PR Newswire | Aug 9, 2021 06:45AM EDT

08/09 05:45 CDT

GP Strategies Reports Second Quarter 2021 Financial Results COLUMBIA, Md., Aug. 9, 2021

COLUMBIA, Md., Aug. 9, 2021 /PRNewswire/ -- Global workforce transformation solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter ended June 30, 2021.

Highlights

* Revenue of $128.8 million, for the second quarter of 2021 compared to $106.1 million, for the second quarter of 2020, or an increase of 21.3%. * Gross profit of $23.8 million, or 18.5% , for the second quarter of 2021 compared to $15.9 million, or 15.0%, for the second quarter of 2020 * Net income of $2.5 million for the second quarter of 2021 compared to a net loss of $0.6 million for the second quarter of 2020 * Earnings per share of $0.14 for the second quarter of 2021 compared to a net loss per share of $(0.04) for the second quarter of 2020 * Adjusted earnings per share of $0.33 for the second quarter of 2021 compared to an adjusted earnings per share of $0.12 for the second quarter of 2020

Revenue

Our revenue increased $22.6 million, or 21.3%, during the second quarter of 2021 compared to the second quarter of 2020. The net increase is due to a $10.1 million increase in our North America segment, a $8.2 million increase in our EMEA segment and a $4.4 million increase in our Emerging Markets segment. Excluding the effects of divestitures, and foreign currency exchange rate changes, our revenue increased $21.8 million for the second quarter of 2021 compared to the second quarter of 2020. Our revenue decreased $2.9 million during the second quarter of 2021 due to a divested revenue stream resulting from the sale of our IC Axon Division on October 1, 2020. The foreign currency exchange rate changes resulted in a $3.7 million increase in U.S. dollar reported revenue during the second quarter of 2021.

Operating income

Operating income increased $4.7 million to operating income of $3.7 million for the second quarter of 2021 compared to an operating loss of $1.0 million for the second quarter of 2020. The net increase is primarily due to a $7.9 million increase in gross profit to $23.8 million, or 18.5%, of revenue from $15.9 million, or 15.0%, of revenue primarily due to operating restructuring initiatives implemented in fiscal year 2020 that resulted in reduced costs and improved efficiencies. This increase was partially offset by a $1.3 million increase in general and administrative expenses, a $0.9 million increase in restructuring charges, a $0.7 million increase in sales and marketing expenses and a $0.4 million loss on the sale of a business in the United Kingdom in the second quarter of 2021.

Net income (loss)

Net income was $2.5 million, or $0.14 per share, for the second quarter of 2021 compared to a net loss of $0.6 million, or $(0.04) per share, for the second quarter of 2020. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $0.33 and $0.12 for the first quarter of 2021 and 2020, respectively.

Investor Call

As previously announced, on July 15, 2021, GP Strategies entered into a definitive agreement to be acquired by Learning Technologies Group plc, a public limited company incorporated in England and Wales. Subject to customary closing conditions, the transaction is expected to close in the fourth calendar quarter of 2021.

Due to the pending acquisition, GP Strategies will not host an earnings conference call with respect to its second quarter fiscal 2021 financial results.

Presentation of Non-GAAP Information

This press release contains non-GAAP financial measures, including Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization), Adjusted Earnings per Diluted Share (Adjusted EPS), and free cash flow (cash flow from operating activities less capital expenditures). The Company believes these non-GAAP financial measures are useful to investors in evaluating the Company's results. These measures should be considered in addition to, and not as a replacement for, or superior to, either net income, as an indicator of the Company's operating performance, or cash flow, as a measure of the Company's liquidity. In addition, because these measures may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. For a reconciliation of Adjusted EBITDA and Adjusted EPS to the most comparable U.S. GAAP equivalents, see the Non-GAAP Reconciliations, along with related footnotes, below.

About GP Strategies

GP Strategies Corporation (NYSE: GPX) is a global workforce transformation solutions provider of training, digital learning solutions, management consulting and engineering services. GP Strategies' solutions improve the effectiveness of organizations by delivering innovative and superior training, consulting and business improvement services, customized to meet the specific needs of its clients. Clients include Fortune 500 companies, automotive, financial services, technology, and other commercial and government customers.

