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GP Strategies Reports Fourth Quarter 2018 Financial Results and Positive Outlook for 2019COLUMBIA, Md., March 18, 2019 /PRNewswire/ -- Global performance improvement solutions provider GP Strategies Corporation (NYSE: GPX) today reported financial results for the quarter and fiscal year ended December 31, 2018. Overview of Fourth Quarter 2018 Results:
"The Company has entered 2019 with a positive outlook for the future," stated Scott N. Greenberg, Chief Executive Officer of GP Strategies. "We anticipate achieving both significant revenue and EBITDA increases in 2019. While our 2018 results were disappointing, we have made substantial progress in our long term strategic objectives." "2018 has been a challenging and transformational year for GP Strategies," commented Adam H. Stedham, President of GP Strategies. "We have created the foundation for exciting times going forward. During 2018, we entered into long term renewals with our two largest customers, which represented 27% of our 2018 revenue. Our new sales structure is in place and functioning well. Our backlog is at an all-time high of $327.4 million, up 22% from the prior year. In addition, not included in this backlog, the Company has been awarded three new multi-year outsourcing contracts. The acquisition of TTi Global further positions the Company to capitalize on expected demand for our services resulting from the unprecedented disruption of the automotive industry. We anticipate TTi Global will contribute positively to our income statement after the first quarter, once its operations are integrated with GP Strategies. In addition to the integration of TTi, we expect to reduce operating costs by approximately $4.0 million on an annual basis, beginning in the second quarter of 2019, with approximately $2.5 million expected to be realized in 2019." The Company's revenue increased $1.4 million or 1.0% during the fourth quarter of 2018 compared to the fourth quarter of 2017. Revenue in the Business Transformation Services segment increased $3.6 million, or 7.0%, which was partially offset by a $2.3 million, or 2.8%, decline in revenue in the Workforce Excellence segment. Revenue for the fiscal year ended December 31, 2018 was $515.2 million, up $6.0 million or 1.2% from 2017 revenue of $509.2 million. Gross profit decreased $3.3 million or 15.1% to $18.3 million, or 13.8% of revenue, for the fourth quarter of 2018 compared to $21.6 million, or 16.4% of revenue, for the fourth quarter of 2017. Gross profit in the Workforce Excellence segment declined $2.4 million during the fourth quarter of 2018 largely due to a $0.6 million gross profit decline on UK job skills training services due to a decline in revenue associated with the previously disclosed funding changes by the UK government for their apprenticeship programs, a $0.7 million loss in the Company's non-core alternative fuels business due to contract over runs, and a $0.8 million decrease in gross profit in the Company's energy business due to a decline in software subscription revenue. Gross profit in the Business Transformation Services segment decreased $0.8 million during the fourth quarter of 2018 primarily due to a revenue decline in the organizational development practice and a decrease in gross margin in the sales enablement practice. In addition, the Company had a $0.5 million increase in medical benefits expense during the fourth quarter of 2018 compared to the fourth quarter of 2017, and a $2.0 million increase in medical benefits expense compared to the third quarter of 2018. General and administrative expenses decreased $1.6 million or 9.7% to $14.6 million for the fourth quarter of 2018 from $16.2 million for the fourth quarter of 2017. The decrease is primarily due to a $1.6 million decrease in bad debt expense due to a $1.3 million reserve related to a terminated contract with a foreign oil and gas client in the fourth quarter of 2017 which did not recur in 2018, and a $0.6 million decrease in ERP system implementation costs, partially offset by a $0.6 million net increase in G&A expenses largely due to acquisition costs associated with the recently completed acquisition of TTi Global, Inc. Sales and marketing expenses increased $1.3 million to $1.7 million for the fourth quarter of 2018 compared to $0.4 million for the fourth quarter of 2017 primarily consisting of increased labor and benefits expenses associated with the establishment of a new business development organization during 2018. Operating income decreased $0.4 million to $2.4 million for the fourth quarter of 2018 from $2.9 million for the fourth quarter of 2017. The decrease in operating income is primarily due to a $3.3 million decrease in gross profit discussed above and a $0.8 million decrease in the gain on change in fair value of contingent consideration, offset by $3.3 million of restructuring expenses in the fourth quarter of 2017 which did not recur in 2018. Interest expense decreased $0.3 million in the fourth quarter of 2018 compared to fourth quarter of 2017 due to a $1.1 million contingent interest accrual in the fourth quarter of 2017 associated with unremitted value-added tax (VAT) that did not recur in 2018, offset by a $0.8 million increase in interest expense due to an increase in borrowings and interest rates under the Company's revolving credit facility. Income tax expense was $0.8 million, or a 66.5% effective income tax rate, for the fourth quarter of 2018 compared to $1.6 million, or a 127.6% effective income tax rate, for the fourth quarter of 2017. For the full year 2018, income tax expense was $4.9 million, or a 33.4% effective rate compared to $6.8 million, or a 34.5% effective tax rate for the full year 2017. The decrease in the effective tax rate in 2018 compared to 2017 is due to the non-recurring unfavorable effect of the 2017 Tax Act on the Company's fourth quarter 2017 effective tax rate. Net income was $0.4 million, or $0.02 per diluted share, for the fourth quarter of 2018 compared to net loss of $0.3 million, or $(0.02) per diluted share, for the fourth quarter of 2017. After accounting for special items, which are set forth in the Non-GAAP Reconciliation - Adjusted EPS below, Adjusted EPS was $0.11 for the fourth quarter of 2018 compared to $0.39 for fourth quarter of 2017. Net income for the fiscal year ended December 31, 2018 was $9.8 million or $0.59 diluted earnings per share compared to $12.9 million or $0.76 diluted earnings per share for the fiscal year ended December 31, 2017. Balance Sheet and Cash Flow Highlights As of December 31, 2018, the Company had cash of $13.4 million compared to $23.6 million as of December 31, 2017. In addition, the Company had $116.5 million of borrowings outstanding under its $200 million credit facility as of December 31, 2018. Cash provided by operating activities was $11.2 million for the year ended December 31, 2018 compared to $26.3 million for the year ended December 31, 2017. During the year ended December 31, 2018, the Company repurchased approximately 354,000 shares of its common stock in the open market for a total cost of approximately $8.0 million. As of December 31, 2018, there was approximately $3.8 million available for future repurchases under the buyback program. ERP System Implementation Update & Delay in 10-K Filing The Company plans to file a Form 12b-25 with the Securities and Exchange Commission to obtain additional time within which to file its Annual Report on Form 10-K for the year ended December 31, 2018. The extension is necessary due to unanticipated delays in completing the year end financial closing process as a result of the implementation of a new ERP system in the fourth quarter of 2018. The Company has not fully completed the activities required to complete its Form 10-K for the year ended December 31, 2018. In addition, while the Company is still completing its assessment of the effectiveness of its internal control over financial reporting as of December 31, 2018, it expects to report material weaknesses in internal control over financial reporting relating to the implementation of the new ERP system. The Company has been implementing measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated in 2019. The Company expects to file its Form 10-K within the 15 day period specified by Rule 12b-25 of the Securities and Exchange Act of 1934, as amended. Investor Call The Company has scheduled an investor conference call for 10:00 a.m. ET on March 18, 2019. Prepared remarks regarding the company's financial and operational results will be followed by a question and answer period with GP Strategies' executive management team. The conference call may be accessed via webcast at: https://services.choruscall.com/links/gpx190315.html or by calling +1 (833) 535-2204 within the US, or +1 (412) 902-6747 internationally, and requesting the "GP Strategies Conference." The presentation slides broadcast via the webcast will also be available on the Investors section of GP Strategies' website the morning of the call. Participants must be logged in via telephone to submit a question to management during the call. Participants may optionally pre-register for the webcast at http://dpregister.com/10129324. The webcast will be archived on the Investors section of GP Strategies' website and will remain available for 90 days. Alternatively, a telephonic replay of the conference call will be available for one week and may be accessed by dialing +1 (877) 344-7529 in the US, or +1 (412) 317-0088 internationally, and requesting conference number 10129324. 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), backlog, 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 GAAP equivalents, see the Non-GAAP Reconciliations, along with related footnotes, below. About GP Strategies GP Strategies Corporation (NYSE: GPX) is a global performance improvement solutions provider of sales and technical 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, manufacturing, process and energy industries, and other commercial and government customers. Additional information may be found at www.gpstrategies.com. 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. 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. 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
SOURCE GP Strategies Corporation 
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