(GVP) research, news, and more from GeoInvesting

Company description

Thu, 17 Dec 2015 14:04:09 GMT

GSE Systems, Inc. provides simulation, engineering, and training solutions and services to the nuclear and fossil power generation, oil and gas, refining, chemicals, petrochemicals, industrial gas, manufacturing, transportation, and plant utilities markets worldwide. It operates in two segments, Performance Improvement Solutions and Staff Augmentation. The Performance Improvement Solutions business segment offers solution-oriented technologies and services. This segment offers simulation solutions, such as the non-specific plant systems of its EnVision product line used to teach fundamental processes to newly hired employees; custom plant-specific simulators used to train plant operators; engineering-grade simulation solutions used to help clients verify and validate control systems prior to new plant construction or modification of existing plants; and engineering-grade simulation solutions used for human factors engineering. Its training services include turnkey and custom training services and 3D visualization training products; and engineering services comprise plant design, automation and control systems design, functional safety and compliance analysis, and engineering consultations. The Staff Augmentation segment provides specialized workforce solutions primarily to the nuclear industry. This segment’s staff augmentation positions include instructors, procedure writers, work management specialists, planners, outage execution specialists, corrective action and self-assessment specialists, and training material developers. It also offers a software platform for online learning and learning management for the energy market. The company markets its products and services through a network of direct sales staff, agents and representatives, and strategic alliance partners. GSE Systems, Inc. was founded in 1994 and is headquartered in Sykesville, Maryland.

Research

Fri, 14 Jun 2019 04:00:00 GMT

Closed Our Long In GVP

After several years of waiting for our position in Gse Systems, Inc. (AMEX:GVP) ($2.52; $50.3M market cap) to play out, we have decided to move on to other opportunities. As stated in its last earnings release, the Company is having some issues with its recent acquisition, and we feel that sitting on the sidelines as we monitor how management navigates through its first hiccup (since we started following the company in 2016) is the most prudent direction to take at this time.

We do believe the Company could be an acquisition target at some point, but for now we are removing GVP from all screens while we continue to keep it on our radar.

Research

Thu, 16 May 2019 15:17:51 GMT

Gse Systems, Inc. (AMEX:GVP) ($2.52; $50.3M market cap), a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power and process industries announced Q1 2019 results:

Sales of $22.2 million vs $22.9 million in the prior year and slightly ahead of analyst estimates of $21.7 million
Non-GAAP EPS of $0.08 vs $0.02 in the prior year and well ahead of analyst estimates of $0.00

The company stated:

We were disappointed in our first quarter 2019 financial results. While Q1 is traditionally a weaker quarter for our business, we were especially impacted by the conclusion of two significant projects in our NITC segment, the temporary work suspension at DP Engineering, a slower start to the year for True North, higher operating expenses in the quarter related to higher accounting and consultant costs offset by some savings from our international restructuring. Moreover, the acquisition of DP Engineering in February 2019 resulted in lower than expected contribution to revenue. We continue to work through a prior design modification issue that, under GAAP accounting rules, required us to recognize a material, non-cash impairment."

Mr. Loudermilk concluded, "We expect DP Engineering to contribute positively to GSE’s overall EBITDA once it returns to historic levels of work and we remain confident in the long-term value of this unique asset. Although quarter to quarter variability can be expected given the project nature of our business, the fundamentals of our end markets remain solid and we have taken decisive actions to increase new order flow and backlog in the coming quarters. This quarter’s results are not indicative of the earnings capacity of GSE. We are committed and well positioned to drive improved performance through our strategic set of assets, talented employees and specialized technologies that deliver value-added solutions to the nuclear power industry, which is increasingly recognized throughout the world as a critical source of carbon-free baseload energy.”

Conference call comments:

Our share price over this time frame has not responded as much as we would have liked given our progress and positioning GSE as a value-creating acquisition platform. Our thesis has been to identify and pursue compelling opportunities in the fragmented vendor ecosystem serving the global power industry. We continue to see ample pipeline of attractive targets in our core areas.

Our Vision 2020 goals of over $200 million in revenue and $20 million of adjusted EBITDA on an annual run rate basis by the end of 2020 assumes that we can secure capital necessary to close deals in a way that does not jeopardize shareholder value.

However, as is always the case, management continuously assesses the strategy and makes decisions necessary to ensure that we maintain optionality for our business, allowing us to maximize shareholder value. We pay close attention to and assess the decisions we make, the effectiveness of those decisions and develop options for our path forward to ensure that we serve our customers, employees and shareholders well.

We are clearly disappointed with management's ability to implement its DP acquisition especially since it had similar issues in the prior quarter. It is unclear of what to make of these comments, but it is not unreasonable to think that management may look for alternative options, including a possible merger or plans to sell the company.

Although management comments indicate that a takeover is not out of the question, we are removing GVP from our Favorite Stock Portfolio Screen as we continue to dig into new developments.

Research

Fri, 15 Mar 2019 15:34:51 GMT

Gse Systems, Inc. (AMEX:GVP) ($3.00; $59.4M market cap), a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power and process industries, announced Q4 2018 results:

Sales of $22.9 million vs $22.0 million in the prior year and slightly ahead of analyst estimates of $21.5 million
Non-GAAP EPS of $0.05 vs $0.01 in the prior year and ahead of analyst estimates of $0.01

“Our adjusted EBITDA in the fourth quarter of 2018 grew by 46.7% year-over-year to $2.8 million, one of the best quarterly outcomes in our history, while GSE’s full year 2018 adjusted EBITDA rose 31.6% year-over-year to $7.4 million, also one of the best annual outcomes in more than two decades. Full year 2018 adjusted net income increased 55.0% to $4.7 million, or $0.24 per diluted share. These strong financial results reflect our ongoing commitment to providing clients with best-in-class engineering and expert staffing solutions, as well as meaningful contributions from the highly-complementary acquisitions of Absolute Consulting in September 2017 and True North Consulting in May 2018. During the year, we won a range of impressive new business orders globally and maintained a solid backlog despite the wind down of our very large full scope simulator project in the US. We are very pleased with this sales performance because it supports the validity of our strategy to consolidate the fragmented ecosystem of vendors serving the nuclear power industry. With the strategic acquisition of DP Engineering in February 2019, we have added an outstanding team of professionals with a broad range of engineering capabilities for nuclear power, including a core competency in engineering design modifications implemented during regularly scheduled nuclear plant outages. We aim to build on our success to date and further enhance GSE’s platform during the remainder of 2019, focusing on the additional value we can create for our clients and shareholders.”

Recent acquisition of DP Engineering:

Following a recent event at a customer location, in accordance with its standard operating procedures and an Engineer of Choice Agreement, the customer of DP Engineering issued a Notice of Suspension to DP Engineering while a root cause analysis of the event proceeds. Approximately 25% of the impacted projects have already been restarted at the request of the customer. DP Engineering and GSE are working with the customer and outside vendors to assist in the causal analysis related to the event and anticipate further clarity once the analysis is complete.

While the company beat both top and bottom line analyst estimates, we are mildly concerned that it appears that the company may have struggled to drive organic topline growth in the quarter. We do like when companies make smart acquisitions to grow the business, but in situations like this, we also want to see organic growth in legacy and acquired businesses, so we need to dig into this a little more.

Research

Tue, 19 Feb 2019 15:46:37 GMT

Gse Systems, Inc. (AMEX:GVP) ($2.84; $56.3M market cap), a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power and process industries, announced the acquisition of DP Engineering, a specialized provider of high-value engineering services and solutions to the nuclear power industry. The acquisition is expected to be immediately accretive.

Over the past three years, DP Engineering’s average annual revenue was greater than $20 million, with gross profit margins in excess of 30% and strong free cash flow.

Transaction details:

“GVP acquired 100% of the equity interest of DP Engineering for $13.5 million in cash, subject to customary working capital adjustments, with additional purchase consideration of up to $5.0 million payable as an earn-out contingent upon DP Engineering satisfying certain annual adjusted EBITDA thresholds over the next two years ranging from $2.75 million to $4.3 million.”

Research

Thu, 15 Nov 2018 15:57:58 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($2.90; $57.2M market cap), a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power and process industries, announced Q3 2018 results:

Sales of $21.8 million vs $15.4 million in the prior year
Non-GAAP EPS of $0.04 vs $0.03 in the prior year
New orders increased 203% to $27.9 million from $9.2 million

“We are excited to see continuing momentum in operating leverage via Adjusted EBITDA and expect this to accelerate as we scale. In addition, new orders were the highest since the first quarter of 2016. Our acquisitions of Absolute Consulting and True North Consulting helped drive this quarter’s strong performance, demonstrating the significant potential of our strategy to scale GSE and create value through rolling up a fractured vendor ecosystem in the nuclear power industry. We continue to evaluate and pursue a robust pipeline of additional potential value-creating strategic acquisitions.”

