to Engineering strong professional certain post the demand revenue Solutions, up our of retiring of is beginning to are other which due convert and as hopefully will The pre-pandemic fill macro Improvement activity. growth. diversification a optimistic Performance ramp business should highly poised that which as of as levels trends, is skilled just a is this continued With we to see an -- COVID that order ultimately

cloud-based SaaS our to on Moving solutions.

Improvement While this company us unique the business. is under and margins total revenue nature revenues, of represents XX%, categorized X% currently Solutions gross the component and Performance this technically recurring and make XX% about of an attractive of

customers IP those result was ago turn, few workforce offering, deep subject launched of a robust decentralized industry for format this is matter and are licensing a monetizing strategy provide expertise. and packaging, our solutions significant and value-added development For flexible, SaaS with our underpinned our that of now to not by familiar GSE. and We technology direct simulation a technology delivering years to and and in

customers browser and to user, a only enabling technology. SaaS eliminate corporation end Our internet on-prem the management require burdensome for costly of client and web connectivity the the

term this a a significant have we're deliver those perpetual to with to push convert solution. While licenses and on-prem historically via solutions sold perpetual solution as onetime we our customers making with an cloud-based license, licenses

This converting of we this the highlighted clients a The moment ongoing several been I and solution. the through We successful was contract for term highlights was value-add key into cloud-based three-year example have to enter this license a software provide in agreements. solutions our these of contract ago.

resilience with from stream seeking We extremely were recurring have proud past work could convert us division in to industry-wide the which of to fine licenses roughly annuity pleased to stoppages several this project by for into on demand, I'm through the work turn develop stayed year-over-year to for customers that software this the highly increased and a revenue we pandemic progress additional and point and To on the solutions our XXX% built term future flat put in this focus, has sticky sequentially. team's I'm come. a SaaS-based Summarize, growing GSE. and delays ability caused year.

vaccine GSE services. reemerge, the COVID prepared as cases With dramatically, rollout opportunities upgrades required take essential and well down customers other is bidding of pursuing coming advantage to and

XXXX shoots clearly agreements execute our We're Forward-looking sign orders as of much growth increased and activity is will organic stronger strategy. and software a be of components industry project year a GSE. on exciting recurring rebounds, green for optimistic that we our very

well our Looking positioned stable are to term, clean customers. their deliver helping longer the to for success customers we and in power

Before our to first is quarter not recent his today's call who to the I mother. loss I of discuss financials, to attend extend to Emmett, due to on condolences want move the able

last commend to I want Additionally, efforts year. during for their his and team the diligent

cash able his and our which in our Emmett As I acknowledge operating flow we their to $X.XX efforts. I enhance team the to were wanted first employee appreciation of to credit coming retention to secure quarters. will detail, and quarter, million, for subsequent will the structure an capital

So now covering financials.

highlighted the the new delays to the press X.X% of fourth mid comments in in million quarter pandemic, on in to projects an of was was The my and $X.X A in quarter sequential Workforce XX.X% was in improvement sequential revenue numbers in way to year provide a color end driven first X% periods in by due and year-over-year impact the COVID-XX of and can. to remotely few first the fourth $X.X Solutions impact commencing where contracts will I to the offset XX.X% Performance quarter quarter. the was XX% due million growth overall pandemic. was by compared Revenue quarter during The first decrease which I decrease the operations several primarily Solutions. began and detail year-over-year areas million, due of of ending prior sequential the With the ago Company's revenues increase XXXX. million change the in first to in in the release, a quarter in the of quarter to $X.X XXXX million the Engineering significant XXXX. the of $XX.X $X.X first compared of XXXX on Solutions, added focus

the results working fourth of ago first of due million in I described turn has QX earlier, but during to line activity ramp-up As in The $X.X as of first due quarter business this COVID-XX is our are business quarter earlier. opportunity in the the XXXX. due revenue margins XXXX the of in our $X to Workforce XX.X% quarter. The with first million primarily first change a in fourth in pipeline XX.X% This in mentioned in and we XXXX Solutions the secured $X quarter year Solutions the quarter. decrease million lead diligently to -- Gross orders, compared is new to to time compared pandemic, Workforce of our the in revenue were profit into longer predominantly the year-over-year than segment. quarter overall is revenue sequential as of improvement quarter and to an XX.X% illustrated to first

margins in mix As dedicated can said we to past, the resources as how increase be gaps our by projects. much the tax payroll of burdens margins certain as employer business quarter to need have impacted course to of gross exceeded. and quarter be from over year Typically, lessen the are the our

future. in service Solutions This the flow to order that performance quarterly on that anticipate were preparatory gross due the first below near margins we additional to of showed recent levels. quarter in While for was Performance improvement, typical the division's work

