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GSE SYSTEMS INC (GVP)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $11.3M (+3.8% YoY; +10.5% QoQ) with gross margin of 28.5% (up from 22.0% YoY and 25.5% QoQ), driving improved EPS to $(0.63) vs $(1.29) YoY; backlog ended at $37.7M .
  • Engineering segment revenue grew 26% YoY to $8.7M with engineering gross margin at 33.3%, underpinning consolidated margin expansion; Workforce Solutions revenue declined to $2.6M amid industry selectivity .
  • Orders were $14.6M (vs $19.1M YoY; up from $7.3M in Q4), reflecting timing dynamics and cautious customer spending; engineering orders were $12.1M while workforce orders were $2.5M .
  • Subsequent events: new CEO Ravi Khanna and COO Damian DeLongchamp appointed; company announced an upcoming SMR program engagement and a $0.8M engineering order for a 24‑month fuel cycle extension—potential catalysts for narrative momentum .
  • Wall Street consensus via S&P Global was unavailable for GVP this quarter, so beats/misses vs estimates cannot be assessed.

What Went Well and What Went Wrong

What Went Well

  • Engineering drove the quarter: revenue +26% YoY to $8.7M; engineering gross margin reached 33.3%, lifting consolidated gross margin to 28.5% .
  • Utilization improved materially: billable engineering utilization increased to 94.4% from 83.9% a year ago, accelerating backlog-to-revenue conversion .
  • Management transition and SMR positioning: new CEO highlighted momentum in nuclear, data center power demand, and SMR simulation technology; “GSE is well‑positioned to add value to energy infrastructure and grid modernization programs” .

What Went Wrong

  • Orders down YoY and Workforce softness: total orders decreased 24% YoY to $14.6M; Workforce Solutions orders fell to $2.5M (vs $4.4M YoY) and revenue to $2.6M (vs $3.9M YoY) due to fewer contracts and early terminations .
  • Operating expenses were elevated sequentially: OpEx rose to $4.7M from $4.1M in Q4 due to $0.5M one‑time advisory fees, pressuring operating loss to $(1.5)M .
  • The business remains exposed to timing/lumpiness: management cited cautious spending and deal slippage into Q1; while orders improved sequentially, lumpiness persists, especially in Workforce Solutions .

Financial Results

Q1 Year-over-Year Comparison

MetricQ1 2023Q1 2024
Revenue ($USD Millions)$10.873 $11.283
Gross Profit ($USD Millions)$2.395 $3.216
Gross Margin %22.0% 28.5%
Operating Loss ($USD Millions)$(2.783) $(1.530)
Net Loss ($USD Millions)$(2.951) $(1.992)
Diluted EPS ($USD)$(1.29) $(0.63)
Adjusted Net Loss ($USD Millions)$(2.574) $(1.106)
Adjusted EPS ($USD)$(1.12) $(0.35)
EBITDA ($USD Millions)$(2.410) $(1.234)
Adjusted EBITDA ($USD Millions)$(2.194) $(0.447)

Sequential Trend (Oldest → Newest)

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$11.566 $10.215 $11.283
Gross Margin %32.1% 25.5% 28.5%
Diluted EPS ($USD)$(0.82) $(0.82) $(0.63)
Adjusted EPS ($USD)$0.07 $(0.28) $(0.35)
Backlog ($USD Millions)$37.6 $34.5 $37.7

Segment Breakdown (Oldest → Newest)

Segment MetricQ1 2023Q3 2023Q4 2023Q1 2024
Engineering Revenue ($USD Millions)$6.9 $8.7 $7.1 $8.7
Workforce Solutions Revenue ($USD Millions)$3.9 $2.9 $3.1 $2.6

Engineering Gross Margin % (Oldest → Newest)

MetricQ1 2023Q4 2023Q1 2024
Engineering Gross Margin %27.1% 29.5% 33.3%

KPIs (Orders, Backlog, Utilization, Cash) (Oldest → Newest)