Research

Thu, 08 Nov 2018 16:38:12 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($2.98; $58.4M market cap), a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power and process industries, today announced a five year contract worth up to $19 million. The contract is:

“...for the continuation of support services to two US Government engineering laboratories dedicated to the support of the US Navy. GSE will serve as a subcontractor to a large global engineering, construction and project management firm. The services include providing simulation engineers and test specialists. The initial year is worth $3.6 million (February 2018 to February 2019) with four additional optional years that would bring the total contract value to approximately $19 million. GSE, which has been under a series of services contracts with these laboratories for 15 years, is tasked to build and test training devices used across a variety of government locations.”

You can view our previous coverage on GVP here.

Research

Tue, 11 Sep 2018 14:45:36 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.50; $69.0M market cap), a company that offers training and staffing for nuclear power plants and is on several of our model portfolios, was highlighted in a Seeking Alpha article yesterday. The author offers a detailed summary of the company and believes shares are significantly undervalued. Below is a bullet summary of the article and the valuation target:

GVP is on an acquisition mission, consolidating a fragmented industry.
Nuclear is an active global option.
GVP has a clear plan to leverage what it's got.
GVP is undervalued from anywhere between 25% to over 500%. An EV/Sales ratio of 1.5 translates into a price target of $6.80, significantly higher than the current price.

You can read the full article titled, “GSE Systems: Strong Performance Has Been Unrecognized By The Market”, here.

Research

Thu, 16 Aug 2018 14:42:29 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.18; $62.8M market cap), a company that offers training and staffing for nuclear power plants, announced an $8 million contract to update simulators in Slovakia and Korea.

“We are grateful for the collaboration with Slovenské Electrárne, which began with the delivery of the Mochovce Unit 1&2 simulator in 1997 and continues to this day. This project demonstrates GSE’s ability to deliver our solutions globally, on any reactor type, building successful relationships for the long term. Delivery of the simulator solution prior to plant commissioning provides the client valuable insights into the plant controls and allows operators to gain a thorough understanding of this unique plant.”

Mr. Loudermilk added, “Clients in Korea are seeing the value of our simulation technology and in particular our RELAP5-HD and PSA-HD solutions. This is the seventh full scope simulator in Korea to upgrade to GSE’s latest technology for critical simulation and training needs.”

In yesterday’s email we highlighted GVP’s strong Q2 2018 results which can be seen here.

Research

Wed, 15 Aug 2018 14:38:23 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.07; $60.3M market cap), a company that offers training and staffing for nuclear power plants, announced Q2 2018 results:

Sales of $24.7 million vs $17.1 million in the prior year
Non-GAAP EPS of $0.13 vs $0.07 in the prior year

“Our acquisitions of Absolute Consulting and True North Consulting helped drive this quarter’s strong performance, demonstrating the significant potential of our strategy to scale GSE and create value through rolling up a fractured vendor ecosystem in the nuclear power industry. With approximately $25 million of available liquidity, consisting of $10 million of cash and $15 million under our delayed draw term loan, we are ready to evaluate and pursue a robust pipeline of additional potential value-creating strategic acquisitions.”

We are pleasantly surprised that GVP (one of our Maj’s Favorite’s model portfolio holdings) was able to execute on its bottom line, partly due to the company’s acquisition activity. More impressive is that the acquired companies appear to be seeing organic growth on their bottom line, already validating GVP’s strategy to bring more efficiency to asset purchases. For example, here is a quote from the conference call:

“Absolute is contributing roughly $1.7 million in annualized adjusted EBITDA. This is an approximate 70% increase from its results as a stand-alone company.”

Research

Tue, 19 Jun 2018 15:14:38 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.25; $61.8M market cap), a company that offers training and staffing for nuclear power plants, announced two new contract awards for its Envision Learning On-Demand platform. Envision is GVP’s next generation learning product that provides cloud access to computer-based tutorials and simulations to train workers in fundamentals through troubleshooting complex refining processes.

There were no financial details in the release which allude the size of these contracts, but the positive takeaway is that this product is a SaaS offering, which could lead to a boost in overall margins if it gains traction. Quotes from management:

“These new contracts with two major energy companies demonstrate the compelling value of our cloud-based learning platform and SaaS business model. Our customers can leverage this platform to modernize their training programs, lower their IT burdens and gain easy access to rich learning content in the form of tutorials, simulation models, and structured simulation exercises.”

Research

Wed, 16 May 2018 14:42:19 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.30; $64.5M market cap), a company that offers training and staffing for nuclear power plants, announced Q1 2018 results:

Sales of $22.9 million vs $16.3 million in the prior year
Non-GAAP EPS of $0.01 vs $0.04 in the prior year period

While it’s great to see revenues increase, we are still waiting for GVP to execute consistently on the EPS level. The company expects the next two quarters to show better results as EBITDA this quarter was lower than expectations due to some one time costs and revenue on some projects being pushed out a couple quarters as a result of accounting rules. The company still believes it is on path to achieve its vision for 2020 of revenue of approximately $300 million, gross margin of approximately 25%, and adjusted EBITDA of between $20 to $30 million. A pullback in the stock would surprise us.

Quotes from management:

“GSE had a solid start to 2018, successfully delivering on our commitments to our customers and our shareholders. We efficiently executed on our backlog, resulting in year over year revenue growth of approximately 40% in the first quarter. We are growing our footprint as a provider of highly skilled professionals and know-how to the nuclear power industry with the recent addition of True North Consulting. Our strong balance sheet, along with our acquisition credit facility, positions us well to advance our strategy of leveraging GSE as an exciting platform for rolling-up fractured vendor ecosystems serving the nuclear power industry. We have identified and continue to work towards capitalizing on a number of exciting organic and inorganic growth opportunities. 2018 is off to a solid start, and we aim to build on our success to grow revenue and further enhance shareholder value.”

Research

Tue, 15 May 2018 14:36:35 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.25; $63.1M market cap), a company that offers training and staffing for nuclear power plants, announced two contract awards worth approximately $4 million for nuclear power simulation work in China. Work is to begin in Q2 2018 and will continue over the next two years.

Quotes from management:

“Our success in providing leading simulation technology and engineering services for several Chinese nuclear power plants have directly resulted in these awards. The desire to continue working with GSE reflects an appreciation for both our world-class technology and know-how. It also reflects the customer commitment to state-of-the-art training and workforce development. We are honored by the awards and the opportunity to continue our relationship long into the future.”

GVP will be reporting its Q1 2018 results after hours today, we will have a full update in tomorrow's email.

Research

Mon, 14 May 2018 14:55:41 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.25; $63.1M market cap), a company that offers training and staffing for nuclear power plants, announced it has acquired True North Consulting. The acquisition is expected to add roughly $10 million to annual revenue and be immediately accretive to adjusted EPS.

Quotes from management:

“The acquisition of True North Consulting broadens our engineering services offering, expands our relationships with several of the largest nuclear energy providers in the United States, and adds a highly specialized, complimentary talent pool to our employee base. True North has built a stellar reputation in the industry, particularly in technical areas such as ASME code expertise, and will expand the portfolio of services we can provide to our customers. We believe True North is a powerful strategic fit with GSE, strengthening our position as the ‘go to’ solutions provider to the power industry. The addition of True North advances our strategy to create value for our customers, employees and shareholders through consolidating a fragmented ecosystem of vendors serving the nuclear power industry.”

Recent transactions:

After completion of this transaction, GSE’s pro forma Adjusted EBITDA for the last twelve months approaches $8 million and our pro forma balance sheet remains strong with approximately $12.4 million in cash and $10 million in long-term debt. In the last eight months, through our strategic acquisitions of Absolute Consulting and True North, we project that we will have added an estimated $40-$50 million in annual revenue and an increase of $3.5-$4.0 million in annual adjusted EBITDA. We continue to work diligently to pursue other similar acquisition opportunities that can enhance shareholder value.”

Research

Mon, 23 Apr 2018 14:48:29 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.25; $63.1M market cap), a company that offers training and staffing for nuclear power plants recently filed its notice of its annual meeting of stockholders. The meeting is scheduled for June 12, 2018. One item in the proxy we found interesting was item 3:

To approve an amendment to the Company's Certificate of Incorporation to increase the total number of authorized shares of capital stock from 32,000,000 to 62,000,000;

With close to $20 million in cash and no debt as of the end of Q4 2017, our assumptions were the Company would likely use cash for any acquisition in its pipeline. Per the Q4 2017 conference call, management stated it planned to close one or two acquisitions in 2018.

