EX-99.1 2 fy13_results-pr.htm EXHIBIT 99.1 GSE SYSTEMS PRESS RELEASE

Exhibit 99.1

FOR IMMEDIATE RELEASE

GSE SYSTEMS ANNOUNCES 2013 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS

Q4 2013 OVERVIEW
·
Revenue of $12.3 million compared to $12.7 million in Q4 2012.
·
Net loss of $162,000, or $0.01 per diluted share, compared to a net loss of $330,000, or $0.02 per diluted share, in Q4 2012.
·
EBITDA improves to $175,000 from EBITDA loss of $317,000 in Q4 2012.
At December 31, 2013
·
Total cash and equivalents of $15.6 million, or $0.87 per diluted share (at February 28, 2014, cash and equivalents totaled $20.8 million, or $1.16 per diluted share).
·
Working capital of $26.0 million.
·
$0 long-term debt.
·
Backlog of $38.0 million.

Sykesville, MD – March 26, 2014 - GSE Systems, Inc. ("GSE" or "the Company") (NYSE MKT: GVP), a global energy services solutions provider, today announced financial results for the fourth quarter ("Q4") and year ended December 31, 2013.

Jim Eberle, Chief Executive Officer of GSE, commented, "We continue to make progress at navigating a challenging business environment. Results in Q4 2013 reflected contributions from previously announced cost-saving initiatives and derivative gains. Our business development efforts continue in earnest, and we intend to add additional senior business development assets to accelerate this process.  During Q4 2013, we booked approximately $11.3 million of new orders, which followed $11.1 million of orders logged in Q3 2013.   Our business continues to be negatively impacted by delays in customers' decisions with respect to more than $21 million of potential orders. We expect to win a number of these awards during the year, some of which could be substantial in size, scope, and financial impact."

Mr. Eberle concluded, "We remain cautious in our approach and outlook, and are committed to effecting additional cost savings, as necessary.  We are particularly focused on diversifying our revenue base and solutions portfolio.  We expect to achieve these goals via a number of avenues, including strategic acquisitions. We are in various stages of discussions with potential acquisition opportunities, and are confident in our ability to consummate at least one material transaction during 2014."


Q4 2013 RESULTS
Q4 2013 revenue declined 3.2% to $12.3 million from $12.7 million in Q4 2012.  The reduction in revenue mainly reflects a $1.7 million decrease in fossil simulation revenue in Q4 2013. Fossil-fueled power utilities continue to delay capital improvement expenditures because of economic uncertainties regarding the continuing viability of coal-fired power plants in light of the low cost of natural gas and additional U.S. regulations contained in the Clean Air and Clean Water Acts.  Partially offsetting this decrease was a $1.1 million increase in revenue generated by the Company's Slovakia simulator project.
Gross profit in Q4 2013 was $3.6 million, or 29.5% of revenue, as compared to $4.3 million, or 33.2% of revenue, in Q4 2012.  The reduction in gross profit as a percent of revenue mainly reflects a significant reduction in Q4 revenue from our Swedish operations, which have historically generated up to 80% of their revenue from Japanese nuclear utility customers, coupled with a decline in their fossil revenue from German customers.  GSE downsized its Swedish operations in Q4 2013.
Operating loss for Q4 2013 was $0.5 million compared to an operating loss of $0.1 million in Q4 2012.
Gain on of derivatives was $0.5 million in Q4 2013, compared to a loss of $0.2 million in Q4 2012.
Provision for income taxes was $0.2 million in Q4 2013 as compared to a benefit of $0.2 million in Q4 2012.  The Q4 2013 provision mainly reflects the establishment of a full valuation allowance against the deferred tax asset of our Swedish operations.
The net loss for Q4 2013 was $0.2 million, or $0.01 per basic and diluted share, compared to a net loss of $0.3 million, or $0.02 per basic and diluted share, in the same period last year.
EBITDA (Earnings before interest, taxes, depreciation and amortization) for Q4 2013 was $0.2 million compared to an EBITDA loss of $0.3 million in Q4 2012.

Backlog at December 31, 2013 was $38.0 million compared to $51.9 million at December 31, 2012.

