GP Strategies Corporation
Q3 2017 Earnings Call Transcript

Published: 2 Nov 2017

[Operator:]

Good morning. My name is Tia, and I will be your conference operator today for the GP Strategies' Third Quarter 2017 Earnings Conference Call. All lines will be placed on mute, preventing any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I will now turn the call over to Ann Blank, Director of Investor Relations. Please go ahead.

[Ann Blank:]

Thank you. Good morning, and welcome to GP Strategies third quarter 2017 earnings call. On the call today are Scott Greenberg, Chief Executive Officer; Doug Sharp, President; and Sharon Esposito-Mayer, Chief Financial Officer. Before we begin, I would like to remind you that today's comments will include forward-looking statements which are subject to certain risks and uncertainties that could cause our actual results to be materially different from expectations. For a complete discussion of these risks, we encourage you to read our documents on file with the SEC, which are posted on the Investors section of our Web site at gpstrategies.com. A replay of this call will also be available on our Web site later today. At this time, I'd like to turn the call over to Scott.

[Scott Greenberg:]

Thank you, Ann. Good morning, and welcome to our third quarter 2017 conference call. Today we will follow our usual quarterly format. To initiate the call, I will provide a brief overview of the results of the third quarter of 2017, then Sharon will present an in depth financial analysis, Doug will give key updates on our global initiatives. After Doug's presentation, I will provide a final summary including an acquisition update and then we will conclude with a Q&A session. This morning before the market opened GP Strategies announced earnings for the third quarter of 2017. GP Strategies reported earnings per share of $.19 for the quarter but that was inclusive of a $.10 per share write-off on an oil and gas contract. Excluding this write-off, it would have been another strong quarter for GP strategies. Revenue increased to $124.1 million in the third quarter of 2017 from $122 million in the corresponding quarter in 2016. This revenue increase was due to a strong performance by our Learning Solutions segment and acquisitions in our Performance Readiness Solutions segment. We achieved these results despite the negative impact from the loss on the oil and gas project which impacted current quarter revenue by approximately $1.3 million from expectations. While we are disappointed with this project, revenue from this client represented only approximately 1% of our total revenue for the trailing 12 months. The Company's EBITDA for the third quarter was $6.4 million. These results include the $2.6 million loss on the contract and approximately $1.3 million of investments in our new ERP system implementation. Some companies and analysts add back non-cash compensation expense to EBITDA on a pro forma basis. These expenses for the quarter was approximately $1.7 million. In the third quarter of 2017, GP Strategies continued with is acquisition strategy and on August 31, completed the acquisition of YouTrain, which is based in Scotland and strengthened our apprenticeship program IT capabilities and cyber security practices. And CLS Performance Solutions which provides us with enhance ERP capabilities in the U.K. Historic revenue for these two acquisitions is approximately $7 million per year. We are currently evaluating additional acquisition opportunities which have been supported by our strong cash flow. The Learning Solutions segment paved the way for our revenue growth. The Learning Solutions revenue increased by 7% to $54.8 million from $51.4 million, so our largest group is still showing robust growth. In addition, the company generated cash flow from operations for the nine months ended September 30, 2017, of $21.2 million compared to $11.9 million for the nine months of 2016. So as you can see, a significant increase. As far as share buyback, the company repurchased approximately 101,000 shares for approximately $2.4 million of GP Strategies stock in the open market for the nine months ended September 30, 2017. The buyback activity in the trailing 12-months have kept the shares fairly consistent on a fully diluted basis with approximately 16.9 million and 16.7 million shares outstanding for the third quarter of 2017 and the corresponding period of 2016. I would like to give a little bit of a summary over the last few years. As many of our long term shareholders know, we have invested heavily in building our global reach and adding high level personnel to our foreign operations and we anticipate seeing the return of these investments in years to come. We have added over 15 global offices and our annual revenue in the Asia Pac region is in excess of $25 million which is a multiple of where it was just five years ago, making it our fastest growing region on an organic basis. We still currently do business with approximately 25% of the global 500 companies worldwide and our goal is to continue to establish GP Strategies brand in these highly fragmented industries. On previous calls we discussed initiatives to expand in the finance and insurance sector. We started these services performing in this sector approximately six years ago, and for the third quarter our revenue in the financial service sector was approximately 22.1%. We are currently making a major push into the pharmaceutical industry as it has the same strong attributes as the financial service sector. We will also continue to focus on automotive, which in 2017 to date is our largest market sector. With that being said, I'll now turn it over to Sharon, who will give a detailed financial presentation for the quarter.

