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Share Name | Share Symbol | Market | Type |
---|---|---|---|
GSE Systems Incorporated | NASDAQ:GVP | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.36 | 1.24 | 2.36 | 8 | 12:36:19 |
(Mark One)
|
|||
|
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended June 30, 2018
|
||
or
|
|||
|
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the transition period from ____ to ____
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Commission File Number 001-14785
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GSE Systems, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
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52-1868008
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
|
1332 Londontown Blvd., Suite 200, Sykesville MD
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21784
|
|
(Address of principal executive offices)
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(Zip Code)
|
Registrant's telephone number, including area code: (410) 970-7800
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Large accelerated filer
|
Accelerated filer
|
Non-accelerated filer
|
Smaller reporting company
|
Emerging growth company
☐
|
(Do not check if a smaller reporting company)
|
PAGE
|
|||
PART I.
|
FINANCIAL INFORMATION
|
2
|
|
Item 1.
|
Financial Statements:
|
||
Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017
|
2
|
||
Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018, and June 30, 2017
|
3
|
||
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2018, and June 30, 2017
|
4
|
||
Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2018
|
5
|
||
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and June 30, 2017
|
6
|
||
Notes to Consolidated Financial Statements
|
7
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||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
23
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|
Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
|
37
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Item 4.
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Controls and Procedures
|
37
|
|
PART II.
|
OTHER INFORMATION
|
38
|
|
Item 1.
|
Legal Proceedings
|
38
|
|
Item 1A.
|
Risk Factors
|
38
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
38
|
|
Item 3.
|
Defaults Upon Senior Securities
|
38
|
|
Item 4.
|
Mine Safety Disclosures
|
38
|
|
Item 5.
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Other Information
|
38
|
|
Item 6.
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Exhibits
|
38
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|
SIGNATURES
|
39
|
Item 1. |
Financial Statements
|
June 30, 2018
|
December 31, 2017
|
||||
(unaudited)
|
|||||
ASSETS
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
9,959
|
$
|
19,111
|
|
Restricted cash
|
523
|
960
|
|||
Contract receivables, net
|
19,221
|
13,997
|
|||
Prepaid expenses and other current assets
|
2,049
|
2,795
|
|||
Total current assets
|
31,752
|
36,863
|
|||
Equipment, software, and leasehold improvements
|
5,270
|
4,782
|
|||
Accumulated depreciation
|
(3,997)
|
(3,719)
|
|||
Equipment, software, and leasehold improvements, net
|
1,273
|
1,063
|
|||
Software development costs, net
|
759
|
690
|
|||
Goodwill
|
13,518
|
8,431
|
|||
Intangible assets, net
|
6,053
|
2,604
|
|||
Deferred tax assets
|
6,387
|
6,494
|
|||
Other assets
|
36
|
37
|
|||
Total assets
|
$
|
59,778