While we are not fans of dilution, we would think the only reason GVP would have to issue shares is if the Company had a big transformative acquisition in its sights. Issuing shares to consummate an accretive transformational type acquisition would make the above proxy item understandable. We also find it interesting that, concurrent with this development, the company is moving the listing of its shares from the NYSE to the NASDAQ.

Research

Fri, 20 Apr 2018 13:43:19 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.28; $63.6M market cap), a company that offers training and staffing for nuclear power plants, announced it will commence trading on NASDAQ on Monday, April 30, 2018. The Company’s common stock will continue to trade on the NYSE American until the market close on Friday, April 27, 2018.

Kyle Loudermilk, GSE’s President and Chief Executive Officer, commented, “We are pleased to announce our listing on the Nasdaq Capital Market. We believe the move to Nasdaq will improve the visibility of our stock, enhance trading liquidity in our shares, and provide us with greater exposure to institutional investors.”

Research

Fri, 16 Mar 2018 16:53:21 GMT

GB Gse Systems, Inc. (AMEX:GVP) ($3.20; $62.0M market cap), a company that offers training and staffing for nuclear power plants, announced Q4 2017 results:

Sales of $22.0 million vs $13.3 million in the prior year
Company provided Non-GAAP net loss of $0.01 vs Non-GAAP EPS of $0.10
Preliminary GeoInvesting Non-GAAP of $0.09 vs Non-GAAP EPS of $0.09 (please note that we are contacting management to determine why our Non-GAAP EPS adjustments diverge from the company’s. The difference mainly is the due to how we are adjusting for tax benefits brought on by Trump’s Tax Bill)

While the stock is up from our initial entry point, the GVP story is taking longer to play out then we had hoped. However, in certain cases, we are early entrants into some stocks, especially those that are going through restructuring. And there have been times when frustration led us to sell a position too early (see $SMID research notes), only to see the story playout as we had initially anticipated. Although it’s possible that GVP might take a short-term hit, we still are placing our confidence in GVP’S management and ability to execute on its growth plan at this time. The Q4 CC contained some good information that we wished management would have included in its press release. We often see that CC commentary can offset negative assumptions garnered from the press release.

Quotes from the press release include:

“We finished the year with approximately $20 million in cash, which is a reflection of GSE’s operations and strong cash flow generation, especially after our all-cash acquisition of Absolute Consulting for approximately $9 million. While growing, we kept a keen eye on improving our efficiency, streamlining our operations to ensure we are a lean and agile company. Our strong balance sheet keeps us well positioned to further execute on our strategy of leveraging GSE as an exciting platform for a roll-up of a fractured vendor ecosystem serving the nuclear power industry. We have identified and continue to work towards capitalizing on a number of exciting organic and inorganic growth opportunities. 2017 was a year of accomplishment for GSE, and in 2018, we aim to build on our success to grow revenue and further enhance shareholder value.”

Conference call highlights...

Reiterating long term goals:

“As we execute on our organic and inorganic growth strategy, we envision significant longer term upside from current levels and have established longer term company goals to achieve by the end of 2020, which include the following objectives. Revenue of approximately $300 million, gross margin of approximately 25%, and adjusted EBITDA of between 7% and 10%. As implied by our 2020 vision, we have identified a pathway to create $15 million to $25 million of additional EBITDA for the company over the long term.”

M&A Pipeline:

“We hit the ground running in 2018 and our M&A efforts are very active. In fact, it's the most active we have seen since we formally kicked off our roll out strategy in January of ’17. We are excited by our pipeline which continues to grow. Our goal remains to close one or two additional deals in 2018 to drive enhanced growth in revenue, adjusted EBITDA and EPS, resulting in approximately $4 million plus in adjusted EBITDA to our platform in 2018.”

Future Earnings:

“The company has now concluded that as of December 31, 2017, it is more likely than not that the company will generate sufficient taxable income with only applicable net operating loss carryforwards periods, to realize a portion of its deferred tax asset. This conclusion and the resulting partial reversal of the deferred tax asset valuation allowance, is based upon consideration of a number of factors, including the company's three year cumulative positive earnings, its demonstrated ability to meet or exceed budgets, and its forecast of future profitability.”

Work from Q4 pushing into Q1 and Q2:

“Our Performance Improvement Solutions segment bookings totaled $4.9 million in Q4 ’17, compared to $13 million in Q4 2016. Year over year comparisons were impacted by several large orders being pushed out of Q4 2017 that we are expecting to close in the first half of 2018.”

Research

Wed, 14 Feb 2018 15:38:40 GMT

GB Gse Systems (NYSE AMEX:GVP) ($3.35; $64.9M market cap),a company that offers training and staffing for nuclear power plants, was recently added to Maj’s favorite stock list due to:

“A great management team that has over delivered; Accomplishments not being reflected in the stock price; Finally makes accretive acquisition; Will begin to increase its shareholder outreach efforts.”

Yesterday, 3 separate 13G/A filings came to our attention. We are pleased to see that all 3 stakeholders increased their positions:

Jack Silver, founder and manager at SIAR Capital increased his stake to 1.57 million shares from 1.46 million shares. He now holds a 8.1% stake.
Needham Investment Management increased their stake to 1.12 million shares from 960,000 shares. They now hold a 5.8% stake.
PVAM Perlus Microcap Fund increased their stake to 1.61 million shares from 1.31 million shares. They now hold a 8.3% stake.

Research

Wed, 27 Dec 2017 17:18:08 GMT

GB Gse Systems (AMEX:GVP) ($3.15; $61.1M market cap), the world leader in real-time high-fidelity simulation systems and training/consulting solutions announced steps to streamline global operations and increase profitability.

“We have made the strategic decision to implement a restructuring program for certain assets in Europe and India to position the company for enhanced long-term profitability and the next phase of our growth. By streamlining our global operations, we become a leaner, more agile business with less complexity, allowing us to better serve our customers as well as dedicate more time to executing our stated M&A goals. A more centralized staff will greatly enhance interactivity and innovation as we advance client solutions, and do so at a lower cost in a more effective manner. These actions are the appropriate steps for us at this stage of our company’s growth trajectory, and should directly benefit our customers, our shareholders and our employees on the whole.”

Research

Wed, 06 Dec 2017 18:30:01 GMT

GB Gse Systems (AMEX:GVP) ($3.15; $61.1M market cap), the world leader in real-time high-fidelity simulation systems and training/consulting solutions announced a new cloud-based training platform, that significantly extends the capabilities of its industry leading EnVisio tutorials and simulations.

“We recognized our clients’ desire to purchase their training as a cloud-based SaaS model,” explained GSE’s Chief Executive Officer, Kyle Loudermilk. “This new platform will help our customers achieve their training objectives in a more focused and cost-effective manner while increasing access and unburdening their IT departments.

The cloud-based SaaS platform reduces the need for IT support, installing, tracking and controlling multiple versions of software.

Dr. Bahram Meyssami, GSE’s Chief Technology Officer said, “The learning platform offered through a SaaS model in the cloud enables our customers to modernize their training programs, taking advantage of the extensive GSE EnVision™ library of tutorials, simulation models, and structured simulation exercises delivered through a web browser. The EnVision™ Learning On-Demand platform improves trainee access to a broad range of learning content, while offering a well-designed learning plan focused on successful outcomes.”

Research

Fri, 01 Dec 2017 18:33:15 GMT

GB Gse Systems (AMEX:GVP) ($3.15; $61.1M market cap), the world leader in real-time high-fidelity simulation systems and training/consulting solutions, issued an 8-K/A with its pro-forma financials from its recent Absolute Consulting acquisition. For fiscal 2016, combined pro-forma revenues were $93.1 million and GAAP EPS was $0.09. For the nine months ended September 30, 2017 sales are $77.5 million with GAAP EPS of $0.02 and non-GAAP EPS of $0.16.

Absolute’s low margins and weak growth performance are likely the reasons GVP was able to purchase the Company so cheaply. Management's efforts on integrating Absolute and improving its margins will be a key factor in driving bottom line growth.

Yesterday, we highlighted the Company’s 3 year growth plan which calls for $300 million in revenues and $20 to $30 million in EBITDA. As we stated yesterday, based on these assumptions, we calculate EPS could eventually reach a range of $1.00 to $1.50 (non-taxed) and $0.65 to $1.00 at a 36% tax rate. You can see our full note from yesterday here.