[Sharon Esposito-Mayer:]

Thanks, Scott, and good morning everyone. We reported third quarter revenue of $124.1 million, which represented a $2.1 million or 2% increase over the third quarter 2016 revenue of $122 million. As Scott mentioned, revenue growth in the quarter was led by strong revenue performance in our Learning Solutions and Performance Readiness Solutions segment. Learning Solutions revenue increased $3.4 million or 7% in the quarter to $54.8 million. The Emantras acquisition completed on April 1 of this year provided $500,000 of revenue in the quarter and the YouTrain acquisition completed on August 31 provided $300,000 of revenue in the quarter. The remaining $2.7 million or 5% organic revenue growth was due to a $2.3 million net increase in eLearning content development and training outsourcing services and a $300,000 revenue increase due to favorable changes in exchange rates. Performance Readiness Solutions revenue of $22.1 million represented a $3.2 million or 17% increase largely due to the revenue provided by acquisitions. The Maverick acquisition completed on October 1 of 2016 contributed $2.1 million of revenue in the quarter, the McKinney Rogers acquisition completed on February 1 of this year provided $1.2 million of revenue, and the recently completed CLS acquisition on August 31 provided $300,000 of revenue. There was also a $300,000 increase in technical training for an aerospace client and a $700,000 decrease in leadership revenue, partially offsetting the increase as noted. The increases in these two segments were offset in part by revenue declines in the Sandy and professional and technical services segment. Sandy third quarter revenue of $22.7 million, represented a $3.9 million or 15% decrease over the third quarter of 2016, primarily due to a net $4 million decline in automotive training services for a non-recurring vehicle launch event in 2016. There was also a $400,000 decrease in [indiscernible] portfolio revenue and these decreases were partially offset by a $500,000 increase in publication revenue due to a partial shipment of publication during the quarter of 2017 that was fully delivered in the fourth quarter of 2016. Sandy's third quarter publication revenue was $3.7 million and we are projecting a total of $5.4 million of publication revenue in the fourth quarter. Professional and technical services revenue of $24.4 million was a $700,000 or 3% decrease compared to the third quarter 2016 revenue of $25.1 million. Revenue was impacted by a $1.3 million cumulative revenue adjustment related to contract performance dispute with a foreign oil and gas client that resulted in an increase in estimated cost and reduction in revenue. This adjustment had a negative 5% impact on revenue in the segment during the quarter and a negative 1% impact on overall company revenue. This adjustment was partially offset by a $600,000 net increase in engineering and technical training services. Revenues for the nine months ended September 30 was $377.7 million or an increase of $14.4 million or 4%. Organic revenue growth was $2 million year to date September and we experienced a $6.6 million revenue decrease due to decline in exchange rates compared to year to date September 2016. This decrease from exchange rate had a negative 2% impact on revenue growth during the year. The automotive sector was our largest sector year to date and comprised 22% of revenue consistent with 2016. We continue to have a revenue concentration from a single automotive customer which accounted for 13% of our year to date revenue in both 2017 and 2016. The financial and insurance sector comprised 20% of year to date 2017 revenue compared to 21% year to date September 2016. We also have a concentration from a single financial services customer which accounted for 14% of our year to date 2017 revenue compared to 15% of our year to date September 2016 revenue. Revenue earned from operations outside the United States represented 30% of our year to date revenue compared to 31% in 2016. Gross profit decreased in the third quarter by $1.4 million or 7%. Gross profit as a percentage of revenue decreased to 15% from 16.4% in the third quarter of 2016. The acquisition discussed contributed $200,000 