|
$
|
56,182
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt, net of debt issuance costs and original issue discount
|
$
|
1,900
|
$
|
-
|
|
Accounts payable
|
834
|
1,251
|
|||
Accrued expenses
|
2,560
|
2,276
|
|||
Accrued compensation
|
3,454
|
2,866
|
|||
Billings in excess of revenue earned
|
9,557
|
14,543
|
|||
Accrued warranty
|
1,018
|
1,433
|
|||
Contingent consideration
|
-
|
1,701
|
|||
Other current liabilities
|
1,066
|
1,182
|
|||
Total current liabilities
|
20,389
|
25,252
|
|||
Long-term debt, less current portion, net of debt issuance costs and original issue discount
|
7,571
|
-
|
|||
Other liabilities
|
1,421
|
1,258
|
|||
Total liabilities
|
29,381
|
26,510
|
|||
Commitments and contingencies
|
|||||
Stockholders' equity:
|
|||||
Preferred stock $0.01 par value, 2,000,000 shares authorized, no shares issued and outstanding
|
-
|
-
|
|||
Common stock $0.01 par value; 60,000,000 shares authorized, 21,310,806 shares issued, 19,711,895 shares outstanding as of June 30, 2018; 30,000,000 shares authorized, 21,024,395 shares issued, 19,425,484 shares outstanding as of December 31, 2017
|
213
|
210
|
|||
Additional paid-in capital
|
77,611
|
76,802
|
|||
Accumulated deficit
|
(42,730)
|
(42,870)
|
|||
Accumulated other comprehensive loss | (1,698) | (1,471) | |||
Treasury stock at cost, 1,598,911 shares in 2018 and 2017
|
(2,999)
|
(2,999)
|
|||
Total stockholders' equity
|
30,397
|
29,672
|
|||
Total liabilities and stockholders' equity
|
$
|
59,778
|
$
|
56,182
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2018
|
2017
|
2018
|
2017
|
||||||||
Revenue
|
$
|
24,698
|
$
|
17,125
|
$
|
47,593
|
$
|
33,467
|
|||
Cost of revenue
|
18,358
|
12,108
|
36,355
|
24,328
|
|||||||
Gross profit
|
6,340
|
5,017
|
11,238
|
9,139
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative
|
4,793
|
3,774
|
9,320
|
7,366
|
|||||||
Research and development
|
189
|
348
|
518
|
750
|
|||||||
Restructuring charges
|
190
|
-
|
1,107
|
45
|
|||||||
Depreciation
|
176
|
99
|
279
|
175
|
|||||||
Amortization of definite-lived intangible assets
|
312
|
34
|
462
|
98
|
|||||||
Total operating expenses
|
5,660
|
4,255
|
11,686
|
8,434
|
|||||||
Operating income (loss)
|
680
|
762
|
(448)
|
705
|
|||||||
Interest (expense) income, net
|
(61)
|
18
|
(39)
|
45
|
|||||||
(Loss) gain on derivative instruments, net
|
(91)
|
315
|
(247)
|
155
|
|||||||
Other income (expense), net
|
4
|
(34)
|
29
|
(37)
|
|||||||
Income (loss) before income taxes
|
532
|
1,061
|
(705)
|
868
|
|||||||
(Benefit) provision for income taxes
|
(449)
|
234
|
(190)
|
307
|
|||||||
Net income (loss)
|
$
|
981
|
$
|
827
|
$
|
(515)
|
$
|
561
|
|||
Basic income (loss) per common share
|
$
|
0.05
|
$
|
0.04
|
$
|
(0.03)
|
$
|
0.03
|
|||
Diluted income (loss) per common share
|
$
|
0.05
|
$
|
0.04
|
$
|
(0.03)
|
$
|
0.03
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2018
|
2017
|
2018
|
2017
|
||||||||
Net income (loss)
|
$
|
981
|
$
|
827
|
$
|
(515)
|
$
|
561
|
|||
Foreign currency translation adjustment
|
(182)
|
34
|
(227)
|
127
|
|||||||
Comprehensive income (loss)
|
$
|
799
|
$
|
861
|
$
|
(742)
|
$
|
688
|
Common
Stock
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive
Loss
|
Treasury
Stock
|
Total
|
|||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||
Balance, January 1, 2018
|
21,024
|
$
|
210
|
$
|
76,802
|
$
|
(42,870)
|
$
|
(1,471)
|
(1,599)
|
$
|
(2,999)
|
$
|
29,672
|
||||||||