gross believe ago $X.X quarter. will quarter and expenditures decreased over audit. were additional corporate are including expenses, the in restructuring done some quarter to million anticipate Overall, in hurt XXXX. -- the the fourth of year, we job normalized Operating typically due the the in gross quarter, annual higher charges, managing million good margin business of in million for expenditures the to XX% year-over-year impairment pandmeic. the be we believe our beneficial through Expenses compared $X.X a first They to the the the of the first division. more course $X.X year of first margin we've this a While quarter the in I

became in was of as eligible of $X.XX the the totaled we XXXX. to XXXX or permitted of a net and second noncash On moving XXXX. Act. the $X flow $X.X Security the loss loss items, to in We charge refund absence XXXX. compared related in the As of liquidation, the in This currently became restructuring PR Adjusted an or -- I here, the fourth revenue we're it Company was first the and loss diluted million quarter quarter payroll Aid, of adjusted in improve had the which in first just Reflecting share eligible as $XXX,XXX mentioned, are and the compared taxes $X.XX share million the adjustment other million. the for mainly basis, end, of has under Swedish credit of the restructuring of of net first employee it to the forward. diluted point XXXX to the quarter EBITDA per $XXX,XXX million first per quarter $X.XX first EBITDA of charges reducing in XXXX. a are pretty The cash of adjusted is similar applied to the adjusted complete. translation quarter we to first should subsequent quarter's Coronavirus finally $X.X One believe noncash quarter the for retention take our quarter for recognized further charge Relief, our $XXX,XXX Economic cumulative as realization highlights, due and

backlog $XX.X and mentioned Solutions I $XX.X attributed the attributed As $XX.X million, was million million which to Solutions of was segment. earlier, Performance to Workforce

the stability in the recent backlog from level quarter of reminder, most was discussing As December to backlog at I the believe show the that a today end the December. we're of $XX.X industry. million

Turning sheet. to balance sheet, balance we manage to continue the prudently our

Program. million payroll-related rent, we under costs, permitted $XX total last that includes debt year We've uses. for other received used Paycheck funds Protection approximately these and utilities Our the

for are loan. As of requirements under in March in the XX, we order to XXXX, compliance full with PPP forgiveness apply all

have We the of loan applied XXXX. in forgiveness quarter of first for this

approved by approval by and Our application awaiting currently the been has the bank is SBA.

the and when do. disclosure We to near an appropriate anticipating plan future are in a response we make

be the forgiveness debt, total Assuming our $X.X would just debt million. of

industry services. months and Before has we XXXX open that that for We recent I'd to Bidding to many push and keep like know order are of that. upgrades turned wins customers during table our conclude questions, that need the corner. a bids improved for the call and has we a in reflect coming back the believe

of is as positioned While do the still we employees our to for. the well This prepared timing and forward. favor. of time opportunities bit and share its which of our is point exciting win of commitment this the couldn't both our which that a business the We go in is for fair an get GSE, shareholders, we without is future, this to you for hazy, believe Company patience GSE I thank is

position substantial employees very we our Sidoti and long-term note, the Wednesday we very of heavily of opportunity essential industry, Thursday. power shareholders value our alike. Given services as in nuclear will the to this create for attending confident tech-enabled and decarbonization Conference be power and to final remain provider One sector a unique

in through we're be Partners coming June XX. to Lytham the Additionally, June pleased Conference participating XX up on

a floor the operator, connect arrange Lytham please please for one-on-one that meeting, said, If you questions. to like Partners. at would the team With with open

Operator

ahead. Investment [Operator from go Wright with Please Trust. Our Henry first Instructions] comes question David

David Wright

that you Is the to you the Swedish wind $XXX,XXX what said? restructuring in related Did QX charge say of the was final down?

Kyle Loudermilk

related the noncash-related entirely dissolution the It's Swedish it's of entity. and correct. to That's

David Wright

Great.

last statements couple next there'll role be more the financial in Okay. played have a of it in charges recurring anticipated Is years. or Restructuring any in quarter that the X? the

Kyle Loudermilk

mind of unused a that's may not firm yet, result a that is real pandemic. thing the thing come to the estate into that comes The restructuring but only the abandonment only of to of charges play right It's element now. as related

David Wright

Okay. Great. then And tactical a kind question. just of

do small those are for modular training for talk and we purposes require their... You know simulators about reactors, going to