of gross profit in the quarter. Learning Solutions gross profit increased in the quarter by $600,000 or 6% due to the revenue growth. These increases were offset by and $400,000 or 10% gross profit decline in Sandy due to the revenue decrease and a $1.9 million gross profit decline in the professional and technical services segment. The gross profit decline in the professional and technical services segment was due to the $1.3 million revenue adjustment related to a foreign oil and gas client, and there was also a $1.3 million cost reserve taken on the same contract during the quarter due to the increase in estimated contact cost. Combined, these resulted in a total overall negative impact of $2.6 million or negative 13% on gross profit dollars and had a 2% impact on gross profit as a percentage of revenue in the quarter, and that was a negative 2% impact on gross profit. SG&A increased $2.6 million to $14.6 million. The largest increasing SG&A is due to $1.3 million of expense in the quarter related to our new financial system implementation, which we anticipate will go live in early 2018. The results of $600,000 increase in labor and benefits expense, a $200,000 increase in amortization expense, and the $200,000 increase in bad debt expense. Projected implementation cost is expected to increase to $1.6 million in the fourth quarter of this year. Interest expense increased approximately $100,000 largely due to an increase in interest rates. Other income increased $100,000 due to an increase in joint venture income and during the quarter we recognized a $300,000 gain related to a net change in the estimated contingent consideration payment. Third quarter 2017 income before tax was $3.9 million compared to $7.6 million in the third quarter of 2016, resulting in a $3.7 million decline largely driven by the $2.6 million oil and gas contract adjustments taken and the $2.6 million increase in SG&A. tax expense was $600,000 in the quarter or a rate of 16.4%, compared to $2.8 million or 36.9% in the third quarter of 2016. The decrease in the rate compared to 2016 is due to a change in the mix of taxable income from our taxing to lower taxing jurisdictions. In addition, during the quarter there was a reduction in projected U.S. income driven in part by the contract adjustment taken and other discrete items that also contributed to the reduced rate. We are projecting a fourth quarter tax rate of approximately 30%. Third quarter net income was $3.3 million compared to $4.8 million in 2016. Third quarter earnings per share were $.19 compared to $.29 per share in the third quarter of 2016. The $2.6 million contract loss impacted EPS by negative $.10 per share. Moving on to the balance sheet. Our cash balances were $18 million at September 30, 2016 compared to the $16.3 million on hand at the end of 2016. During the year, as Scott mentioned, we spent $2.4 million on share repurchases and $4.2 million just on the YouTrain acquisition and $400,000 to fund the CLS acquisition, both completed in August of this year. We also spent $4.3 million to fund the McKinney Rogers acquisition and $3.2 million to fund the Emantras acquisition, both completed earlier in the year. We generated $21.2 million of cash flows from operations year to date September, compared to $11.9 million year to date September 2016. The $21.2 million is comprised of year to date income of $13.2 million plus non-cash add backs to net income, including depreciation and amortization of $5.2 million and non-cash compensation expense of $4.9 million, offset by a $1.3 million decrease in cash from changes in other operating items, deferred income taxes of $400,000 and a $400,000 non-cash gain on contingent considerations. Fixed asset additions were $2.3 million year to date September, resulting in free cash flows for the nine months of $18.9 million. At the end of September, backlog was $265 million compared to $302 million at September 30, 2016 and $285 million at the end of December 2016. Approximately $22 million of the backlog declined compared to September 2016 due to a timing difference as to when backlog will be received in 2017. At this time, I will turn the call over to Doug, who will discuss some operational highlights.

