GSE Systems, Inc.
Q4 2020 Earnings Call Transcript

Published: 31 Mar 2021

[Operator:]

Greetings and welcome to GSE Solutions’ Fourth Quarter and Year End 2020 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Kalle Ahl of The Equity Group. Thank you, you may begin.

[Kalle Ahl:]

Thank you, Dallan; and good afternoon, everyone. Thank you for joining us today. Before we begin, I would like to remind everyone that statements made during the course of this call may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934. These statements reflect current expectations concerning future events and results. Words such as expect, intend, believe, may, will, should, could, anticipate and similar expressions are words that are used to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks and uncertainties and other important factors that could cause actual performance or achievements to be materially different from those projected.

[Kyle Loudermilk:]

Thank you, Kalle. I'd like to welcome everyone to GSE's fourth quarter and full year 2020 financial results conference call. Joining me on today's call is Emmett Pepe, our Chief Financial Officer. Earlier today, we issued a press release covering our fourth quarter and full year financial results. Hopefully, you've had a chance to review this news release, but if not, a copy can be found on our website at www.gses.com under the News section. We finished 2020 on a very encouraging note. The fourth quarter adjusted EBITDA, improving to positive $1.1 million compared to three straight quarters of negative adjusted EBITDA at the start the year, amidst the onset of the global COVID-19 pandemic. This is really good news demonstrating that GSE can achieve positive adjusted EBITDA, even amidst COVID-19 significant business impact toward top line revenues in the quarter. I'm proud of our team's resilience and ability to work through the industry-wide project delays and work stoppages caused by the pandemic this year. Our ability to end the year on a positive note is also a direct result of a multi-year effort to intentionally align GSE to a broad set of essential services for the industry. Our priority during the pandemic has been the health and wellbeing of our employees and customers. I also am proud of our efforts to keep our offices open as essential services, to enable employees to work from home through effective use of technology, to pivot, to remote work when possible, and to keep engaged with coworkers and customers via effective use of technology and critical onsite visits.

[Emmett Pepe:]

Thank you, Kyle. Total revenue in Q4 2020 was $12.7 million compared to $17.3 million in Q4 2019, reflecting a $1.6 million decrease in our performance improvement segment revenue and a $3 million decrease in our NITC segment revenue. The decrease in performance improvement revenue was driven primarily by COVID-19 related headwinds and our inability to commence certain projects remotely. The decline in NITC revenue was primarily due to COVID-19 related project delays and stoppages and lower staff augmentation needs from customers during the quarter. On a sequential basis, our Q4 2020 total revenue remained essentially flat compared to Q3 2020 total revenue. And we believe we are well positioned to build on this revenue base as we progress through 2021, given recent contract wins and the recent increase in bidding activity, Kyle mentioned earlier. Gross profit in Q4 2020 totaled $3.8 million compared to $5 million in Q4 2019. Performance improvement gross profit declined by approximately $289,000 year-over-year to $3.2 million; NITC gross profit decreased by approximately $944,000 year-over-year to $634,000. Our overall gross profit margin increased year-over-year, despite the challenges caused by COVID-19 pandemic. We were able to adapt our cost structure quickly to counteract the revenue declines caused by the industry-wide project delays and stoppages. Credits given to the entire organization for being agile in 2020, while we face historic level of uncertainty. SG&A expenses, totaled $3.2 million in Q4 2020 versus the comparable figure of $3.9 million in Q4 2019. The decrease in SG&A expenses was primarily driven by lower business development costs. We are currently in the process of back office systems overhaul to fully integrate all of our subsidiaries onto one platform. This is an exciting project that will allow the corporate function to better support the businesses as they execute the organic growth strategy that Kyle outlined. As these systems begin to come online in 2021, we anticipate that there will be synergies to capture that will further reduce our cost structure.

[Kyle Loudermilk:]

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

[Operator:]

Since there are no further questions at this time, I would like to turn the call back over to management for any closing remarks.

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[Kyle Loudermilk:]

Okay. I just like to thank everybody for joining us. We appreciate your time and interest in GSC, really very pleased with the quarter and very excited about what's ahead of us in 2021. If you have any questions, please reach out to our IR from, the equity group and we'd be happy to schedule a follow-up call. Thanks again, everyone. Be safe, and we look forward to speaking with you all soon, ticker.

[Operator:]

And with that, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.