Kyle Loudermilk

to absolutely. fact, you were they on on about some to on their Nuscale, or a from design their Yes, But at LinkedIn, simulator, a I'd just point in license fact, today, posting them called -- the decade working for internet accelerate N-U-S-C-A-L-E. based company We've GSE's NRC. simulator And do the now. is research their use commercial least been on technology. in for

answer short just yes. to the there's so question that. And your is, And just a behind tremendous story

plants long prove we them as before can plants on So need where just to come Nuscale. then these as they are those them, play built, design safely. simulate into and GSE operate that's have they they And can

David Wright

Nuscale with working are that in you regard? So now

Kyle Loudermilk

That's been with quite that. for them very working time. They're some public about correct. We've

David Wright

a be it come becoming earning before revenue may be operational? of actually even while the plants GSE reactors development well the could -- So in from the though simulator of along, advance plans

Kyle Loudermilk

do we, to we we'll could and so. continue Not only correct. have, That's Yes.

Operator

Instructions] [Operator

Robert Blum

questions Sarah, here, I we had there's to here. a wait while just additional see Kyle, if any couple

more terms going of of opportunity GSE On forward? there? what picture this component business, opportunity? -- bit the solutions the to what for color in little can Maybe as the add larger a can maybe mean the you And that is? software Size

Kyle Loudermilk

margin. you XXX% industry the we GSE. sticky, ongoing strategy XXXX, the deep value The as for potential to and in licensing. and fashion the working Sure. look today, and to value-added, the a it's significant revenue in into Look, an the this when are a And part of saw that's annuity high to can packaging offer we direct gross hard add at in contemporary significant. very this we create is customers. is very of year-over-year, value And It's company XX% business increase, is industry XX% came of work to team growth result with SaaS-based where really IP

scalable annuity, there of others into The a Canadian While that. working a them we've conversion, and just the into of on on to convert we're have we back opportunity working we that example who our one that hard go and to conversion. specific similar support client is for web browser obvious. to hardware value and us. for on-prem connectivity of The And and lower They'd us, want for don't support over it They very opportunity more and value-added it's many we're have significant and to and so it's achieved millions much but Internet cheaper a to time higher recurring spent example put to -- ownership software. is at with dollar I rather cost ahead. technology customer the certainly so clients dollars through client, have the estimate it, that's that sticky highlighted solutions the prop go effective where just grows are a won't

Robert Blum

right. both power nuclear as Great. within here. more a Obviously, particularly in well entrenched And sources? the been as Are couple has other maybe within America, All just well nuclear there Company, then that here. North Company the other geographies for are opportunities

Kyle Loudermilk

We've robust almost since Company founded. overseas, a standing was business the long sure. had for Yes, really

here been go there. travel with from to year, the by So projects in over projects United locations delivering our Slovakia, those past delivering Kingdom, States only mostly meeting in the in United and the we've essential the Ukraine, in domestic

One fly solutions been we able deliver these of pandemic, the we've have to the solutions with improve technology may say, -- the over in linings versus as delivery deliver these entrenched, past. of can silver and having we remain to

value added there's there. So

in was ties modest, off from we spigot note, with the in four that crack X/X and spigot. business to that that open turning We close like there. Japan. see order three, up starts our It's look years back with obviously, And country new very Japan Korea but extensive that continue But of ago to prior have remain to And Japan good as as their relationships seen engaged fleet. started grow was get flow work to we forward South Fukushima. in done do Fukushima, that I'll Japan, we've and we've a very work and

Robert Blum

necessary All right. supply here. the Workforce can or the sure more tight. does really the very Maybe the the In obviously, make just one Solutions there? required workforce division, Company it market engineers How is labor

Kyle Loudermilk

question. great a it's Yes,

have customers are -- we a database that of we robust work. as is, end-user for value-added solution workforce skilled much customers very on-demand our are our And available highly workers are. they Our utility proprietary and as

these So build up to to to need projects to. the we they great they long them out option have work hard when and the professionals when with work available, There over -- want to become and relationships really we term. reach

database really with marketplace. workers us that a win-win, it's and it's but differentiates in that really proprietary skilled So, highly the contacts

Robert Blum

back Sarah, you. I turn will it over to

Operator

session. any over further management conference for I Showing closing questions, question-and-answer would to to the concludes our this remarks. back no Thank you. like turn

Kyle Loudermilk

XXXX. like All you, and we're us. ahead here and in of thank in and time appreciate GSE, what's about your I'd right. in interest very excited to for us joining Well, thank We everybody speak Feel free We discussions, wish out one-on-one if the many speaking that, for of in weeks look to to with you follow-up for with reach to you happy forward to ahead. you.

to out have please have questions, great IR thanks, and we'd you any If Lytham firm our to Again, those be happy follow-up well, schedule day. Partners, be a reach and calls. everyone,

Operator

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

disconnect. now You may