Maj Soueidan will be meeting management in California next week at the LD Microcap Conference.

Research

Thu, 30 Nov 2017 15:31:40 GMT

GB Gse Systems (AMEX:GVP) ($3.40; $65.4M market cap) As expected would happen prior to the upcoming LD Micro Conference, Gse Systems, the world leader in real-time high-fidelity simulation systems and training/consulting solutions, released an updated investor presentation. In our recent emails we had discussed how we were awaiting this investor presentation as management stated it planned to unveil ints new 3 year growth outlook. Management did not disappoint, with what we feel is a very bullish 3 year plan ending with sales of $300 million for 2020.

With pro-forma TTM revenues currently at $100 million, the $300 million goal by 2020 implies extremely strong growth rates for the next several years. While stating something and achieving something are two different things, one of our original catalysts in the GVP story revolved around the strong management team. So far management has executed on all of its prior projections, giving us confidence they can achieve the aggressive goals outlined in their presentation..

Based on the above projections, we calculate EPS could eventually reach a range of $1.00 to $1.50 (non-taxed) and $0.65 to $1.00 at a 36% tax rate. Our estimates do not take into account any interest expense it may incur to finance its growth plans. Keep in mind that the company has a significant amount of NOL’s ( 50m), so it will likely not need to pay taxes for some time.

Research

Tue, 28 Nov 2017 15:50:54 GMT

GB Gse Systems (AMEX:GVP) ($3.40; $65.4M market cap), the world leader in real-time high-fidelity simulation systems and training/consulting solutions announced that it has been selected by a major client to implement its latest simulation platform at all the clients’ nuclear plant sites in the southern United States. Management states:

“The OpenSim 7.0 simulation engine is a leap forward for OpenSim installations, allowing customers to take advantage of GSE’s technology innovation to easily integrate third party systems and advanced (industry-accepted) codes. With such integration capabilities, customers can increase the fidelity of their existing training simulator and expand their use of our technology to leverage the nuclear plant simulator asset for engineering purposes, beyond the traditional training use. GSE continues to develop and unify several of our key existing technology innovations across our product portfolio to benefit all of our installed user base and future customers.”

There were no financial details in the release. It's possible the company may offer more details on this contract with its new investor presentation likely to be issued within a week (prior to LD Micro Conference). As stated in the last conference call, the updated investor presentation will offer its vision for the next 3 years.

Research

Wed, 15 Nov 2017 16:50:50 GMT

GB Gse Systems (AMEX:GVP) ($3.40; $65.4 m market cap), the world leader in real-time high-fidelity simulation systems and training/consulting solutions, announced Q3 2017 results:

Sales of $15.4 million vs $14.4 million in the prior year
Non-GAAP EPS of $0.03 vs $0.02 in the prior year

Quotes from management:

"In Q3 2017, GSE delivered year-over-year growth in revenue, adjusted net income and adjusted EBITDA. We completed our acquisition of Absolute Consulting, significantly enhancing GSE’s position as the ‘go to’ provider of consulting solutions to the power industry, with a particular focus on nuclear power. Our combination with Absolute makes us a company of scale, with trailing twelve-month revenue of approximately $100 million. It is also a significant proof point of our thesis that GSE is a terrific platform for consolidating a fragmented vendor ecosystem for nuclear power. Absolute Consulting will begin to contribute meaningfully to our consolidated results in the fourth quarter. Our backlog remains strong, reflecting our focus on organic business initiatives and operational execution. We ended the quarter with approximately $16.5 million of cash and no debt. I am delighted with our progress so far in 2017, and with a robust and active M&A pipeline, we look forward to scaling GSE further."

Some quotes from conference call:

“Our goal is to close 1 or 2 additional deals in 2018 to drive enhanced growth in revenue, adjusted EBITDA and earnings per share.”

“Moving on to our overall operations. With the acquisition of Absolute complete, we will provide investors with our updated 3-year operating model to properly frame our vision for where we want GSE to be by 2020. We believe this operating framework will help investors model our business as well as understand our latest strategy based on new information and activities as they unfold.”

The company also discussed some possible favorable nuclear policy developments which could increase demand for nuclear power technologies. We encourage investors to read the full transcript here.

Research

Thu, 28 Sep 2017 14:57:58 GMT

Added GVP to Our Buy on Pullback Mock Portfolio 6.0

Yesterday via premium tweet we stated we were adding GVP ($3.30) to our Buy on Pullback Mock Portfolio 6.0. GVP provides simulation, training, and engineering solutions to the power and process industries worldwide.

Despite being added to our Mock Portfolio 5.0 on July 14, 2017, when the stock was trading at $2.90, we feel shares under-reacted to what is possibly a recent transformational acquisition for the Company.

In its acquisition press release, GVP had stated that Absolute Consulting will be immediately accretive to earnings, add $40 million in revenue and more than $2 million in adjusted EBITDA.

Under the assumption of half a million dollars in depreciation and other expenses for Absolute Consulting, the pro forma consolidated adjusted net income for the last 12 months would be around $6 million, which means GVP is currently trading at a P/E of about 11.

Prior to announcing the acquisition of Absolute Consulting, GVP had trailing non-GAAP EPS of $0.25. Applying a trailing P/E multiple range of 20 to 25 would equate to a near term price target of $5.00 to $6.25, or 51% to 89% higher than current levels.

Investors should note that GVP has just recently entered its top line growth cycle, and grew Q2 2017 revenues by 38% prior to this acquisition announcement. Lastly, management's strong balance sheet leaves the door open for another similar style transaction as done with Absolute. Management's comments:

“We are well positioned to pursue such opportunities as our balance sheet remains strong, even after the purchase of Absolute Consulting, with estimated pro-forma cash of approximately $15 million and no long-term debt.”

GVP joins EML and MIXT on Buy on Pullback Mock Portfolio 6.0 as we continue to look for other names to round out Mock Portfolio 6.0.

Research

Thu, 21 Sep 2017 15:28:24 GMT

GB $GVP ($2.80, marked up 5% pre market) announced the acquisition of Absolute Consulting, a provider of technical consulting and staffing solutions to the global nuclear power industry. Absolute generated $40 million in revenue in fiscal 2016. GVP paid $8.75 million in cash and expects the acquisition to be immediately accretive to earnings and to add more than $2 million in annual adjusted EBITDA as well as $12 million to GVP’s backlog. GVP expects additional accretion and growth based on cost and revenue synergies.

Quotes from management:

“After vetting more than 150 acquisition opportunities over a 12-month period, we believe we have found a terrific fit in Absolute Consulting. We are purchasing a well-run business, at an attractive price, that addresses a critical challenge in our industry: the world’s aging nuclear workforce. In addition to advancing our growth strategy, the transaction makes excellent use of our cash on hand and is expected to be accretive to GSE’s diluted earnings per share. Pro-forma for this transaction, GSE’s trailing revenues eclipse the $100 million mark for the first time, and we see additional opportunities for similar follow-on deals. We are well positioned to pursue such opportunities as our balance sheet remains strong, even after the purchase of Absolute Consulting, with estimated pro-forma cash of approximately $15 million and no long-term debt.”

In mid July, we added GVP to our “Buy on Pullback Mock Portfolio 5.0” when the stock was trading at $2.90. We stated:

“there may be some short term volatility with GVP, but also that we are extremely bullish on the company’s long term prospects. One concern we have stems from the Company’s ability to sustain EPS growth without making an acquisition. However, we believe their is an acquisition lined up before year’s end.”

We are excited to see management execute on their plan. This is a significant acquisition, increasing the size of the company by 65%. We remain very bullish on the long term prospects of GVP.

Research

Tue, 15 Aug 2017 14:32:53 GMT

GB GVP ($2.85) announced Q2 2017 results:

Sales of $17.1 million vs $12.4 million in the prior year
Non-GAAP EPS of $0.08 vs $0.05 in the prior year

Quotes from management:

“In Q2 2017, GSE achieved strong revenue and net income growth, driven by robust demand for our Nuclear Industry Training and Consulting staffing services and the advancement of three major nuclear simulation projects in our Performance Improvement Solutions division. Our backlog remains strong, reflecting our focus on organic business initiatives and operational execution. We ended the quarter with almost $25 million of cash and no debt. I am delighted with our progress in the first half of 2017, and we are well positioned to create additional shareholder value through organic and inorganic growth initiatives."

We were pleasantly surprised with Q2 results. GVP is an instance where an activist management team has delivered from day one. We continue to believe that GVP will deliver over the long-term. We first viewed an investment in GVP as a bet on management. Now, with a run-rate P/E of near 10 and cash per share of $1.20, it is slowly turning into a bet where attractive valuation is starting to state its investment case.