GSE's cash position at December 31, 2013 was $15.6 million, excluding $1.1 million of restricted cash, as compared to cash and equivalents of $17.6 million, excluding $2.2 million of restricted cash at September 30, 2013.  At December 31, 2013, the Company had an $8.8 million receivable from the Slovakian utility, $7.9 million of which was collected in Q1 2014.

2013 Overview
2013 revenue decreased 9.0% to $47.6 million from $52.2 million in 2012, reflecting the impact of $32.0 million of orders logged in 2013 as compared to $52.2 million of orders in 2012.  As an aftermath to the 2011 Fukushima earthquake and tsunami, the Japanese have shut down all of their nuclear reactors and the Germans have announced plans to shut down all of their nuclear reactors by 2022.  Accordingly, the Company has seen significant reductions in orders and revenue from nuclear customers in both Japan and Germany, two traditionally strong sources of revenue.  For the year ended December 31, 2013, revenue generated from nuclear simulation customers in Japan decreased by $4.2 million and revenue generated from nuclear simulation customers in Germany decreased by $1.6 million, as compared to the prior year.

In 2013, gross profit declined to $10.4 million, or 21.9% of revenue, from $17.7 million, or 33.9% of revenue, in 2012.  Gross profit in 2013 was negatively impacted by a one-time $2.2 million write-down of capitalized software development costs in Q2 2013; absent this charge, gross profit in 2013 would have been $12.6 million, or 26.5% of revenues.  Gross profit in 2013 was also impacted by a higher percentage of total revenue associated with the Slovakian project (24.2% in 2013 as compared to 6.5% in 2012), which has a substantially lower gross profit margin than GSE's normal gross profit margin due to an inordinate amount of hardware being supplied.  Lower EnVision product revenue in 2013, which has an overall gross profit that is substantially higher than GSE's normal gross profit margin, also contributed to the lower overall gross profit in 2013.

GSE recorded a one-time, non-cash goodwill impairment charge of $4.5 million in Q2 2013.

Operating loss was $10.7 million in 2013 compared to operating income of $2.0 million in 2012.

Net loss was $10.5 million, or $0.58 per diluted share, ub 2013 compared to a net income of $1.2 million, or $0.06 per diluted share, in 2012.

EBITDA loss was $3.1 million compared to EBITDA of $2.6 million in 2012.

CONFERENCE CALL
Management will host a conference call this afternoon at 4:30 pm Eastern Time to discuss Q4 results and other matters.

Interested parties may participate in the call by dialing:

·
(877) 407-9753 (Domestic) or
·
(201) 493-6739 (International)

The conference call will also be accessible via the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=172528
ABOUT GSE SYSTEMS, INC.
GSE Systems, Inc. is a world leader in real-time high-fidelity simulation, providing a wide range of simulation, training and engineering solutions to the energy and process industries. Its comprehensive and modular solutions help customers achieve performance excellence in design, training and operations. GSE's products and services are tailored to meet specific client requirements such as scope, budget and timeline. The Company has over four decades of experience, more than 1,100 installations, and hundreds of customers in over 50 countries spanning the globe. GSE Systems is headquartered in Sykesville (Baltimore), Maryland, with offices in St. Marys, Georgia; Madison, New Jersey; Cary, North Carolina; Chennai, India; Nyköping, Sweden; Stockton-on-Tees, UK; Glasgow, UK; and Beijing, China. Information about GSE Systems is available at www.gses.com.


FORWARD LOOKING STATEMENTS
We make statements in this press release that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current expectations concerning future events and results. We use words such as "expect," "intend," "believe," "may," "will," "should," "could," "anticipates," and similar expressions to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. 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. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Company Contact
 
The Equity Group Inc.
Jim Eberle
 
Devin Sullivan
Chief Executive Officer
 
Senior Vice President
GSE Systems, Inc.
 
