GSE Systems Reports Fourth Quarter and Fiscal 2022 Financial Results
GSE Systems (GVP) reported its Q4 and FY 2022 financial results, highlighting a 12% increase in new orders to $11.4 million compared to Q3 2022, driven by a 127% rise in Workforce Solutions orders. Q4 2022 revenue decreased by 9% to $10.8 million year-over-year, and FY 2022 revenue was $47.7 million, down 13.5% from 2021. The company closed Q4 with $32.9 million in backlog and $4.4 million in cash. Management expressed optimism for improved industry spending moving forward, aided by a renewed $28.3 million contract. Operating loss reduced to $(1.1) million in Q4 2022, with a net loss of $(1.5) million.
- New orders increased by 12% to $11.4 million in Q4 2022.
- Workforce Solutions orders rose 127% sequentially.
- Backlog at December 31, 2022, was $32.9 million.
- Renewed 5-year contract worth up to $28.3 million.
- Q4 revenue decreased 9% year-over-year to $10.8 million.
- FY 2022 revenue declined 13.5% to $47.7 million.
- Net loss in Q4 2022 was $(1.5) million.
Conference Call Scheduled for today, March 30, 2023 at 4:30pm ET
COLUMBIA, Md., March 30, 2023 /PRNewswire/ -- GSE Systems, Inc. ("GSE Solutions", "GSE", or "the Company") (Nasdaq: GVP), a leader in advanced engineering and workforce solutions that support the future of clean-energy production and overall decarbonization initiatives of the power industry, today announced financial results for the fourth quarter ("Q4") and fiscal year ended December 31, 2022.
Q4 2022 and FY22 Highlights
- New orders in Q4 2022 increased
12% to approximately$11.4 million from Q3 2022, bolstered by$6.8 million in new orders for Workforce Solutions, or a127% sequential increase from Q3 2022. - Training and Consulting Services sales increased in Q4 of 2022 by
54% to$4.8 million when compared to$3.1 million in Q4 of 2021 and rose6% compared to Q3 of 2022. - Backlog at December 31, 2022, was
$32.9 million , including$23.8 million of Engineering backlog, and$9.1 million of Workforce Solutions backlog. - Ended Q4 with cash, cash equivalents and restricted cash of
$4.4 million , including restricted cash of$1.6 million .
Highlights subsequent to year-end
- Renewed 5-year contract with additional options worth up to
$28.3 million for Engineering Services. - Appointment of industry veteran, Ray Hruby as VP of Sales.
Management Commentary
"Fiscal 2022 was a busy year for GSE. The ongoing investments we have made in the company during 2022 include putting master services agreements in place with key utility customers, which eases the path to purchase our capabilities across the entire breadth of our business; we have rebuilt our sales and recruiting teams in Workforce Solutions; and we are glad to have hired a new head of sales early this year who is respected and well connected within the nuclear power industry. While industry spend has yet to return to pre-pandemic levels, we have been diligent during the year to be in front of customers to promote the business and align ourselves to their needs, remain a lean organization and preserve our capital structure to align the company to future opportunities. These efforts have begun to show initial progress during the fourth quarter, such as the sequential growth in Workforce Solutions Orders, and into early 2023 as exemplified by the successful renewal and expansion of a sizable, long-term agreement with US Government engineering laboratories that work directly with the US Navy. Other wins subsequent to Q4 close should significantly enhance the Company's backlog to more typical levels," commented Kyle J. Loudermilk, GSE's President and Chief Executive Officer.
"We are pleased with the recent wins we've reported and are positioned for what we expect to be improved industry spending moving forward. While the industry is still timid with the timing and release of projects in general, many customers are in the midst of their planning process for future capital investment and maintenance programs. We are eager for this planning to move to the execution phase, at which point more business should flow to the vendor ecosystem. The outlook for the industry has not looked this positive in decades, especially given the legislation that has been passed in the recent years to strengthen the nuclear industry for the foreseeable future," added Mr. Loudermilk.