Research

Mon, 17 Jul 2017 15:44:35 GMT

On Friday, via premium tweet, we decided to add GVP ($2.90) to round out our Buy on Pullback Mock Portfolio 5.0. We noted that there may be some short term volatility with GVP, but also that we are extremely bullish on the company’s long term prospects. One concern we have stems from the Company’s ability to sustain EPS growth without making an acquisition. However, we believe their is an acquisition lined up before year’s end. Shares are considerably off the 52 week high of $3.85. We will look to add to our position on any further pullbacks and expect management will likely be buyers of stock once again after the most recent earnings blackout period ends. The “Buy on Pullback Mock Portfolio 5.0“ now consists of the following 5 stocks:

$GVP
$RCMT
$VISI
$IHC
$ARIS

See the portfolio here.

Research

Wed, 12 Jul 2017 15:57:11 GMT

GVP ($2.75) - We are adding GVP to our Buy On Pullback Mock Portfolio 5.0 watchlist while we conduct more due diligence.

Research

Thu, 08 Jun 2017 15:14:05 GMT

GVP ($3.25) - Executive Vice President Paul Abbott bought over 5,000 shares at open market prices. While it was only slightly over 5,000 shares, insider buying was one of our initial bullish catalysts that attracted us to the GVP story in December 2015 when the stock was trading $2.00. Management has shown continuous alignment of interests with shareholders, buying shares at open market prices throughout the restructuring process which began in 2015. GVP provides simulation, training, and engineering solutions to the power and process industries worldwide.

Research

Tue, 16 May 2017 15:17:33 GMT

GVP ($3.30) announced Q1 2017 results:

Sales of $16.3 million vs $13.0 million in the prior year
Non-GAAP EPS of $0.03 vs $0.03 in the prior year

Quotes from management:

“In Q1 2017, GSE achieved 26% year-over-year revenue growth, driven by particularly strong demand for our Nuclear Industry Training and Consulting staffing services and the advancement of three major nuclear simulation projects in our Performance Improvement Solutions division. Our Nuclear Industry Training and Consulting segment achieved record quarterly orders, revenue, and gross profit, while ending Q1 2017 with its highest backlog ever. Our reinvigorated sales team generated total new orders exceeding $19.8 million this quarter and, as we execute on our near-record backlog, we believe GSE is well positioned for revenue growth in 2017. Armed with $22.8 million in cash at the end of Q1 2017, we are seeking and carefully evaluating select inorganic opportunities that can enhance our growth trajectory, enhance organic growth opportunities, and in-turn create additional shareholder value.”

The market may be disappointed with the flat EPS growth, but we think the most important takeaway from the quarter is that the Company is beginning to generate meaningful, profitable, revenue growth since management’s restructuring efforts began in 2015.

Comments in the related conference call indicate that weak Q1 margins were related to new project ramp up activities that are abating. We may look to add to our position if shares dip below $3.00.

Research

Tue, 14 Mar 2017 15:18:46 GMT

GVP ($3.50) will be presenting at the Roth Conference tomorrow at 11:30 AM EST. GVP is the world leader in real-time high-fidelity simulation systems and training solutions to the power and process industries. Yesterday after hours the company filed an 8-K with an updated investor presentation. We encourage you to look over the full presentation which covers its past restructuring efforts, strong management team, market share penetration, robust industry demand as well as future outlook. However, we would like to highlight 3 slides in particular.

Page 11 - Managment Aligned With Shareholders

Page 12 - Turnaround Progressing According to Plan (now in Growth phase)

Page 22 - Long Term Operating Model Goals (20% CAGR Revenue Goal)

Research

Fri, 10 Mar 2017 16:13:27 GMT

GVP ($3.10) is the world leader in real-time high-fidelity simulation systems and training solutions to the power and process industries. GVP reported Q4 2016 results:

Sales of $13.3 million vs $14.3 million in the prior year
Non-GAAP EPS of $0.10 vs $0.07
Backlog of $73.2 million vs $47.9 in the prior year

Quotes from management:

“GSE closed an outstanding 2016 with a solid fourth quarter, successfully delivering on our commitments to our customers and our shareholders. We finished the year with a significantly higher cash balance of $22.9 million, reflecting GSE’s improved operations and strong cash flow generation. Our strengthened financial position enhances our ability to pursue a number of exciting organic and inorganic growth opportunities that we have identified. Our focus on organic growth is most recently illustrated by our major contract expansion in Q4 2016 with EDF Energy to upgrade the control room station simulation system at their Torness nuclear power plant in the United Kingdom. As a result of this and other major new orders we won in 2016, we finished the year with near-record backlog. 2016 was a transformational year for GSE in many ways. In 2017, we aim to build on our success to grow revenue and further enhance shareholder value.”

We encourage you to read the full conference call transcript here. Management offered what we feel is a bullish outlook for the Company.

Conference Call Highlights

On possible acquisitions:

“Our pipeline remains robust and we are pursuing a number of new business development initiatives to strengthen our backlog further.”

“We are actively and prudently seeking out companies that offer natural adjacencies to our offerings that have a high potential to add value to our customers as part of our platform.”

Regulatory environment:

“Several state legislative initiatives are underway to recognize the critical importance of generating carbon free electricity by providers of nuclear power.”

“A key component of the country's carbon free energy mix, on our last call we discussed New York States clean energy standard, which provides an emissions free subsidy of $0.017 per kilowatt hour that helps ensure the State's existing nuclear power plants remain economically viable in an era of low cost natural gas while helping to level the playing field with wind and solar subsidies.

“Following suite in December of 2016, Illinois passed The Future Energy Jobs Bill, which similarly recognizes the value of carbon free electrical generation from nuclear”

Restructuring efforts paying off:

“GSE’s stock during this timeframe (August 2015), has risen from approximately $1.35 per share to $3.20 per share, up approximately 137% as of yesterday's close, which corresponds to an increase in market cap from approximately $24 million to approximately $60 million. We feel this is just the beginning of a long and exciting growth journey.”

Outlook:

“We are seeing promising results, continue to move forward with discussions with some of the more exciting prospects and hopefully we’ll have news to share in the coming quarters.”

“2017 is a key year for the unveiling of that strategy, and we're working hard, we’re not making promises but we do at least provide transparency that goes beyond what you typically see for a Company, in that we talk about the number.”

Information Arbitrage gives us clue that revenue growth is in the cards for 2017

We calculated 2017 revenue guidance of $60 to $65 million (vs $53.1) based on the commentary below:

“So a lot of hard work went into that, the big boost in backlog was the large order, we announced last March. If you look at our backlog historically, we tend to burn 60 plus percent of that backlog, there's also a cash and carry component of our business. There is also component of our business that isn't large into backlog, the contracts tend to roll quarter to quarter that is our Hyperspring subsidiary. That business runs $17 million to $20 million a year in revenue. So you can do some math and kind of start to at least map, what 2017 maybe. So needless to say, we feel good about it.”

With the restructuring efforts behind them and the company now focused on growing the top line organically and via acquisitions, we feel the future remains bright for GVP. Management has done a great job implementing its turnaround strategy to reduce expenses, increase wallet share with its current customers and expand its product reach. We coded GVP as a GeoBargain on December 23, 2015 when the stock was trading at $2.41. You can see our full coverage on GVP here.

Research

Tue, 14 Feb 2017 17:45:32 GMT

GVP ($3.15) - In a 13G filed this morning, Needham Investment Management disclosed a 5.1% stake in GVP.

Research

Fri, 10 Feb 2017 16:00:34 GMT

GVP ($3.15) - PVAM Perlus Microcap Fund increased its stake in GeoBargain GVP to 1.3 million shares, or 7.17% of total outstanding shares. PVAM had 986,222 or 5.44% in its original 13G filing from October 2016.

Research

Thu, 05 Jan 2017 16:31:41 GMT

GVP ($3.15) announced new $5 million revolving credit facility.

“The new three-year credit facility with Citizens Bank provides GSE the ability to utilize the facility for general working capital with a lower interest rate of LIBOR plus 2.25%, a reduction in letter of credit fees from 1.75% to 1.25%, and lower unused capacity fees and removes the previous credit facility’s restricted cash requirement for future letters of credit.

Chris Sorrells, GSE’s Chief Operating Officer, said, “We are pleased to close on this new enhanced credit facility, which reflects GSE’s strengthening business fundamentals and increasing profitability over the past year under our ongoing transformation. Today our Company is on strong financial footing and as a result, well-positioned to effect our growth strategy. This new facility, coupled with the cash generated by our business, provides us with additional flexibility as we pursue our strategic initiatives and continue the expansion of our business."