[Doug Sharp:]

Thank you, Sharon and hello, everyone. I just have three quick points to communicate. First, at a macro level the demand for corporate learning remains strong, driven by new technology and processes, new regulations and products, or simply the desire for global consistency our workforce turnover. There is always more knowledge to be transferred and put to work today than it was yesterday. Said differently, corporate training is a great space to be in. To my second point, we are also a leader in the corporate training space, not just from our size and global reach as Scott mentioned, but also on our developing and offering creative, innovative and performance based training solutions. We are not alone in our thinking. Industry associations and research organizations agree. In 2017, in partnership with our clients, GP Strategies was recognized by Brandon Hall and presented with 11 awards ranging from best learning team and best high potential employee development, to best use of games and simulation and best unique and innovative learning. Again, these awards were in partnership of marquee customers like GM, Lowe's, Facebook , Mondelez and MasterCard. We are also listed as a top 20 provider in six training industry incorporated categories ranging from leading in training outsourcing to leading in sales training and leading in leadership development. And finally, the 2017 Chief Learning Office Magazine recognized GP Strategies with two excellence in learning awards. So the first point, corporate learning being a great space to be in. The second point is that we are well known for quality, innovation and transforming of services in the space of training and development of workforces for global corporations. So my final point addresses how we will leverage our market position to grow GP Strategies. We are very fortunate that our hard work has resulted in a brand and reputation that attracts proposal opportunities. Going forward, we will be a bit less humble and further expand our brand in Europe, Asia and South America. We will place considerably more emphasis on sales and our objective being to develop and entertain more opportunities. I will leave it at that and turn it back to Scott.

[Scott Greenberg:]

Thank you, Doug. Hopefully, you heard today about GP Strategies being a strong company but we continue to make improvements. The area that I would like to expand on before I turn it over to the Q&A is on acquisitions. Historically, acquisitions have been a key part of GP Strategies growth, when we grew the company from $200 million to over $400 million in a very short period of time. Due to our global initiative, expansion of offices, hiring of people, we slowed down the acquisition policy for about a two to three year period. We felt we needed to do that to establish our bandwidth and establish our offices and get everything in the right place. Approximately 12 months ago, we announced that we are resuming our acquisition strategy. A key development for the company. In the last 12 months we have done five acquisitions for approximately $30 million of annual revenue. So in our world, not a lot of revenue, not as much as we expect but we have started the engine, so to speak. We are having strong support from the board and the leaders of the company, and I believe in the next 12 months you will see as far as revenue being derived or revving up of our acquisition activity. As you heard from Sharon to date, the cash flow that’s generated from the company is strong and it will support our acquisition strategy along with the credit facility we have in place and we are very excited about going forward and continuing on in and in addition to growing organically, expanding our acquisition strategy as we did in prior periods. We are going to look for companies that have both global reach, enhance our competencies and a lot of what we are looking for is being told to us by our customers. So we do listen to our customers, we see the needs and that goes into the development of our acquisition strategy. Even as we speak, we currently have acquisitions that we are evaluating and we even have one or two in letters of intent. So you will hear about that, hopefully, in the near future. With that being said, I will now turn it over to the Q&A session, moderator.

[Operator:]

[Operator Instructions] Our first question is from the line of Alex Paris. Please proceed.

[Alexander Paris:]

I would like to dive a little bit more into the foreign oil and gas contract. I am assuming this is the Kuwaiti contract that we have talked about on previous calls.

[Scott Greenberg:]

Well, judging by the size and what we said, the annual revenue, that’s a pretty astute assumption.

[Alexander Paris:]

Okay. Just wanted to be clear. Second, obviously this has a bit hit on revenue but what sort of contribution margin did this contract provide over the last 12 months. If it was, what do you say, 1% of revenue over the last 12 months? What is the impact on gross or operating, however you want to give it, from that contract. I just want to get an idea of the size.

[Scott Greenberg:]

Yes. Well, we took a hit in the quarter because we had to write-off revenue that we had [cost] [ph] and prior receivables or earned but not billed on, well, the ongoing gross margin on this contract has been roughly into 10% range. And a lot of -- and of course it's a variable type of cost system. So I would say if we said, it was roughly 1% of our revenue, which equates to roughly $5 million of revenue in trailing 12 months, the contribution on those contracts would have been roughly in the $500,000 range. So while the hit is large because we are writing off all the revenue in the quarter, the pro forma impact on a quarterly basis if we did not have the contract, once we get rid of the cost would not be material. And that really has to be the takeaway from this call today that while it was a big hit, historically it has not been a bit income providing item for the company.

[Alexander Paris:]

When was the first quarter that you generated revenue from this contract?

[Scott Greenberg:]

I think it was about four quarters ago. We have been generating for a year. So there might have been -- so it was probably the third quarter of 2016. There might have been a little in the second but the real revenue that was coming out, so started in the third quarter of last year.