Cumulative effect of adopting ASC 606
|
-
|
-
|
-
|
655
|
-
|
-
|
-
|
655
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
968
|
-
|
-
|
-
|
-
|
968
|
||||||||||||||
Common stock issued for options exercised
|
130
|
1
|
93
|
-
|
-
|
-
|
-
|
94
|
||||||||||||||
Common stock issued for RSUs vested
|
157
|
2
|
(2)
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||
Vested RSU shares withheld to pay taxes
|
-
|
-
|
(250)
|
-
|
-
|
-
|
-
|
(250)
|
||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
(227)
|
-
|
-
|
(227)
|
||||||||||||||
Net loss
|
-
|
-
|
-
|
(515)
|
-
|
-
|
-
|
(515)
|
||||||||||||||
Balance, June 30, 2018
|
21,311
|
$
|
213
|
$
|
77,611
|
$
|
(42,730)
|
$
|
(1,698)
|
(1,599)
|
$
|
(2,999)
|
$
|
30,397
|
Six months ended
June 30,
|
|||||
2018
|
2017
|
||||
Cash flows from operating activities:
|
|||||
Net (loss) income
|
$
|
(515)
|
$
|
561
|
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
|
|||||
Depreciation
|
279
|
175
|
|||
Amortization of definite-lived intangible assets
|
462
|
98
|
|||
Amortization of capitalized software development costs
|
203
|
234
|
|||
Stock-based compensation expense
|
1,028
|
1,246
|
|||
Bad debt expense
|
117
|
118
|
|||
Loss (gain) on derivative instruments, net
|
247
|
(155)
|
|||
Deferred income taxes
|
(179)
|
69
|
|||
Changes in assets and liabilities:
|
|||||
Contract receivables, net
|
(3,030)
|
4,660
|
|||
Prepaid expenses and other assets
|
506
|
435
|
|||
Accounts payable, accrued compensation, and accrued expenses
|
(1,082)
|
(877)
|
|||
Billings in excess of revenue earned
|
(4,121)
|
(3,902)
|
|||
Accrued warranty
|
(239)
|
88
|
|||
Other liabilities
|
(15)
|
125
|
|||
Cash (used in) provided by operating activities
|
(6,339)
|
2,875
|
|||
Cash flows from investing activities:
|
|||||
Capital expenditures
|
(488)
|
(54)
|
|||
Capitalized software development costs
|
(272)
|
(88)
|
|||
Acquisition of True North Consulting, net of cash acquired
|
(9,791)
|
-
|
|||
Cash used in investing activities
|
(10,551)
|
(142)
|
|||
Cash flows from financing activities:
|
|||||
Proceeds from issuance of long-term debt, net of debt issuance costs and original issue discount
|
10,154
|
-
|
|||
Repayment of long-term debt
|
(683)
|
-
|
|||
Proceeds from issuance of common stock on the exercise of stock options
|
94
|
62
|
|||
Contingent consideration payments to Hyperspring, LLC
|
(1,701)
|
(553)
|
|||
RSUs withheld to pay taxes
|
(250)
|
(874)
|
|||
Cash provided by (used in) financing activities
|
7,614
|
(1,365)
|
|||
Effect of exchange rate changes on cash
|
(313)
|
232
|
|||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(9,589)
|
1,600
|
|||
Cash, cash equivalents, and restricted cash, beginning balance
|
20,071
|
22,887
|
|||
Cash, cash equivalents, and restricted cash, ending balance
|
$
|
10,482
|
$
|
24,487
|
|
1. |
Summary of Significant Accounting Policies
|
● |
Nuclear Industry Training and Consulting (approximately 56% of revenue)
|
2. |
Recent Accounting Pronouncements
|
For the Three Months Ended June 30, 2018
|
For the Six Months Ended June 30, 2018
|
|||||||||||||||||
As Reported
|
Balance without adoption of ASC 606
|
Effect of Change
|
As Reported
|
Balance without adoption of ASC 606
|
Effect of Change
|
|||||||||||||
Revenue
|
$
|
24,698
|
$
|
24,862
|
$
|
(164)
|
$
|
47,593
|
$
|
47,714
|
$
|
(121)
|
||||||
Gross profit
|
6,340
|
6,504
|
(164)
|
11,238
|
11,359
|
(121)
|
||||||||||||
(Benefit) provision for income taxes
|