The company has stated it has been actively looking at acquisition opportunities. We believe this new credit facility will help GVP pursue its previously discussed plans.

Contract Awards

Tue, 03 Jan 2017 16:08:56 GMT

SYKESVILLE, Md.--(BUSINESS WIRE)--GSE Systems, Inc. (“GSE” or “the Company”) (NYSE MKT: GVP), the world leader in real-time high-fidelity simulation systems and training solutions to the power and process industries, today announced that it has been awarded an expanded contract to implement a significant upgrade to the control room station simulation system for EDF Energy’s Torness nuclear power plant in the United Kingdom. The contract, modified in December 2016, follows an initial award from EDF Energy in August 2016 for the design phase of the project. GSE expects the implementation phase of the project to commence in mid-2017 and be completed within three years. The Company ended 2016 with backlog of approximately $75 million, which is up over 56% from December 31, 2015.

The Torness station started generating electricity in 1988. In February 2016 EDF Energy announced it was extending the operating life of Torness by seven years to 2030. As part of EDF Energy’s commitment to safety and training, and an integral part of its training program accreditation process, EDF Energy made the decision to upgrade the existing simulator that was originally commissioned in 1988. The new simulation platform takes advantage of today’s advanced modeling capabilities and will provide a modern platform to extend the useful life of the simulator and plant.

GSE will maintain the existing simulator instrumentation and control panels while upgrading the computing system, all plant models and the control systems on the simulator. The Company will use its industry-leading JADETM suite of simulation tools to develop modern and sustainable models for the Unit 1 control room simulator and develop a new model for the Unit 2 plant. This will enable EDF Energy to operate the simulators in an integrated fashion for a wide range of training scenarios. In addition to the control room simulator, the Company will provide classroom simulators and a debriefing room simulator to enable students to take advantage of simulation technology across a multitude of learning environments.

Kyle J. Loudermilk, Chief Executive Officer and President of GSE, said, “We have a long standing relationship with EDF Energy and its predecessor, British Energy, having worked on simulators for a number of power stations and training facilities in the fleet. We are delighted and honored to enhance the relationship by supporting EDF Energy’s commitment to nuclear safety and training through the implementation and use of GSE’s state-of-art simulation and training technology. Nuclear power continues to play a critical role in the UK energy mix by providing carbon free power generation. We are thrilled to be chosen by EDF Energy to provide the simulation technology and services needed to support their critical nuclear assets.”

Research

Tue, 13 Dec 2016 16:04:03 GMT

GVP ($3.50) - Shares of GeoBargain GVP closed at a 52 week high of $3.50. After the market close yesterday, two form 4’s were filed by two directors. Mainly the shares acquired were from restricted share unit agreements. However, one director also acquired 5000 shares at open market prices. Its encouraging to see management continuing to buy shares even as the stock hits new highs.

Research

Tue, 15 Nov 2016 18:27:54 GMT

GVP ($2.80) announced Q3 2016 results:

Sales of $14.4 million vs $14.8 million in the prior year
Non-GAAP EPS of $0.04 vs non-GAAP EPS of $0.00 in the prior year (The company reports non-GAAP EPS of $0.02 vs a loss of $0.10) Items we adjusted that the company did not:
- Write-down of capitalized software development costs; Loss on derivative instruments, net; Other income (expense), net; Amortization of definite-lived intangible assets; Capitalized software amortization; Loss on sales of equipment, software, and leasehold improvements

Quotes from management:

“We are pleased to report GSE’s fifth consecutive quarter of positive adjusted EBITDA, which grew significantly on a year over year basis in Q3 2016, driven by our efforts to increase our backlog, reduce costs and streamline operations. This quarter we continued to win important new projects, including two contracts to modernize nuclear simulators in the UK and Japan, which demonstrate the global strength of our innovative simulation solutions. Our backlog remains strong, we have enhanced our leadership team and Board, and we are actively pursuing exciting organic and inorganic growth opportunities. We are focused on generating positive revenue growth in 2017 while continuing to generate strong cash flow and improved profitability. Our increasingly strong balance sheet and operational performance put us in a great position to affect our growth strategy.”

These results are consistent with what we expected as the company prepares for the next leg in its restructuring initiatives. See our research history on GVP here.

Research

Fri, 16 Sep 2016 16:34:06 GMT

GVP ($2.52) - A newly issued investor presentation highlights the company’s revenue growth goal of $80 to $100 million in 3 years, up from its current run rate of $50 million. Management also indicates that EBITDA as a percent of sales will increase from 7% to 10% during this time, which should lead to EPS growing at a higher rate than sales if management does not take on excess leverage. It's worth noting that the Company currently has zero debt and it appears that management is averse to taking on excessive leverage. See full presentation here.

Contract Awards

Wed, 07 Sep 2016 04:00:00 GMT

GVP ($2.66) announced two contract awards that add over $6 million to the Company’s backlog. The two projects are with customers from the UK and Japan. Management stated, “both projects include the options that could grow GVP’s backlog significantly further.”

Research

Fri, 19 Aug 2016 12:06:23 GMT

GVP ($2.52) - In a form 4 filing after hours yesterday, Chris Sorrells, the recently hired COO was awarded a compensation package. Similar to that offered to Kyle Loudermilk, GVP’s CEO who was brought on a little over a year ago, the package is designed to vest as the Company creates shareholder value with the restricted share units (vesting at $3.25, $4.25 and $6.00).

Management's alignment with shareholders has been one of the bullish catalysts behind the GVP story; it adds confidence to the turnaround/growth play it is starting to represent.

Research

Wed, 17 Aug 2016 15:05:01 GMT

Added to Our GVP Long Position

Yesterday, via premium tweet we stated on the heels of strong Q2 results we had added to our long position in $GVP ($2.30). See a full summary of Q2 2016 results here.

Research

Tue, 16 Aug 2016 17:44:39 GMT

GVP ($2.27) reported Q2 2016results:

Sales of $12.4 million vs $13.7 million in the prior year
Non-GAAP EPS of $0.05 vs a non-GAAP net loss of $0.05 in the prior year
Backlog of $71.1 million vs $47.9 million in the prior year

Quotes from management:

“We are pleased to report GSE’s fourth consecutive quarter of positive adjusted EBITDA. In Q2 2016, GSE recorded significantly higher gross margins and lower operating expenses, reflecting our continuing efforts to reduce costs and focus on project profitability. We have reduced annualized operating expenses by more than $4 million since I joined GSE approximately one year ago. We also have continued to invest in resources for growth, hiring key leadership positions in the areas of technology, finance and operations…

With the benefit of an enhanced leadership team and streamlined operations, we are now firmly focused on implementing our strategy to revitalize GSE’s growth.”

The conference call indicated that the Company expects a significant ramp up in revenues in Q3 and Q4 of 2016. The Company also stated it continues to look at potential acquisition targets.

Research

Fri, 17 Jun 2016 14:35:47 GMT

Added To Our Long Position In GeoBargain GVP

Yesterday via premium tweet, we stated that on the heels of steady insider buying we have added to our position. We also stated we would look to add more if weak hands take the stock below $2.00 a share.

In yesterday’s morning email we highlighted the most recent insider purchase by CEO Kyle Loudermilk. Since late May, the aggregate total of insider buys is over 110,000 shares.

Research

Thu, 16 Jun 2016 14:48:41 GMT

GVP ($2.12) - We have been highlighting recent insider purchases at GVP over the several weeks. Yesterday, CEO Kyle Loudermilk filed a Form 4 showing he has purchased an additional 25,000 shares at open market prices. Since late May, the aggregate total of insider buys is over 110,000 shares.

Research

Thu, 02 Jun 2016 04:00:00 GMT

GVP ($2.21) - The insider buying theme continues. On Tuesday we stated:

“Insiders continue to buy shares in the open market. A number of insiders including CEO Kyle Loudermil,k COO Chris Sorrells & CTO Bahram Meyssami filed open market purchases the week of May 23rd. An aggregate of 75,892 shares were acquired by company insiders at the prices between $2.10 and $2.17. We will follow their lead, especially if shares drop under $2.00.”

Yesterday after the close, Bahram Meyssami filed another Form 4 adding another 8,000 shares.

Research

Tue, 31 May 2016 14:52:46 GMT

Note from Mock Portfolio 2.0

GVP ($2.19) is evolving from a world leader in real-time, high-fidelity simulation, training and engineering solutions into a premier performance improvement company. The company currently mainly serves energy service providers (power plants) but is seeking avenues to broaden its target market customer base.