[Alexander Paris:]

Okay. And then is it relatively even across the quarters, so $1 million in a quarter, per quarter sort of revenue? You are sort of $1.3 for the quarter, so is it kind of $1.3 million per quarter sort of contract?

[Sharon Esposito-Mayer:]

It's varied a little bit Alex. I mean it's probably run anywhere from $1.7 million as a high to a low of about $1 million. So it's been based on really the level of effort expended in each quarter. But on average it's been about what you are saying.

[Scott Greenberg:]

Now the one thing to realize is that we are not saying at this stage the contract is over. There is dispute over deliverable requirements under the contract and we are trying to remediate it. But we felt that this was the conservative thing to do when we spoke and we followed the accountants and we did our research. But the contract has not been terminated at this point.

[Alexander Paris:]

So the revenue that you got in Q3, Q4, Q1, Q2 stands? You just reversed the revenue that you earned in the third quarter due to the dispute over deliverables.

[Sharon Esposito-Mayer:]

Yes. I mean technically in the third quarter we only generated about $400,000 of revenue related to this contract and that is based on the fact that we took a new look at what our estimated costs are at completion under the contract. So revenue recognition on any fixed price contract is always based on a cumulative look to where you are at any point in time versus where you expect to be at completion. So the $1.3 million adjustment that we have taken, technically was a cumulative adjustment based on the fact that we believe that we are going to have a potential increase in cost to complete this contract due to the dispute over the deliverable requirements.

[Alexander Paris:]

So in other words, you had made some estimate in terms of cost, this is a percentage of completion, right?

[Sharon Esposito-Mayer:]

Right. And we make that estimate every single quarter. It's just based on the dispute that we are having currently that resulted in an increase in the cost that we expect. That is what in turn resulted in the basically reduction of revenue based on the percentage of completion methodology.

[Alexander Paris:]

So the dispute is really, if you want these deliverables, we need to get paid more for them. Is that it?

[Sharon Esposito-Mayer:]

I think it's a combination of where we are at with the deliverables, what the requirements are for the deliverables. There's many factors coming into play on it and we are trying right now to work with the client. As Scott mentioned, we are still under contract and we are trying to work with the client to resolve them. But we are in the middle of that resolution currently.

[Scott Greenberg:]

But this is complicated situation currently.

[Alexander Paris:]

All right. Well, I appreciate the information that you were able to communicate. I realize it's sensitive information. Scott, I just want to say, percentage of completion contracts always entail a risk and I don’t think I have seen a material adjustment from GP Strategies historically. So...

[Scott Greenberg:]

Yes. I have been the CEO here, Alex, for a while, and I have been with the company for 35 years and this is the first adjustment that we have had like this in at least the last ten years.

[Sharon Esposito-Mayer:]

This [indiscernible] adjustment that we have had in probably 20 years.

[Scott Greenberg:]

So we have had a great track record but we obviously aren't impervious to it.

[Alexander Paris:]

So I guess my takeaway is, you are hopeful that you could remediate the contract and continue to performance under the contract. But if worst case scenario happens and the contract is terminated, while it is $5 million a year contract, it's a $500,000 a year gross income from the contract for you.

[Scott Greenberg:]

You said it as well as I could have, so that’s correct.

[Operator:]

The next question is from the line of Jeff Martin with ROTH Capital Partners. Please proceed.

[Jeff Martin:]

Just a quick follow up on the contract, the oil and gas contract. What is different about this contract versus the other contracts given you have not had this sort of issue in the past, and what are the lessons to be learned from it.

[Scott Greenberg:]

Well, most of our revenues, if you look at GP Strategies is not -- while we do have long-term contracts with our customers, in most cases the deliverables are come over a shorter period of time. And in effect this was a period of time where the first set of deliverables was a while into the contract. So I think the lesson learned is one, we have to be very careful on longer-term deliverable contracts. Which isn't really GP's main business, so to speak. So we did do this. We do have expertise in the oil and gas and we believe that the work we are doing is of good quality but you know you combine that with a foreign customer and that provided challenges as well. So I think getting into a new country has to be something that we have to be cognizant as well when we enter into large scale contracts.