(449)
|
(326)
|
123
|
(190)
|
(95)
|
95
|
||||||||||||
Net income (loss)
|
981
|
1,022
|
(41)
|
(515)
|
(489)
|
(26)
|
June 30, 2018
|
|||||||||
As Reported
|
Balance without adoption of ASC 606
|
Effect of Change
|
|||||||
Contract receivables, net
|
$
|
19,221
|
$
|
19,231
|
$
|
(10)
|
|||
Deferred tax assets
|
6,387
|
6,533
|
(146)
|
||||||
Billings in excess of revenue earned
|
9,557
|
10,342
|
(785)
|
||||||
Accumulated deficit
|
(42,730)
|
(43,359)
|
629
|
3. |
Basic and Diluted Income (Loss) per Common Share
|
(in thousands, except for share amounts)
|
Three months ended
|
Six months ended
|
||||||||||
June 30,
|
June 30,
|
|||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||
Numerator:
|
||||||||||||
Net income (loss)
|
$
|
981
|
$
|
827
|
$
|
(515)
|
$
|
561
|
||||
Denominator:
|
||||||||||||
Weighted-average shares outstanding for basic income (loss) per share
|
19,651,441
|
19,196,133
|
19,580,046
|
19,154,297
|
||||||||
Effect of dilutive securities:
|
||||||||||||
Stock options and restricted stock units
|
377,682
|
365,112
|
-
|
317,497
|
||||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted income (loss) per share
|
20,029,123
|
19,561,245
|
19,580,046
|
19,471,794
|
||||||||
Shares related to dilutive securities excluded because inclusion would be anti-dilutive
|
374,833
|
564,833
|
714,821
|
564,833
|
4. |
Acquisitions
|
Total purchase price
|
$
|
9,941
|
|
Purchase price allocation:
|
|||
Cash
|
150
|
||
Contract receivables
|
2,345
|
||
Prepaid expenses and other current assets
|
4
|
||
Property, and equipment, net
|
1
|
||
Intangible assets
|
3,911
|
||
Accounts payable, accrued expenses
|
(1,420)
|
||
Accrued compensation
|
|
(137)
|
|
Total identifiable net assets
|
4,854
|
||
Goodwill
|
5,087
|
||
Net assets acquired
|
$
|
9,941
|
Intangible Assets
|
Weighted average amortization period
|
Fair Value
|
|||
(in years)
|
(in thousands)
|
||||
Customer relationships
|
10
|
$
|
1,856
|
||
Trademarks/Names
|
3
|
713
|
|||
Total
|
$
|
2,569
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||
2018
|
2017
|
2018
|
2017
|
||||||||
(
unaudited and in thousands
)
|
|||||||||||
Revenue
|
$
|
25,892
|
$
|
30,413
|
$
|
50,763
|
$
|
57,768
|
|||
Net income (loss)
|
615
|
459
|
(1,368)
|
(512)
|
5. |
Restructuring Activities
|
June 30, 2018
|
|||||||||
Total Expected Costs
|
Costs Incurred to Date
|
Expected Costs Remaining
|
|||||||
Employee termination benefits
|
$
|
831
|
$
|
831
|
$
|
-
|
|||
Lease termination costs
|
604
|
604
|
-
|
||||||
Assets write-offs/impairment
|
222
|
222
|
-
|
||||||
Other restructuring costs
|
342
|
183
|
159
|
||||||
Total Restructuring costs
|
$
|
1,999
|
$
|
1,840
|
$
|
159
|
Employee termination benefits
|
Lease termination costs
|
Other Restructuring costs
|
Total
|
|||||||||
Balance as of January 1, 2018
|
$
|
465
|
$
|
-
|
$
|
33
|
$
|
498
|
||||
Accruals
|
366
|
604
|
137
|
1,107
|
||||||||
Payments
|
(503)
|
(624)
|
(170)
|
(1,297)
|
||||||||
Currency translation and other adjustments
|
|
(11)
|
|
70
|
|
-
|
|
59
|
||||
Balance as of June 30, 2018
|
$
|
317
|
$
|
50
|
$
|
-
|
$
|
367
|
6. |
Contingent Consideration
|
7. |
Contract Receivables
|
(in thousands)
|
June 30,
|
December 31,
|
|||
2018
|
2017
|
||||
Billed receivables
|
$
|
9,544
|
$
|
8,154
|
|
Unbilled receivables
|
9,928
|
5,980
|
|||
Allowance for doubtful accounts
|
(251)
|
(137)
|
|||
Total contract receivables, net
|
$
|
19,221
|
$
|
13,997
|
8. |