We began tracking GVP in early December 2015. The stock quickly rose by nearly 20% during our due diligence process. On December 17, 2015 we published our reasons for tracking note when the stock was trading at $2.36. On March 18, 2016 the stock hit its 52 week high of $3.08 on the heels of strong Q4 2015 earnings and an announcement that it had increased its backlog by 60%.

Shares have recently retreated to current levels of around $2.15 after the company reported its Q1 2016 EPS results $0.03 that were sequentially down from the strong Q4 2015 EPS performance of $0.05. In our earnings preview email on May 9, 2016 we stated:

“With this recent backlog announcement, a strong management team and favorable industry tailwinds, we feel GVP’s mid to long term growth outlook is very positive, despite how some investors may react to possible near-term quarterly financial results. We will likely be buyers on dips due to overreactions to earnings reports not well received by investors. We also think activist investors already in the stock will back up the truck under $2.00.”

As we stated before, insider buying (who happen to be activists) was one of our original reasons we started buying GVP. It seems insiders may once again be looking to acquire shares in the open market as shares pullback.

Insiders continue to buy shares in the open market. A number of insiders including CEO Kyle Loudermil,k COO Chris Sorrells & CTO Bahram Meyssami filed open market purchases the week of May 23rd. An aggregate of 75,892 shares were acquired by company insiders at the prices between $2.10 and $2.17. We will follow their lead, especially if shares drop under $2.00.

Research

Fri, 27 May 2016 16:03:38 GMT

GVP ($2.16) Insiders continue to buy shares in the open market. In addition to the CTO purchasing shares in the open market days ago, two other insiders including the company’s CEO Kyle Loudermilk filed open market purchases after the bell yesterday. Between all of the purchases made, an aggregate of 75,892 shares were acquired by company insiders at the prices between $2.10 and $2.17.

We are constructing our second “Buy on Pullback” portfolio for our members to review. Recall, our first “Buy on Pullback” portfolio during the dip in January of this year returned 36% at its peak in 3 months.

Research

Thu, 26 May 2016 15:29:34 GMT

GVP ($2.14) - Insider buying was one of our original reasons from our December research note. It seems insiders may once again be looking to acquire shares in the open market and the stock's recent pullback. A form 4 filed yesterday after the close showed that Chris Sorrells, the Company’s COO added 14,300 shares at prices between $2.10 and $2.17. Chris is the interim COO, joining the Company from NGP Energy Technology Partners (GVP’s largest institutional investor), where he served as both a Managing Director and Operating Partner.

Research

Tue, 17 May 2016 17:58:59 GMT

GVP ($2.38) - Recall in our May 9, 2016 earnings preview we stated:

“With this recent backlog announcement, a strong management team and favorable industry tailwinds, we feel GVP’s mid to long term growth outlook is very positive, despite how some investors may react to possible near-term quarterly financial results. We will likely be buyers on dips due to overreactions to earnings reports not well received by investors. We also think activist investors already in the stock will back up the truck under $2.00.”

We may get our chance today since the company reported Q1 2016 results where EPS and EBITDA were sequentially below what some investors may have assumed was a breakout quarter.

GVP reported Q1 2016 results:

Sales of $13.0 million vs $14.0 million in the prior year
Non-GAAP EPS of $0.02 vs loss of $0.02 In the prior year
Backlog at March 31, 2016 increased 56% to $74.5 million from $47.9 million at December 31, 2015.

Quotes from management:

“We are optimistic that our operating performance will continue to improve over 2015 results as growth initiatives take hold and backlog converts to sales. While quarter-to-quarter variability can be expected, we expect to deliver positive adjusted EBITDA for full year 2016. We are in the process of finalizing our strategic growth plan and I remain enthusiastic about the opportunities not only in our existing businesses, but also in adjacent markets. Our strong balance sheet provides us with financial flexibility to pursue growth initiatives that we believe will drive shareholder value.”

We encourage you to read the conference call transcript where management discusses its acquisition strategy and plans. It is our belief that the Company will likely announce an accretive acquisition sooner rather than later.

Research

Mon, 09 May 2016 14:55:19 GMT

GeoBargain GVP ($2.47) reported very strong EPS improvements in its Q4 2015. The Company reported EPS of $0.05 vs a loss of $0.08 in the prior year period. While we are bullish on the long term prospects of GVP, a sequentially down EPS quarter is likely in the cards for Q1 2016. As we stated in our March 18, 2016 email, GVP announced a 60% increase in its backlog. Regarding the contract, we do not know exactly when revenue will be recognized over the next two years. If we divide it evenly over the next 8 quarters, it alone would generate $3.3 million per quarter - or nearly 24% of Q4 2015’s revenue run rate. With this recent backlog announcement, a strong management team and favorable industry tailwinds, we feel GVP’s mid to long term growth outlook is very positive, despite how some investors may react to possible near-term quarterly financial results. We will likely be buyers on dips due to overreactions to earnings reports not well received by investors. We also think activist investors already in the stock will back up the truck under $2.00. GVP reports its Q1 2016 results on May 16.

Research

Fri, 18 Mar 2016 17:38:08 GMT

GVP ($2.69) increases backlog by 60% with the sale of 3 full scale nuclear simulator systems.

“GSE will deliver a second reference plant simulator to each of three nuclear plant sites over the next 18 to 24 months, dramatically enhancing the simulation capabilities of the customer’s fleet. Work will commence immediately...

..This contract increases our current backlog by approximately 60% to around $75 million. While much of the contract is hardware oriented, our deep technical know-how and unique technology platform enable us to provide the simulators in a manner that no one can match within our industry.”

We do not know exactly how this contract will fill out in terms of when revenue will be recognized over the next two years. If we divide it evenly over the next 8 quarters, it alone would generate $3.3 million per quarter - or nearly 24% of Q4 2015’s revenue run rate.

This new contract places GVP on track to meet or exceed our high end projection from our financial modeling we issued on December 17, 2015. We estimated at 30% top line growth the Company would generate $0.25 EPS. See our initial research note and financial modeling here.

As many long time members know, we stress the importance of a strong management team as a key catalyst we look for when we are finalizing a decision for an investment. We believe GVP’s management team is one of the best we have come across.

Comments & Business Outlook

Wed, 16 Mar 2016 15:13:36 GMT

GVP ($2.36) reported fourth quarter 2015results:

Q4 sales of $14.2 million vs $12.7 million in Q4 2014
EPS of $0.05 vs a loss of $0.08 in Q4 2014

Quotes from management:

“We concluded 2015 on a very strong note, recording GSE’s first quarter of positive operating income and net earnings since the third quarter of 2012. Our Q4 2015 financial results directly reflect our team’s efforts to reduce costs, improve business processes and enhance productivity levels across the entire company. We have made significant progress executing our turnaround plan, yet still have more to do to create a best in class technology enabled software and service company focused on primarily the global nuclear power industry.”

Mr. Loudermilk continued, “Now that we have an appropriate, streamlined cost structure in place, and have staffed most of our critical senior leadership positions, our focus turns to the next phase of our strategic plan: reinvigorating GSE’s growth. As we move forward, we are optimistic that we will continue to add critical hires where needed to affect our growth, including growing our backlog. I remain optimistic about the business opportunities in front of us, not only in our existing businesses, but also in adjacent markets. In 2016 we expect to provide additional details on new elements of our growth strategy, including initiatives that support a more diversified, recurring revenue base. I am confident that as we continue to successfully execute our strategy, we will increase cash flow, improve GSE’s strong balance sheet, grow our backlog, and enhance shareholder value.”

Notable Share Transactions

Tue, 26 Jan 2016 16:31:19 GMT

GVP ($2.13) - A 13D/A filed yesterday after hours shows Angeleno Investors increased its stake in GVP to 6.5% from 5.5% disclosed in original13D on December 17, 2015. See our research note from original 13D filinghere.

Research

Wed, 23 Dec 2015 15:42:44 GMT

Coding $GVP ($2.41) as a GeoBargain

We are coding GSE Systems (GVP) a GeoBargain. In our previous note to members, we stated that we were going to be reaching out to management, and we are analyzing additional takeaways on our due diligence after speaking to the company. We are gaining confidence that activist investors involved have enough gravitas to help facilitate a turnaround in the company’s share price. In addition, two previous investments by new COO Chris Sorrells have performed well in the past (PWER & ULBI). We have started to build a position at GVP’s current prices

Look for a more detailed comprehensive research note in coming days.