[Jeff Martin:]

Okay. And then is the $1.3 million reserve, is that just backward looking or is that also forward looking and are you continuing to accumulate expenses for the work you are doing now? Are you still working on that contract or is it on hold at this point?

[Sharon Esposito-Mayer:]

So, yes, we are still working on the contract, it is not on hold. We are trying to work through the issues with the client. And the $1.3 million revenue adjustment and $1.3 million cost reserve that we booked is based on where we believe our forward looking costs are going to come in that right now. We will obviously have to continue to look at that and true that up as we progress in Q4 but we hope that by the end of Q4 we will have a better understanding of where we stand overall on this contract.

[Jeff Martin:]

Okay. Great. And then I will shift on to the acquisitions comments that you made Scott. When you say you are revving up the acquisition activity, what does that mean? I know in the past you have said for acquisitions to make a sizable impact you are going to have to do larger acquisitions than you have done historically. Does that mean, we are going to see more than $30 million type of revenue run rate added over the next 12 months? I would imagine you would probably look to grow historically in the 7% to 8% range by acquisitions, so that would imply maybe more of $40 million to $50 million type of target. Just looking to get some additional color on the revving comment.

[Scott Greenberg:]

I mean right now, we did $30 million of acquisitions, but they are mainly small because they were five acquisitions that totaled $30 million. So while we did a lot of acquisitions, we did not get any sizable acquisitions into the mix. I would agree with you, Jeff, historically if you look at GP and say we want to have 10% acquisitions, the real target should be $50 million of acquisitions in the next 12-month period as opposed to the $30 million that we have done. So in order to comply with our prior type of acquisition strategy, I would hope that in the next 12 months we could bring in $50 million in revenue on acquisitions.

[Jeff Martin:]

Okay. And is that targeting geographies? Is that targeting certain customers in various industry sectors? Is this combination, is it strategic in terms of services?

[Scott Greenberg:]

Well, we could talk about some of the ones we did this year. So one of the areas we were interested in expanding is getting into the C-suite. So if you look at GP Strategies, we tend to come in with the head of learning in the learning organization. The McKinney Rogers acquisition get us into the C-suite with the hope that we could sell other services. So one area we are looking at targeting is the entry point of the acquisitions. The second area that we are targeting as well is the global reach of the acquisitions. The third area is, for example, we just had our customer forum and we took all our customers and the actually took a tour of the New York stock exchange during the meeting. But from the customer forum, we see what our customers' needs are and what their requirements are, and what their ideas are and what they look to be spending their money on in the future. And to the extent we could bring in an acquisition that gives us more emphasis in those areas or more strength in those areas, when you look at them as well, and then the fourth area is global reach. But GP Strategies in the last few years has bought in lot in the leadership space as well, and that’s an area that we continue to look at. So, overall, it's geography, it's getting into different entre points and also getting competencies in that we believe we could cross-sell and our customers are starting to spend more money in those areas.

[Jeff Martin:]

Okay. Great. And then last question is, how is the ramp with the pharmaceutical client coming and how do you feel about that sector in your strategy to push into like you did with finance and insurance a while back.

[Scott Greenberg:]

Well, there is good and bad news in relation to that. The pharmaceutical customer, the large customer we talked about in Switzerland, we are still very optimistic about generating significant revenue from that. However, they have been slow in implementing us coming in as a global provider. They have started working more heavily in that so I believe that starting the first quarter, you will start seeing significant revenue from that. We are starting to see projects and we are getting contacted by them but it was slower ramp up due to the client not because of GP Strategies, bringing, of course, all their organizations in their different areas. So they are starting with Switzerland and then they move into the United States, which is their key area. But I would hope to start providing some good revenue growth in that starting in Q1.

[Operator:]

The next question is from the line of Kevin Liu with B. Riley FBR. Please proceed.

[Kevin Liu:]

Just wanted to start off with talking about your international operations. Obviously, you mentioned that you have expanded significantly from an infrastructure standpoint. As you look into next year, would you expect leverage of those operations and would that come more so from kind of either expansion with existing customers or new wins, or do you think you will bolt-on acquisitions in order to help get some more leverage out of the investments.