Prepaid Expenses and Other Current Assets
|
(in thousands)
|
June 30,
|
December 31,
|
|||
2018
|
2017
|
||||
Inventory
|
$
|
444
|
$
|
755
|
|
Income taxes receivable
|
387
|
418
|
|||
Prepaid expenses
|
402
|
549
|
|||
Other current assets
|
816
|
1,073
|
|||
Total prepaid expenses and other current assets
|
$
|
2,049
|
$
|
2,795
|
9. |
Software Development Costs, Net
|
10. |
Goodwill and Intangible Assets
|
Performance Improvement Solutions
|
Nuclear Industry Training and Consulting
|
Total
|
|||||||
Balance, January 1, 2018
|
$
|
-
|
$
|
8,431
|
$
|
8,431
|
|||
Acquisition
|
5,087
|
-
|
5,087
|
||||||
Balance, June 30, 2018
|
$
|
5,087
|
$
|
8,431
|
$
|
13,518
|
11. |
Fair Value of Financial Instruments
|
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|||||||
Money market funds
|
$
|
1,396
|
$
|
-
|
$
|
-
|
$
|
1,396
|
|||
Foreign exchange contracts
|
-
|
32
|
-
|
32
|
|||||||
Total assets
|
$
|
1,396
|
$
|
32
|
$
|
-
|
$
|
1,428
|
|||
Liability awards
|
$
|
-
|
$
|
(302)
|
$
|
-
|
$
|
(302)
|
|||
Interest rate swap contract
|
-
|
(11)
|
-
|
(11)
|
|||||||
Total liabilities
|
$
|
-
|
$
|
(313)
|
$
|
-
|
$
|
(313)
|
|||
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|||||||
Money market funds
|
$
|
3,240
|
$
|
-
|
$
|
-
|
$
|
3,240
|
|||
Foreign exchange contracts
|
-
|
201
|
-
|
201
|
|||||||
Total assets
|
$
|
3,240
|
$
|
201
|
$
|
-
|
$
|
3,441
|
|||
Liability awards
|
$
|
-
|
$
|
(242)
|
$
|
-
|
$
|
(242)
|
|||
Contingent consideration
|
-
|
-
|
(1,701)
|
(1,701)
|
|||||||
Total liabilities
|
$
|
-
|
$
|
(242)
|
$
|
(1,701)
|
$
|
(1,943)
|
|||
(in thousands)
|
||
Balance, January 1, 2018
|
$
|
1,701
|
Payments made on contingent liabilities
|
(1,701)
|
|
Change in fair value
|
-
|
|
Balance, June 30, 2018
|
$
|
-
|
12. |
Derivative Instruments
|
June 30,
|
December 31,
|
||||
(in thousands)
|
2018
|
2017
|
|||
Prepaid expenses and other current assets
|
|||||
Foreign exchange contracts
|
$
|
32
|
$
|
201
|
|
Total asset derivatives
|
32
|
$
|
201
|
||
Other liabilities
|
|||||
Interest rate swaps
|
(11)
|
-
|
|||
Total liability derivatives
|
(11)
|
-
|
|||
Net fair value
|
$
|
21
|
$
|
201
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
2018
|
2017
|
|||||||
Interest rate swap - change in fair value
|
$
|
(11)
|
$
|
-
|
$
|
(11)
|
$
|
-
|
|||
Foreign exchange contracts-change in fair value
|
(46)
|
157
|
(164)
|
71
|
|||||||
Remeasurement of related contract receivables, billings in excess of revenue earned, and subcontractor accruals
|
(34)
|
158
|
(72)
|
84
|
|||||||
(Loss) gain on derivative instruments, net
|
$
|
(91)
|
$
|
315
|
$
|
(247)
|
$
|
155
|
13. |
Stock-Based Compensation
|
14. |
Debt
|
Long-term debt, net of discount
|
$
|
9,471
|
|
Less: current portion of long-term debt
|
|
(1,900)
|
|
Long-term debt, less current portion
|
$
|
7,571
|
15. |
Product Warranty
|
(in thousands)
|
||
Balance, January 1, 2018
|
$
|
1,953
|
Current period provision
|
(93)
|
|
Current period claims
|
(146)
|
|
Currency adjustment
|
(5)
|
|
Balance at June 30, 2018
|
$
|
1,709
|
16. |
Revenue
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||
2018
|
2017
(1)
|
2018
|
2017
(1)
|
|||||||||
Performance Improvement Solutions segment
|
||||||||||||
System Design and Build
|
$
|
7,300
|
$
|
8,773
|
$
|
14,795
|
$
|
16,092
|
||||
Software
|
546
|
1,091
|
1,415
|
1,547
|
||||||||
Training and Consulting Services
|
3,018
|
1,822
|
4,555
|
3,717
|
||||||||
Nuclear Industry Training and Consulting segment