Research

Fri, 18 Dec 2015 16:09:35 GMT

Activist Investor Takes 5.5% Stake In $GVP

Yesterday, we released our reasons for tracking for GVP, centered around insider buying, activist involvement, restructuring efforts by new management team, along with strong topline growth. After the markets closed, another 13D was filed by Angeleno Investors disclosing a 5.5% stake. An excerpt from the 13D states:

“Representatives of the Reporting Persons have met with the management of GSE and expect to have a dialogue with management from time to time regarding, among other things, GSE’s operations, strategic direction, capital structure and corporate governance. In addition, the Reporting Persons may communicate with other persons regarding GSE, including, without limitation, the board of directors of GSE, other shareholders of GSE and potential strategic or financing partners.”

We began tracking GVP a few weeks ago, but shares have increased nearly 20% during our due diligence. If our financial modeling is accurate (shown below) we concluded that at current levels, an investment in GVP is only warranted if:

An aggressive forward P/E is applied. (We normally apply a forward P/E of 15 to 20)
More aggressive revenue projections are achievable.
Margins are significantly improved.

Research

Thu, 17 Dec 2015 16:03:02 GMT

Beginning To Track $GVP ($2.36)

An aggressive forward P/E is applied. (We normally apply a forward P/E of 15 to 20)
More aggressive revenue projections are achievable.
Margins are significantly improved.

We plan to interview management to determine if any of these outcomes are likely.

Here is our initial reasons for optimism:

Insider buying, activist involvement, restructuring efforts by new management team along with strong topline growth has piqued our interest in GVP. GSE Systems Inc is a global energy industry performance improvement company. GVP is a is a world leader in real-time high-fidelity simulation, providing a wide range of simulation, training and engineering solutions to the power, energy and process industries. GVP operates in two segments: Performance Improvement Solutions and Staff Augmentation. Based on the introduction in the company’s 10-K:

1. Performance Improvement Solutions

This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve.

2. Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry. These employees work at our clients' facilities under client direction.

Reasons for tracking:

Insides are buying the company’s stock in the open market. Since November this year, insiders have purchased 180 thousand shares at an average price of $1.81.
There is an activist investor involved in this company. On December 30, 2014, activist investor Spear Point Capital Management filed a 13D together with Richard C. McKenzie, Jr., and as a “Participation Group”, they owned 1.02 million shares, representing 5.69% of the total outstanding shares of GVP. In May 2015, the Group increased their position to 1.24 million shares (6.93% of total outstanding shares). On their most recent November 24, 2015 13D/A filing, the two parties decided to terminate the Participation Group Agreement because”

“Due to recent changes in the management and composition of the Board of Directors of the Issuer, and due to restructuring efforts begun by the Issuer, Spear Point is supportive of the current direction of the Issuer.”

And Spear Point Capital owns 0.75 million shares (4.19%); Richard C. McKenzie, Jr. owns 0.22 million shares (1.22%), respectively.

On July 30. 2015, GVP announced that it appointed Mr. Kyle J. Loudermilk as its CEO and President. According to the introduction in the press release:

“Mr. Loudermilk joins GSE from MicroStrategy, Inc., a publicly-traded enterprise-analytics, mobile and security software company. He served as MicroStrategy’s Vice President, Technology / Development Operations since 2013, and was Vice President Corporate Development from 2005 to 2009. From 2009 to 2012, he was Vice President Product Management at Datatel, Inc., a leading provider of software and services for higher-education institutions and technical schools. Datatel was a portfolio company of Hellman & Friedman LLC prior to Datatel’s strategic combination with SunGard Higher Education, resulting in a successful transaction for investors. Mr. Loudermilk also held various senior management positions at Aspen Technology, Inc., a publicly traded, leading provider of enterprise-level software and services that enable energy and chemical companies to optimize their manufacturing operations performance. His positions at Aspen included Vice President Design and Simulation Business Unit, and Vice President Research and Development. Mr. Loudermilk began his career as a Process and Project Engineer for Mobil Oil Corporation. He earned BS and MS degrees in Chemical Engineering from Columbia University, and later attended Harvard University’s General Management program.”

Annualized net income based on Q3 2015 is $592 thousand and since the company is planning to have $5 million cash savings from its restructuring moving forward, then the projected annualized fully taxed EPS would equate to $0.20.
The company basically has no debt, along with $0.91 per share in cash.
There are certain steps regarding the restructuring plan announced in September this year. The first step is cost cutting and operating efficiency improving, and the second step is illustrated by the current CEO in the commentary of the company’s Q3 2015 financial results:

“Under the next phase of our strategic plan, we expect to take actions to reinvigorate the growth of GSE’s businesses, including enhancing our senior leadership team. We also expect to add new elements to our growth platform over time, including initiatives that support a more diversified, recurring revenue base. “

Caveats:

Backlog is flat but still strong.
Sequential growth has been limited over the last three quarters, and the company is facing tough comparables in the coming quarters.

Company has a history of not being able to break out of a quarterly revenue range of between $13 or $14 million, often retracing to lower levels of quarterly revenues.
The company also services the energy sector. However, we need to perform more due diligence on the revenue contribution from the energy sector.

Reasons For Tracking

Thu, 17 Dec 2015 05:00:00 GMT

Beginning To Track $GVP ($2.36)

An aggressive forward P/E is applied. (We normally apply a forward P/E of 15 to 20)
More aggressive revenue projections are achievable.
Margins are significantly improved.

We plan to interview management to determine if any of these outcomes are likely.

Here is our initial reasons for optimism:

1. Performance Improvement Solutions

This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve.

2. Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry. These employees work at our clients' facilities under client direction.

Reasons for tracking:

Insides are buying the company’s stock in the open market. Since November this year, insiders have purchased 180 thousand shares at an average price of $1.81.
There is an activist investor involved in this company. On December 30, 2014, activist investor Spear Point Capital Management filed a 13D together with Richard C. McKenzie, Jr., and as a “Participation Group”, they owned 1.02 million shares, representing 5.69% of the total outstanding shares of GVP. In May 2015, the Group increased their position to 1.24 million shares (6.93% of total outstanding shares). On their most recent November 24, 2015 13D/A filing, the two parties decided to terminate the Participation Group Agreement because”

“Due to recent changes in the management and composition of the Board of Directors of the Issuer, and due to restructuring efforts begun by the Issuer, Spear Point is supportive of the current direction of the Issuer.”

And Spear Point Capital owns 0.75 million shares (4.19%); Richard C. McKenzie, Jr. owns 0.22 million shares (1.22%), respectively.

On July 30. 2015, GVP announced that it appointed Mr. Kyle J. Loudermilk as its CEO and President. According to the introduction in the press release:

“Mr. Loudermilk joins GSE from MicroStrategy, Inc., a publicly-traded enterprise-analytics, mobile and security software company. He served as MicroStrategy’s Vice President, Technology / Development Operations since 2013, and was Vice President Corporate Development from 2005 to 2009. From 2009 to 2012, he was Vice President Product Management at Datatel, Inc., a leading provider of software and services for higher-education institutions and technical schools. Datatel was a portfolio company of Hellman & Friedman LLC prior to Datatel’s strategic combination with SunGard Higher Education, resulting in a successful transaction for investors. Mr. Loudermilk also held various senior management positions at Aspen Technology, Inc., a publicly traded, leading provider of enterprise-level software and services that enable energy and chemical companies to optimize their manufacturing operations performance. His positions at Aspen included Vice President Design and Simulation Business Unit, and Vice President Research and Development. Mr. Loudermilk began his career as a Process and Project Engineer for Mobil Oil Corporation. He earned BS and MS degrees in Chemical Engineering from Columbia University, and later attended Harvard University’s General Management program.”

Annualized net income based on Q3 2015 is $592 thousand and since the company is planning to have $5 million cash savings from its restructuring moving forward, then the projected annualized fully taxed EPS would equate to $0.20.
The company basically has no debt, along with $0.91 per share in cash.
There are certain steps regarding the restructuring plan announced in September this year. The first step is cost cutting and operating efficiency improving, and the second step is illustrated by the current CEO in the commentary of the company’s Q3 2015 financial results:

“Under the next phase of our strategic plan, we expect to take actions to reinvigorate the growth of GSE’s businesses, including enhancing our senior leadership team. We also expect to add new elements to our growth platform over time, including initiatives that support a more diversified, recurring revenue base. “

Caveats:

Backlog is flat but still strong.
Sequential growth has been limited over the last three quarters, and the company is facing tough comparables in the coming quarters.

Company has a history of not being able to break out of a quarterly revenue range of between $13 or $14 million, often retracing to lower levels of quarterly revenues.
The company also services the energy sector. However, we need to perform more due diligence on the revenue contribution from the energy sector.