Emmett Pepe, CFO of GSE Systems, added, "During fiscal 2022 we were able to make certain investments in our business development teams and changes in our back office while maintaining tight expense controls. The back-office changes include systems integrations, process improvement and bolstering our accounting team. While some orders received cascaded into early 2023, these wins have replenished our backlog to more historical levels and reveal that our pipeline remains very active. As part of the company's goal to return to profitability we continue to be proactive in pursuing additional cost containment measures. While many of these are initiatives for 2023, we achieved some savings in Q4 2022 which help offset growth investment. The company's balance sheet remained stable as cash, cash equivalents and restricted cash at the end of Q4 2022 was
Q4 2022 FINANCIAL RESULTS
Revenue during Q4 2022 was
Engineering revenue was
Workforce Solutions revenue was
Gross profit in Q4 2022 was
Operating expenses in Q4 2022 were
Operating loss was approximately
Net loss in Q4 2022 was
Adjusted net loss1 totaled
Adjusted EBITDA1 totaled
Backlog at December 31, 2022, was
2022 FULL YEAR RECAP
Revenue in 2022 was
Engineering revenue was
Workforce Solutions revenue was
Gross profit in 2022 was
Operating expenses in 2022 were
Operating loss was approximately
Net loss in 2022 was
Adjusted net loss1 totaled
Adjusted EBITDA1 totaled
1 Refer to the non-GAAP reconciliation tables at the end of this press release for a definition of "EBITDA", "adjusted EBITDA" and "adjusted net income".
CONFERENCE CALL
GSE Systems has scheduled a conference call for today, March 30, 2023 at 4:30 p.m. ET (1:30 p.m. PT) to review these results. Interested parties can access the conference call by dialing (833) 974-2453 or (412) 317-5784 or can listen via a live Internet webcast at: https://app.webinar.net/9WOQrgvYE0K. Access to the link is also available in the Investor Relations section of the Company's website at: https://www.gses.com/about/investors/.
A teleconference replay of the call will be available for seven days at (877) 344-7529 or (412) 317-0088, confirmation # 5336388. A webcast replay will be available in the Investor Relations section of the Company's website at https://www.gses.com/about/investors/ for 90 days.
ABOUT GSE SOLUTIONS
Proven by more than 50 years of experience in the nuclear power industry, GSE knows what it takes to help customers deliver carbon-free electricity safely and reliably. Today, GSE Solutions leverages top talent, expertise, and technology to help energy facilities achieve next-level power plant performance. GSE's advanced Engineering and Workforce Solutions divisions offer highly specialized training, engineering design, program compliance, simulation, and technical staffing that reduce risk and optimize plant operations. With more than 1,100 installations and hundreds of customers in over 50 countries, GSE delivers operational excellence. www.gses.com.
FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current expectations concerning future events and results. We use words such as "expect," "intend," "believe," "may," "will," "should," "could," "anticipates," and similar expressions to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project. For a full discussion of these risks, uncertainties, and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Company Contact | Investor Contact | |
Kyle Loudermilk | Lytham Partners | |
Chief Executive Officer | Adam Lowensteiner, Vice President | |
GSE Systems, Inc. | (646) 829-9702 | |
(410) 970-7800 |
GSE SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||
(in thousands, except share and per share data) | ||||||||||||
Three Months ended | Twelve Months ended | |||||||||||