|
||||||||||||
Training and Consulting Services
|
13,834
|
5,439
|
26,828
|
12,111
|
||||||||
|
|
|
|
|
|
|
|
|||||
Total revenue
|
$
|
24,698
|
$
|
17,125
|
$
|
47,593
|
$
|
33,467
|
June 30, 2018
|
December 31, 2017
|
|||||
Billings in excess of revenue earned (BIE)
|
$
|
9,557
|
$
|
14,543
|
||
Revenue recognized in the period from amounts included in BIE at the beginning of the period
|
$
|
7,954
|
N/A
|
17. |
Income Taxes
|
(in thousands)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||
2018
|
2017
|
2018
|
2017
|
||||||||
(Benefit) provision for income taxes
|
$
|
(449)
|
$
|
234
|
$
|
(190)
|
$
|
307
|
|||
Effective tax rate
|
-84.4 %
|
22.1%
|
27.0 %
|
35.4%
|
18. |
Segment Information
|
(in thousands)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||
2018
|
2017
|
2018
|
2017
|
||||||||
Revenue:
|
|||||||||||
Performance Improvement Solutions
|
$
|
10,864
|
$
|
11,686
|
$
|
20,765
|
$
|
21,356
|
|||
Nuclear Industry Training and Consulting
|
13,834
|
5,439
|
26,828
|
12,111
|
|||||||
24,698
|
17,125
|
47,593
|
33,467
|
||||||||
Operating income:
|
|||||||||||
Performance Improvement Solutions
|
619
|
997
|
(171)
|
886
|
|||||||
Nuclear Industry Training and Consulting
|
61
|
(192)
|
(277)
|
116
|
|||||||
Change in fair value of contingent consideration, net
|
-
|
(43)
|
-
|
(297)
|
|||||||
Operating income (loss)
|
680
|
762
|
(448)
|
705
|
|||||||
Interest (expense) income, net
|
(61)
|
18
|
(39)
|
45
|
|||||||
(Loss) gain on derivative instruments, net
|
(91)
|
315
|
(247)
|
155
|
|||||||
Other income (expense), net
|
4
|
(34)
|
29
|
(37)
|
|||||||
Income (loss) before income taxes
|
$
|
532
|
$
|
1,061
|
$
|
(705)
|
$
|
868
|
19. |
Supplemental Cash Flow Information
|
June 30, 2018
|
December 31, 2017
|
|||||
Cash and cash equivalents
|
$
|
9,959
|
$
|
19,111
|
||
Restricted cash
|
|
523
|
|
960
|
||
Cash, cash equivalents, and restricted cash
|
$
|
10,482
|
$
|
20,071
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
● |
Universal Training Simulators:
These products complement the Self-Paced Training Tutorials by reinforcing what the student learned in the tutorial, putting it into practice on the Universal Simulator. The simulation models are high fidelity and engineering correct, but represent a typical plant or typical process, rather than the exact replication of a client's plant. We have delivered over 360 such simulation models to clients consisting of major oil companies and educational institutions.
|
● |
Part-Task Training Simulators:
Like the Universal Simulators, we provide other unique training solutions such as a generic nuclear plant simulator and VPanel
®
displays, which replicate control room hardware and simulator solutions specific to industry needs such as severe accident models to train on and aid in the understanding of events like the Fukushima Daiichi accident.
|
● |
Plant-Specific Operator Training Simulators:
These simulators provide an exact replication of the plant control room and plant operations. They provide the highest level of realism and training and allow users to practice their own plant-specific procedures. Clients can safely practice startup, shutdown, normal operations, as well as response to abnormal events we all hope they never have to experience in real life. Since our inception, we have delivered over 480 plant-specific simulators to clients in the nuclear power, fossil power and process industries worldwide.