[Scott Greenberg:]

I think what you are referring, we could break it out into two. We could break it out into Europe and Asia. I think in Europe, we will have organic expansion but there will also be acquisitions that would impact our Europe operations. Just like the two we completed just in the last quarter. So, Europe, yes in acquisitions. As far as Asia goes, we are still seeing significant amount of customer expansion. New opportunities, we are in the development phase there. As I mentioned, we are billing north of $25 million of revenue there. So I think most of the opportunity there will not come from acquisition but will be more organic growth and continuing on with the strategy that we have had in the last five years.

[Kevin Liu:]

Got it. And within the professional and technical services segment, if we kind of satisfied the foreign oil and gas customer you have been talking about this morning, what are you seeing in terms of, kind of the composition of the pipeline and the opportunities for growth from the rest of the customer base specifically for that vertical.

[Scott Greenberg:]

Well, unfortunately if you add back the results of the write-off in both profit and revenue, that group would have grown for the quarter slightly. So it would have its first quarter in a while both revenue growth and profit growth, adding it back in. And I think one of the key driving factors in that is the EtaPRO product that we have. EtaPRO is the product that we have that does both on changes passing the [indiscernible]. I am just feeling all of the energy in the professional technical services, not just the oil and gas because I think that was your question. So if I am wrong, you could correct me and then we will go back to that. But if you look at the energy space which is part of professional and technical services, we have a product called EtaPRO. What EtaPRO does is measure thermal efficiency of power plants, carbon emissions, vibration analysis and pattern recognition. It is a very robust program and product where we get both ongoing work and license work as well. I think that’s been in 2017 the lead of the professional and technical services group. So I think that while our oil and gas business took this decline, our energy grew, is actually doing quite well and we are starting to see some opportunities in certain of the other areas in the professional and technical services like the reliability and maintenance. And, you know, if it wasn’t for this one slip up I would say that the group looks like it's starting to move in the right direction.

[Sharon Esposito-Mayer:]

And Kevin, energy is about 6% of our overall company revenue. Oil and gas is actually less than 2% of our overall company. Just to put that in perspective.

[Kevin Liu:]

Yes. That’s helpful. And then just lastly from me. Regarding Sandy, you have been talking about kind of the non-recurring launch about it from last year. I know from time to time you do get those events so I am kind of curious if you have anything kind of in the near term that you would expect to benefit the growth there from these types of events. And then more generally, what sort of activity are you seeing in the pipeline for some of the training services they deliver.

[Scott Greenberg:]

Yes. Right now, I don’t see major events in Q4. That doesn’t mean we won't see it next year. However, we are looking at opportunities in Sandy both domestically and the U.S. So one of the things we have set up is, both domestically and internationally, I got looks from everybody, sorry, when I said that. But in the United States we have set up an office in Texas and we are starting to market Toyota because they moved to Plano, Texas in the last year. So we are trying hard to get our foot in the bill with them. We are expanding our international footprint in the automotive. For example, we are doing work for Jaguar Land Rover outside of the U.S. We are doing work for [indiscernible] in China. We are doing work for Mercedes Benz in China. So Sandy was mainly a domestic operation or our automotive revenue was mainly domestic and now we are starting to see that we can use their name, reputation, their talent to start winning work globally in addition to trying to expand outside of our current base of manufacturers. In a way we have added two new clients this year even though they were kind of clients last year and I will explain why. Cadillac, which is part of General Motors, which is obviously top two accounts at GP Strategies. They moved the division to New York City to try to rebrand it and we are marketing that separately. And Hyundai did the same thing with the Genesis whereby they separated it and they are marketing it and we are working with Hyundai as well. So in that regards, we kind of added two new clients but, again, we are trying to get with companies like Toyota and expand Sandy internationally.

[Operator:]

[Operator Instructions] We have no further questions. I will turn the call back to you.

[Scott Greenberg:]

Thank you, moderator. I would like to thank everybody for joining the call. And we will see you, speak to you in the near future and we will provide next report at the year-end. So thanks for participating and thanks for your support.

[Operator:]

Ladies and gentlemen, that does conclude the call for today. We thank you for your participation and ask that you please disconnect your line.