December 31, | December 31, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||
Revenue | ||||||||||||
Cost of revenue | 7,761 | 10,813 | 35,824 | 43,325 | ||||||||
Gross profit | 3,055 | 3,058 | 11,910 | 11,858 | ||||||||
Selling, general and administrative | 3,775 | 4,387 | 17,028 | 14,908 | ||||||||
Research and development | 101 | 166 | 611 | 626 | ||||||||
Restructuring charges | - | - | - | 798 | ||||||||
Goodwill and intangible asset impairment charge | - | - | 7,505 | 3 | ||||||||
Depreciation | 91 | 68 | 304 | 284 | ||||||||
Amortization of definite-lived intangible assets | 168 | 284 | 868 | 1,213 | ||||||||
Total operating expenses | 4,135 | 4,905 | 26,316 | 17,832 | ||||||||
Operating loss | (1,080) | (1,847) | (14,406) | (5,974) | ||||||||
Other income and expenses, net | ||||||||||||
Interest expense | (344) | (24) | (1,272) | (159) | ||||||||
Change in fair value of derivative instruments, net | 100 | 19 | 477 | 19 | ||||||||
Other (loss) income, net | (33) | 31 | (91) | 16,884 | ||||||||
(Loss) income before taxes | (1,357) | (1,821) | (15,292) | 10,770 | ||||||||
Provision for income taxes | 159 | 36 | 51 | 163 | ||||||||
Net (loss) income | ||||||||||||
Net (loss) income per common share - basic | ||||||||||||
Net (loss) Income per common share - Diluted | ||||||||||||
Weighted average shares outstanding - Basic | 22,136,313 | 20,901,005 | 21,362,897 | 20,761,191 | ||||||||
Weighted average shares outstanding - Diluted | 22,136,313 | 20,901,005 | 21,362,897 | 20,761,191 | ||||||||
GSE SYSTEMS, INC. AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS | |||||
(in thousands, except share and per share data) | |||||
December 31, 2022 | December 31, 2021 | ||||
(unaudited) | (audited) | ||||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 2,789 | $ | 3,550 | |
Restricted cash, current | 1,052 | - | |||
Contract receivables, net | 10,064 | 11,257 | |||
Prepaid expenses and other current assets | 2,165 | 5,262 | |||
Total current assets | 16,070 | 20,069 | |||
Equipment, software and leasehold improvements, net | 772 | 839 | |||
Software development costs, net | 574 | 532 | |||
Goodwill | 6,299 | 13,339 | |||
Intangible assets, net | 1,687 | 3,020 | |||
Restricted cash - long term | 535 | - | |||
Operating lease right-of-use assets, net | 506 | 1,200 | |||
Other assets | 53 | 52 | |||
Total assets | $ | 26,496 | $ | 39,051 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Current liabilities: | |||||
Line of credit | $ | - | $ | 1,817 | |
Current portion of long-term note | 3,038 | - | |||
Accounts payable | 1,262 | 1,179 | |||
Accrued expenses | 2,084 | 1,358 | |||
Accrued compensation | 1,071 | 1,452 | |||
Billings in excess of revenue earned | 4,163 | 5,029 | |||
Accrued warranty | 370 | 667 | |||
Income taxes payable | 1,774 | 1,654 | |||
Derivative liabilities | 603 | - | |||
Other current liabilities | 1,286 | 1,883 | |||
Total current liabilities | 15,651 | 15,039 | |||
Long-term note, less current portion | 310 | - | |||
Operating lease liabilities noncurrent | 160 | 790 | |||
Other noncurrent liabilities | 144 | 179 | |||
Total liabilities | 16,265 | 16,008 | |||
Commitments and contingencies (Note 22) | |||||
Stockholders' equity: | |||||
Preferred stock | - | - | |||
Common stock | 240 | 225 | |||
Additional paid-in capital | 82,911 | 80,505 | |||
Accumulated deficit | (69,927) | (54,584) | |||
Accumulated other comprehensive income (loss) | 6 | (104) | |||
Treasury stock at cost, 1,598,911 shares | (2,999) | (2,999) | |||
Total stockholders' equity | 10,231 | 23,043 | |||
Total liabilities and stockholders' equity | $ | 26,496 | $ | 39,051 | |
The accompanying notes are an integral part of these consolidated financial statements.