|
(in thousands)
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||||
2018
|
%
|
2017
|
%
|
2018
|
%
|
2017
|
%
|
||||||||||||
Revenue
|
$
|
24,698
|
100.0 %
|
$
|
17,125
|
100.0 %
|
$
|
47,593
|
100.0 %
|
$
|
33,467
|
100.0 %
|
|||||||
Cost of revenue
|
18,358
|
74.3 %
|
12,108
|
70.7 %
|
36,355
|
76.4 %
|
24,328
|
72.7 %
|
|||||||||||
Gross profit
|
6,340
|
25.7 %
|
5,017
|
29.3 %
|
11,238
|
23.6 %
|
9,139
|
27.3 %
|
|||||||||||
Operating expenses:
|
|||||||||||||||||||
Selling, general and administrative
|
4,793
|
19.4 %
|
3,774
|
22.0%
|
9,320
|
19.6%
|
7,366
|
22.0%
|
|||||||||||
Research and development
|
189
|
0.8 %
|
348
|
2.0 %
|
518
|
1.1 %
|
750
|
2.2%
|
|||||||||||
Restructuring charges
|
190
|
0.8%
|
-
|
0.0%
|
1,107
|
2.3%
|
45
|
0.1%
|
|||||||||||
Depreciation
|
176
|
0.7 %
|
99
|
0.6 %
|
279
|
0.6 %
|
175
|
0.5 %
|
|||||||||||
Amortization of definite-lived intangible assets
|
312
|
1.3 %
|
34
|
0.2 %
|
462
|
1.0 %
|
98
|
0.3 %
|
|||||||||||
Total operating expenses
|
5,660
|
22.9 %
|
4,255
|
24.8 %
|
11,686
|
24.6 %
|
8,434
|
25.2 %
|
|||||||||||
Operating income (loss)
|
680
|
2.8%
|
762
|
4.5%
|
(448)
|
(1.0)%
|
705
|
2.1%
|
|||||||||||
Interest (expense) income, net
|
(61)
|
(0.2)%
|
18
|
0.1%
|
(39)
|
(0.1)%
|
45
|
0.1%
|
|||||||||||
(Loss) gain on derivative instruments, net
|
(91)
|
(0.4)%
|
315
|
1.8%
|
(247)
|
(0.5)%
|
155
|
0.5%
|
|||||||||||
Other income (expense), net
|
4
|
0.0%
|
(34)
|
(0.1)%
|
29
|
0.1%
|
(37)
|
(0.1)%
|
|||||||||||
Income (loss) before income taxes
|
532
|
2.2%
|
1,061
|
6.2%
|
(705)
|
(1.5)%
|
868
|
2.6%
|
|||||||||||
(Benefit) provision for income taxes
|
(449)
|
(1.8)%
|
234
|
1.5%
|
(190)
|
(0.4)%
|
307
|
0.9%
|
|||||||||||
Net income (loss)
|
$
|
981
|
4.0%
|
$
|
827
|
4.8%
|
$
|
(515)
|
(1.1)%
|
$
|
561
|
1.7%
|
Three months ended
|
Six months ended
|
||||||||||
June 30,
|
June 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
2018
|
2017
|
|||||||
Revenue:
|
|||||||||||
Performance Improvement Solutions
|
$
|
10,864
|
$
|
11,686
|
$
|
20,765
|
$
|
21,356
|
|||
Nuclear Industry Training and Consulting
|
13,834
|
5,439
|
26,828
|
12,111
|
|||||||
Total revenue
|
$
|
24,698
|
$
|
17,125
|
$
|
47,593
|
$
|
33,467
|
Three months ended
|
Six months ended
|
||||||||||||||||||
June 30,
|
June 30,
|
||||||||||||||||||
(in thousands)
|
2018
|
%
|
2017
|
%
|
2018
|
%
|
2017
|
%
|
|||||||||||
Gross profit:
|
|||||||||||||||||||
Performance Improvement Solutions
|
$
|
4,429
|
40.8 %
|
$
|
4,389
|
37.6 %
|
$
|
7,680
|
37.0 %
|
$
|
7,433
|
34.8 %
|
|||||||
Nuclear Industry Training and Consulting
|
1,911
|
13.8 %
|
628
|
11.5 %
|
3,558
|
13.3 %
|
1,706
|
14.1 %
|
|||||||||||
Consolidated gross profit
|
$
|
6,340
|
25.7 %
|
$
|
5,017
|
29.3 %
|
$
|
11,238
|
23.6 %
|
$
|
9,139
|
27.3 %
|
Three months ended
|
Six months ended
|
||||||||||
June 30,
|
June 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
2018
|
2017
|
|||||||
Corporate charges
|
$
|
3,432
|
$
|
2,600
|
$
|
6,769
|
$
|
5,042
|
|||
Business development
|
965
|
792
|
1,883
|
1,477
|
|||||||
Facility operation & maintenance (O&M)
|
276
|
221
|
547
|
432
|
|||||||
Bad debt expense
|
117
|
118
|
117
|
118
|