Forward-Looking Statements

We make statements in this press release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934, including statements about the anticipated effects of the COVID-19 pandemic and related events on our business and results of operations. 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, including the impact of the COVID-19 pandemic and related events that are beyond our control and risks related to the Agreement and Plan of Merger with Learning Technologies Group plc, a public limited company incorporated in England and Wales ("LTG"), Learning Technologies Acquisition Corporation, a Delaware corporation and a direct wholly owned subsidiary of LTG ("US Holdco"), and Gravity Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of US Holdco, and the related merger. 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. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

TABLES FOLLOW

GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Revenue $ 128,782 $ 106,144 $ 243,333 $ 234,425

Cost of revenue 104,954 90,247 198,064 200,914

Gross profit 23,828 15,897 45,269 33,511

General and administrative expenses 15,442 14,180 30,278 31,464

Sales and marketing expenses 2,562 1,857 5,030 3,696

Restructuring charges 1,763 855 2,462 855

Loss on change in fair value of - - 269 -contingent consideration

Gain (loss) on sale of business (377) - (377) 1,064

Operating income (loss) 3,684 (995) 6,853 (1,440)

Interest expense 197 607 378 1,585

Other expense 196 189 1,019 689

Income (loss) before income tax expense (benefit) 3,291 (1,791) 5,456 (3,714)

Income tax expense (benefit) 812 (1,185) 1,253 (1,814)

Net income (loss) $ $ (606) 4,203 (1,900) 2,479

Basic weighted average shares outstanding 17,453 17,144 17,389 17,113

Diluted weighted average shares outstanding 18,321 17,207 18,237 17,162

Per common share data:

Basic earnings (loss) per share $ $ $0.24 $ 0.14 (0.04) (0.11)

Diluted earnings (loss) per share $ $ $ $ 0.14 (0.04) 0.23 (0.11)

Other data:

Adjusted EBITDA^(1) $ $ $ $ 11,100 5,984 20,294 9,408

Adjusted EPS ^(1) $ $ $ $ 0.33 0.12 0.58 0.09

The terms Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures that the Company believes are useful to(1) investors in evaluating its results. For a reconciliation of these non-GAAP financial measures to the most comparable U.S. GAAP equivalent, see the Non- GAAP Reconciliations, along with related footnotes, below.

GP STRATEGIES CORPORATION AND SUBSIDIARIESSUPPLEMENTAL FINANCIAL INFORMATION

(In thousands)

(Unaudited)

Three Months Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Revenue by segment ^(2):

North America $ $ $ $ 82,999 72,913 155,328 157,849

Europe Middle East Africa 31,831 23,680 61,804 55,578

Emerging Markets 13,952 9,551 26,201 20,998

Total $ $ $ $revenue 128,782 106,144 243,333 234,425

Gross profit by segment ^(2):

North America $ $ $ $ 16,676 13,527 31,169 26,585

Europe Middle East Africa 4,993 1,393 10,043 5,169

Emerging Markets 2,159 977 4,057 1,757

Total gross profit $ $ $ $ 23,828 15,897 45,269 33,511

Supplemental Cash Flow Information:

Net cash provided by (used in) operating activities $ $ $ $ (3,935) 22,918 (3,371) 32,765

Capital expenditures (554) (579) (1,009) (1,046)

Free cash in (out) flow $ $ $ $ (4,489) 22,339 (4,380) 31,719

Effective July 1, 2020, we began managing our business under a new organizational structure on a regional basis through our three geographic markets, North America, EMEA (Europe Middle East Africa) and Emerging Markets. Effective January 1, 2021 as a result of change in management, we(2) transferred one of our businesses from our North America segment to our EMEA segment. In addition, we realigned some of our business between our OPS and TPS solutions to more accurately align with their focus industries. We have reclassified the segment financial information herein for the prior year periods to reflect the changes in our segment reporting and conform to the current year's presentation.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Non-GAAP Reconciliation - Adjusted EBITDA ^(3)

(In thousands)

(Unaudited)

Three Months Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 2,479 $ (606) $ 4,203 $ (1,900)

Interest expense 197 607 378 1,585

Income tax expense (benefit) 812 (1,185) 1,253 (1,814)

Depreciation and amortization 1,487 2,077 2,959 4,254

EBITDA 4,975 893 8,793 2,125

Adjustments:

Non-cash stock compensation expense 1,620 1,536 3,287 2,792

Restructuring charges 1,763 855 2,462 855

Severance expense 585 2,354 1,124 2,565

Loss on change in fair value of - - 269 -contingent consideration

Foreign currency transaction losses 372 346 1,621 842

Legal acquisition/ 1,408 - 2,258 1,038divestiture and transaction

Impairment of operating - - 103 255lease right-of-use asset

Loss (gain) on sale of business 377 - 377 (1,064)

Adjusted EBITDA $ 11,100 $ 5,984 $ 20,294 $ 9,408

Adjusted earnings before interest, income taxes, depreciation and amortization (Adjusted EBITDA) is a widely used non-GAAP financial measure of operating performance. It is presented as supplemental information that the Company believes is useful to investors to evaluate its results because it excludes certain items that are not directly related to the Company's core operating performance. Adjusted EBITDA is calculated by adding back to net income, interest expense, income tax expense (benefit), depreciation and amortization, non-cash stock compensation expense, and other unusual or infrequently occurring items. For the periods presented, these other items(3) are restructuring charges, severance expense, loss on change in fair value of contingent consideration, foreign currency transaction losses, legal acquisition/divestiture and transaction costs, impairment of operating lease right-of-use asset, and gain on sale of business. Adjusted EBITDA should not be considered as a substitute either for net income, as an indicator of the Company's operating performance, or for cash flow, as a measure of the Company's liquidity. In addition, because Adjusted EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Non-GAAP Reconciliation - Adjusted EPS ^(4)

(Unaudited)

Three Months Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Diluted earnings (loss) per share $ 0.14 $ (0.04) $ 0.23 $ (0.11)

Restructuring charges 0.07 0.04 0.10 0.04

Severance expense 0.02 0.10 0.05 0.11

Loss on change in fair value of - - 0.01 -contingent consideration

Foreign currency transaction losses 0.02 0.01 0.07 0.03

Legal acquisition/ 0.06 - 0.10 0.04divestiture and transaction costs

Impairment of operating - - - 0.01lease right-of-use asset

Settlement of - 0.01 - 0.01contingent consideration in shares

Loss (gain) on sale of business 0.02 - 0.02 (0.04)

Adjusted EPS $ 0.33 $ 0.12 $ 0.58 $ 0.09

Adjusted Earnings per Diluted Share ("Adjusted EPS"), which is a non-GAAP financial measure, is defined as earnings per diluted share excluding the gain or loss on the change in fair value of acquisition-related contingent consideration and special charges, such as restructuring, and other unusual or infrequently occurring items of income or expense. Management uses(4) Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that this non-GAAP financial measure, which excludes the gain on change in fair value of acquisition-related contingent consideration and other special charges, when considered together with our U.S. GAAP financial results, provides management and investors with an additional understanding of our business operating results, including underlying trends.

GP STRATEGIES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

June 30, December 31, 2021 2020

(Unaudited)

Current assets:

Cash $ $ 15,460 23,076

Accounts and other receivables 100,494 110,575

Unbilled revenue 38,254 28,100

Prepaid expenses and 22,537 15,186other current assets

Assets held for sale 40,875 42,463

Total current assets 217,620 219,400

Property, plant and equipment, net 3,880 4,650

Operating lease right-of-use assets 17,752 20,862

Goodwill and intangible assets, net 125,124 126,245

Other assets 9,012 10,619

Total assets $ $ 373,388 381,776

Current liabilities:

Accounts payable and accrued expenses $ $ 83,583 91,572

Current portion of operating lease 5,382 5,523liabilities

Deferred revenue 16,511 16,509

Liabilities held for sale 4,823 5,868

Total current liabilities 110,299 119,472

Long-term debt 8,995 12,748

Long-term portion of operating lease 13,878 16,260liabilities

Other liabilities 9,386 9,950

Total liabilities 142,558 158,430

Total stockholders' equity 230,830 223,346

Total liabilities and stockholders' $ $ equity 373,388 381,776

(c) 2020 GP Strategies Corporation. All rights reserved. GP Strategies and GP Strategies with logo design are registered trademarks of GP Strategies Corporation.

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SOURCE GP Strategies Corporation