EBITDA and Adjusted EBITDA Reconciliation (in thousands)
References to "EBITDA" mean net (loss) income, before taking into account interest expense (income), provision for income taxes, depreciation and amortization. References to Adjusted EBITDA exclude the impact of litigation, goodwill and intangible asset impairment charge, employee retention credit, PPP loan and accumulated interest, restructuring charges, stock-based compensation expense, change in fair value of derivative instruments, and VAT write-off. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles (GAAP). Management believes EBITDA and Adjusted EBITDA, in addition to operating profit, net income and other GAAP measures, are useful to investors to evaluate our results because it excludes certain items that are not directly related to our core operating performance that may, or could, have a disproportionate positive or negative impact on our results for any particular period. Investors should recognize that EBITDA and Adjusted EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows:
Three Months ended | Twelve Months ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
(unaudited) | (unaudited) | (unaudited) | (audited) | |||||||||||
Net (loss) income | ||||||||||||||
Interest expense, net | 344 | 24 | 1,272 | 159 | ||||||||||
Provision for income taxes | 159 | 36 | 51 | 163 | ||||||||||
Depreciation and amortization | 344 | 439 | 1,511 | 1,865 | ||||||||||
EBITDA | (669) | (1,358) | (12,509) | 12,794 | ||||||||||
Litigation | - | (22) | - | (22) | ||||||||||
Goodwill and intangible asset impairment charge | - | - | 7,505 | 3 | ||||||||||
Employee retention credit | - | - | - | (7,162) | ||||||||||
PPP loan and accumulated interest forgiveness | - | - | - | (10,127) | ||||||||||
Restructuring charges | - | - | - | 798 | ||||||||||
Stock-based compensation expense | 362 | 259 | 1,954 | 1,043 | ||||||||||
Change in fair value of derivative instruments, net | (100) | (19) | (477) | (19) | ||||||||||
VAT write-off | - | - | - | 450 | ||||||||||
Adjusted EBITDA | ||||||||||||||
Adjusted Net Income and Adjusted EPS Reconciliation (in thousands, except per share amounts)
References to Adjusted net (loss) income exclude the impact of litigation, goodwill and intangible asset impairment charge, employee retention credit, PPP loan and accumulated interest, restructuring charges, stock-based compensation expense, change in fair value of derivative instruments, VAT write-off, amortization of intangible assets related to acquisitions, release of valuation allowance, and income tax expense impact of adjustments. Adjusted Net Income and adjusted earnings per share (adjusted EPS) are not measures of financial performance under GAAP. Management believes adjusted net income and adjusted EPS, in addition to other GAAP measures, are useful to investors to evaluate our results because they exclude certain items that are not directly related to our core operating performance and non-cash items that may, or could, have a disproportionate positive or negative impact on our results for any particular period. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP adjusted net income and adjusted EPS to GAAP net income, the most directly comparable GAAP financial measure, is as follows:
Three Months ended | Twelve Months ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
(unaudited) | (unaudited) | (unaudited) | (audited) | |||||||||||
Net (loss) income | ||||||||||||||
Litigation | - | (22) | - | (22) | ||||||||||
Goodwill and intangible asset impairment charge | - | - | 7,505 | 3 | ||||||||||
Employee retention credit | - | - | - | (7,162) | ||||||||||
PPP loan and accumulated interest forgiveness | - | - | - | (10,127) | ||||||||||
Restructuring charges | - | - | - | 798 | ||||||||||
Stock-based compensation expense | 362 | 259 | 1,954 | 1,043 | ||||||||||
Change in fair value of derivative instruments, net | (100) | (19) | (477) | (19) | ||||||||||
VAT write-off | - | - | - | 450 | ||||||||||
Amortization of intangible assets related to acquisitions | 168 | 284 | 868 | 1,213 | ||||||||||
Valuation allowance | - | 246 | - | 246 | ||||||||||
Income tax expense impact of adjustments | - | 46 | - | 46 | ||||||||||
Adjusted net loss | ||||||||||||||
Adjusted loss per common share – Diluted | (0.05) | (0.05) | (0.26) | (0.14) | ||||||||||
Weighted average shares outstanding – Diluted(a) | 22,136,313 | 20,901,005 | 21,362,897 | 20,761,191 | ||||||||||
(a) During the year ended December 31, 2022, the Company reported a GAAP net loss and adjusted net loss. Accordingly, there was no dilutive shares from RSUs included in the adjusted earnings per common share calculation for the year ended December 31, 2022, that was considered anti-dilutive in determining the GAAP diluted loss per common share. |
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SOURCE GSE Systems, Inc.
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