|||||||
Contingent consideration accretion
|
-
|
43
|
-
|
297
|
|||||||
Other
|
3
|
-
|
4
|
-
|
|||||||
Total
|
$
|
4,793
|
$
|
3,774
|
$
|
9,320
|
$
|
7,366
|
Three months ended June 30,
|
Three months ended June 30,
|
|||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||
Interest rate swap - change in fair value
|
$
|
(11)
|
$
|
-
|
$
|
(11)
|
$
|
-
|
||||
Foreign exchange contracts- change in fair value
|
(46)
|
157
|
(164)
|
71
|
||||||||
Remeasurement of related contract receivables, billings in excess of revenue earned, and subcontractor accruals
|
(34)
|
|
158
|
|
(72)
|
84
|
||||||
(Loss) gain on derivative instruments, net
|
$
|
(91)
|
|
315
|
$
|
(247)
|
$
|
155
|
Three months ended
|
Six months ended
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||
Net income (loss)
|
$
|
981
|
$
|
827
|
$
|
(515)
|
$
|
561
|
||||
Interest (expense) income, net
|
61
|
(18)
|
39
|
(45)
|
||||||||
(Benefit) provision for income taxes
|
(449)
|
234
|
(190)
|
307
|
||||||||
Depreciation and amortization
|
|
573
|
|
250
|
|
944
|
|
507
|
||||
EBITDA
|
1,166
|
1,293
|
278
|
1,330
|
||||||||
Change in fair value of contingent consideration
|
-
|
43
|
-
|
297
|
||||||||
Restructuring charges
|
190
|
-
|
1,107
|
45
|
||||||||
Stock-based compensation expense
|
401
|
650
|
1,028
|
1,246
|
||||||||
Impact of the change in fair value of derivative instruments
|
91
|
(315)
|
247
|
(155)
|
||||||||
Acquisition-related expense
|
491
|
-
|
491
|
-
|
||||||||
Bankruptcy related expense
|
|
65
|
|
122
|
|
65
|
|
122
|
||||
Adjusted EBITDA
|
$
|
2,404
|
$
|
1,793
|
$
|
3,216
|
$
|
2,885
|
Three months ended
|
Six months ended
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2018
|
|
2017
|
2018
|
|
2017
|
|||||||
Net income (loss)
|
$
|
981
|
$
|
827
|
$
|
(515)
|
$
|
561
|
||||
Change in fair value of contingent consideration
|
-
|
43
|
-
|
297
|
||||||||
Restructuring charges
|
190
|
-
|
1,107
|
45
|
||||||||
Stock-based compensation expense
|
401
|
650
|
1,028
|
1,246
|
||||||||
Impact of the change in fair value of derivative instruments
|
91
|
(315)
|
247
|
(155)
|
||||||||
Acquisition-related expense
|
491
|
-
|
491
|
-
|
||||||||
Amortization of intangible assets related to acquisitions
|
312
|
34
|
462
|
98
|
||||||||
Bankruptcy related expense
|
|
65
|
|
122
|
|
65
|
|
122
|
||||
Adjusted net income
|
$
|
2,531
|
$
|
1,361
|
$
|
2,885
|
$
|
2,214
|
||||
Diluted income (loss) per common share
|
$
|
0.05
|
$
|
0.04
|
$
|
(0.03)
|
$
|
0.03
|
||||
Adjusted earnings per common share – Diluted
|
$
|
0.13
|
$
|
0.07
|
$
|
0.14
|
$
|
0.11
|
||||
Weighted average shares outstanding - Diluted
(1)
|
|
20,029,123
|
|
19,561,245
|
|
19,920,034
|
|
19,471,794
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4. |
Controls and Procedures
|
Item 1. |
Legal Proceedings
|
Item 1A. |
Risk Factors
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3. |
Defaults Upon Senior Securities
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Other Information
|
Item 6. |
Exhibits
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
1 Year GSE Systems Chart |
1 Month GSE Systems Chart |
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