KPIQ3 2023Q4 2023Q1 2024
Total Orders ($USD Millions)$14.7 $7.3 $14.6
Engineering Orders ($USD Millions)$13.0 $5.0 $12.1
Workforce Orders ($USD Millions)$1.7 $2.3 $2.5
Backlog ($USD Millions)$37.6 $34.5 $37.7
Engineering Backlog ($USD Millions)$31.4 $29.0 $32.3
Workforce Backlog ($USD Millions)$6.2 $5.5 $5.4
Engineering Utilization %——94.4%
Cash ($USD Millions)$2.0 $2.250 $1.360
Restricted Cash ($USD Millions)$1.5 $1.5 $1.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Expenses per quarterFY 2024$3.5M–$4.0M per quarter $3.5M–$4.0M per quarter (target) Maintained
Gross MarginFY 2024Not quantified (positive outlook) Expect continued strong margins; engineering-led Maintained qualitative outlook
Convertible Notes Repayment2024–2025First tranche near completion; second tranche $1.8M to be repaid by May 2025 $6.2M repaid; ~$0.1M remaining on first tranche; second tranche repayments begin June 2024, targeting full repayment by May 2025 Progressed (outstanding reduced)
Revenue/Margins (numeric)FY 2024None provided None provided Maintained (no numeric guidance)
Tax rate, dividendsFY 2024None provided None provided Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
AI/data centers driving power demand; nuclear as stable baseloadEmphasis on AI/Bitcoin/data center demand; nuclear baseload benefits and green bond financing (Constellation) Detailed data center power needs (60–90 MW per site); Dominion/McKinsey demand outlook; nuclear as only scalable 24/7 carbon‑free source Intensifying narrative
SMR initiativesLimited prior detail; focus on existing fleet upgrades Announced forthcoming SMR simulator technology engagement in UK; digital twin simulation for design advancement Emerging growth vector
Digital control upgrades and plant life extensionMajor digital control room modernization contracts and upgrades highlighted Continued focus on digital upgrades; cross‑division integration to deliver procedures, analysis, training Ongoing; execution focus
Workforce Solutions environmentOngoing industry selectivity; early terminations; fragmentation and competitive pressures Continued headwinds; orders lower YoY; strategic focus on targeted nuclear staffing Persistent pressure
Engineering utilization/marginsRecord gross margin in Q3 (32.1%); utilization initiatives in 2H’23 Utilization 94.4%; engineering GM 33.3%; consolidated GM 28.5% Improving
Cash/debt managementCash ~$2.3M; repayment progress on Lind facility; maintain cost controls Cash $1.4M (ex‑restricted $1.5M); first tranche nearly repaid; second tranche schedule set; OpEx targeted at $3.5M–$4.0M Progressing; disciplined

Management Commentary

  • “I am pleased to announce the company delivered both strong revenue and improved gross margins in the first quarter of 2024… GSE is well‑positioned to add value to energy infrastructure and grid modernization programs” — Ravi Khanna, President & CEO .
  • “Our Engineering segment… delivered gross margin of 33.3% driving our consolidated gross margin of 28.5%… We expect to continue our strong gross margin as we look to increase revenue in coming quarters.” — Emmett Pepe, CFO .
  • On industry demand: “Technologies… cloud computing, artificial intelligence… require a wealth of electricity… nuclear power becomes the only scalable and stable carbon‑free power source option that can reliably be available 24/7.” — Ravi Khanna .
  • On SMRs: “GSE will supply… SMR program with… high fidelity simulators… to enable future virtual commissioning… That has been in the works for over a year.” — Ravi Khanna .

Q&A Highlights

  • Integration across divisions to deliver digital upgrades: management emphasized unified execution across procedures, engineering analysis, design and training to win plant digital projects .
  • SMR win details: forthcoming press release; focus on high‑fidelity modeling and digital twin simulations to advance plant design and reuse throughout the lifecycle .
  • Tone: confident and optimistic post‑transition; continued discipline on OpEx and cost controls (target $3.5M–$4.0M/quarter reiterated in prepared remarks) .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable for GVP this quarter; therefore, we cannot assess beats/misses vs estimates.
  • In absence of consensus, notable actuals include revenue $11.283M, EBITDA $(1.234)M, diluted EPS $(0.63), with consolidated gross margin at 28.5% and adjusted metrics improved YoY .
MetricQ1 2024 ActualWall Street Consensus (S&P Global)Surprise
Revenue ($USD Millions)$11.283 N/AN/A
Diluted EPS ($USD)$(0.63) N/AN/A
EBITDA ($USD Millions)$(1.234) N/AN/A

Key Takeaways for Investors

  • Margin story improving: consolidated GM 28.5% (+650 bps YoY) on engineering mix and utilization (94.4%), supporting better operating leverage as orders convert .
  • Engineering is the growth engine: revenue +26% YoY to $8.7M; engineering backlog $32.3M suggests continued execution runway .
  • Orders lumpy but sequentially stronger: $14.6M in Q1 vs $7.3M in Q4; watch conversions and cadence into H2 as nuclear upgrade cycles continue .
  • Workforce Solutions remains a drag: revenue and orders down YoY amid industry selectivity; management focusing on targeted staffing niches .
  • Balance sheet discipline: cash $1.4M (plus $1.5M restricted); first tranche of convert nearly repaid; second tranche repayment scheduled through May 2025 .
  • Strategic catalysts: leadership transition, SMR simulator engagement and continued digital upgrade wins can support narrative and backlog expansion .
  • Near-term trading: monitor backlog build vs Workforce headwinds and OpEx trajectory ($3.5M–$4.0M/quarter); medium-term thesis hinges on engineering utilization, SMR/digital projects, and order conversion to sustain margin gains .
Non-GAAP notes: Adjusted EBITDA excludes stock-based compensation, advisory fees and change in fair value of derivative instruments; Adjusted net loss excludes stock-based compensation, advisory fees, change in fair value of derivatives and acquisition-related amortization **[944480_0001140361-24-026236_ef20029127_ex99-1.htm:4]** **[944480_0001140361-24-026236_ef20029127_ex99-1.htm:5]**.