(212) 836-9608
(410) 970-7950
 
dsullivan@equityny.com
 
 
 
 
 
Thomas Mei
 
 
Associate
 
 
(212) 836-9614
 
 
tmei@equityny.com



GSE SYSTEMS, INC. AND SUBSIDIARIES
  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  
(in thousands, except share and per share data)
  
 
 
  
(unaudited)
    
 
 
  
Three Months ended
    
Year ended
  
 
  
December 31,
    
December 31,
  
 
  
2013
    
2012
    
2013
    
2012
  
 
  
   
   
   
 
 
  
   
   
   
 
Contract revenue
  
$
12,262
    
$
12,665
    
$
47,562
    
$
52,246
  
Cost of revenue
    
8,649
      
8,366
      
34,981
      
34,509
  
Write-down of capitalized software development costs
    
-
      
-
      
2,174
      
-
  
 
                                
Gross profit
    
3,613
      
4,299
      
10,407
      
17,737
  
 
                                
Selling, general and administrative
    
3,917
      
4,202
      
15,836
      
14,865
  
Goodwill impairment loss
    
-
      
-
      
4,462
      
-
  
Depreciation
    
136
      
156
      
570
      
562
  
Amortization of definited-lived intangible assets
    
52
      
78
      
207
      
313
  
Operating expenses
    
4,105
      
4,436
      
21,075
      
15,740
  
 
                                
Operating income (loss)
    
(492
)
    
(137
)
    
(10,668
)
    
1,997
  
 
                                
 
                                
Interest income, net
    
20
      
41
      
105
      
162
  
Gain (loss) on derivative instruments
    
486
      
(157
)
    
265
      
(121
)
Other expense, net
    
(7
)
    
(257
)
    
(67
)
    
(175
)
 
                                
Income (loss) before income taxes
    
7
      
(510
)
    
(10,365
)
    
1,863
  
 
                                
Provision (benefit) for income taxes
    
169
      
(180
)
    
146
      
689
  
 
                                
Net income (loss)
  
$
(162
)
  
$
(330
)
  
$
(10,511
)
  
$
1,174
  
 
                                
 
                                
 
                                
Basic income (loss) per common share
  
$
(0.01
)
  
$
(0.02
)
  
$
(0.58
)
  
$
0.06
  
Diluted income (loss) per common share
  
$
(0.01
)
  
$
(0.02
)
  
$
(0.58
)
  
$
0.06
  
 
                                
 
                                
Weighted average shares outstanding - Basic
    
17,905,977
      
18,346,965
      
18,150,915
      
18,383,564
  
Weighted average shares outstanding - Diluted
    
17,905,977
      
18,346,965
      
18,150,915
      
18,458,456
  
 
                                

 
 




GSE SYSTEMS, INC AND SUBSIDIARIES
  
Selected balance sheet data
  
 
  
   
 
 
  
December 31, 2013
    
December 31, 2012
  
 
  
   
 
Cash and cash equivalents
  
$
15,643
    
$
22,386
  
Restricted cash - current
    
45
      
743
  
Current assets
    
43,944
      
50,057
  
Long-term restricted cash
    
1,021
      
1,192
  
Total assets
    
48,827
      
62,564
  
 
                
Current liabilities
  
$
17,953
    
$
20,275
  
Long-term liabilities
    
487
      
1,459
  
Stockholders' equity
    
30,387
      
40,830
  
 
                

EBITDA Reconciliation

EBITDA is not a measure of financial performance under generally accepted accounting principles ("GAAP").  Management believes EBITDA, in addition to operating profit, net income and other GAAP measures, is useful to investors to evaluate the Company's results because it excludes certain items that are not directly related to the Company's core operating performance. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies.  This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.  A reconciliation of EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows:

 
  
Three Months ended
    
Year ended
  
 
  
December 31,
    
December 31,
  
 
  
2013
    
2012
    
2013
    
2012
  
 
  
   
   
   
 
Net income (loss)
  
$
(162
)
  
$
(330
)
  
$
(10,511
)
  
$
1,174
  
Interest income, net
    
(20
)
    
(41
)
    
(105
)
    
(162
)
Provision (benefit) for income taxes
    
169
      
(180
)
    
146
      
689
  
Write-down of capitalized software development costs
    
-
      
-
      
2,174
      
-
  
Depreciation and amortization
    
188
      
234
      
777
      
875
  
Goodwill impairment loss
    
-
      
-
      
4,462
      
-
  
EBITDA
  
$
175
    
$
(317
)
  
$
(3,057
)
  
$
2,576