GSE Systems Inc (GVP) 2004 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the GSE Systems Incorporated first quarter 2004 results conference call. At this time all participants are in a listen-only mode.

If you have any questions at any time during or after the presentation, please e-mail them to gsecall@gses.com. Once again, that's gsecall@gses.com. Please include your name and affiliation on your e-mail. The questions will be addressed at the conclusion of the presentation.

And now I'd like to turn the program over to Andrea Kantor. Please go ahead, ma'am.

Good afternoon, I'm Andrea Kantor, general counsel of GSE Systems. I would like to welcome you to the GSE first quarter 2004 conference call. As the moderator said, a question-and-answer session will be held at the conclusion of John Moran's presentation. And now I would like to read a short statement.

The forward-looking statements that we will be discussing during this conference call reflect management's current views with respect to future events and financial performance. We will be using words such as expect, intends, and anticipates to indicate forward-looking statements.

Our actual future results may differ materially due to a number of factors including but not limited to delays in introduction of products or enhancements, size and timing of individual orders, rapid technological changes, market acceptance of new products and competition. These and other factors are more fully discussed in our annual report on Form 10-K for the year ended December 31st, 2003, and periodic reports and registration statements that we file with the Securities and Exchange Commission.

If anyone or more of these expectations and assumptions prove incorrect, our actual results will likely differ materially from those contemplated by our forward-looking statements. Even if all of the foregoing assumptions and expectations prove correct our actual results may still differ from those expressed in the forward-looking statements as a result of several factors that we may not anticipate or that may be beyond our control.

While we cannot assess the future impact that any of these differences could have on our business, financial condition, results of operations, and cash flows, or the market price of the shares of our common stock, the differences could be significant. We do not undertake to update any forward-looking statements made by us.

Once again, the e-mail address for submission of questions is gsecall@gses.com. We will endeavor to respond to as many questions as time permits after John Moran's presentation. Please remember to indicate your name and affiliation with your questions.

Now I would like to introduce John Moran, the company's Chief Executive Officer.

Thank you, Andrea. Good afternoon everyone and thank you all for joining GSE's first quarter 2004 results conference call. With me this afternoon are Jerry Jen, GSE's President and Chief Operating Officer, and Jeff Hough, our Chief Financial Officer.

I'd like to start with a little history to provide some context for my remarks. As we announced in September of 2003 GSE sold its automation business, Process Automation business, to focus on what we consider to be the company's core strength, which is real-time high fidelity simulation. We use the proceeds from the sale to eliminate the company's long-term bank debt and to provide working capital.

At the same time, GSE bought out the shares -- G T strategies, I'm sorry, bought out the shares of GSE that were previously owned by man-tech and became a 58% majority shareholder of GSE Systems. Over the course of the fourth quarter of 2003, the company was very busy. We streamlined our operational organization, we outsourced many of the corporate G&A physicians to General Physics, which, by the way, is a wholly owned subsidiary of GP Strategies. We created a dedicated business development function which we then staffed with our most experienced executives.

As we enter 2004 our primary goals included returning the company to profitability, extending our simulation capability into the Fossil process and government markets, developing common processes and systems that could be used across our entire enterprise, and finally to obtain a new credit facility for the company. I'm pleased to report that we're making good progress on all of these goals.

First, as announced in our press release of April 14th we successfully negotiated a $1.5 million revolving credit facility with Wachovia Bank. This not only provides working capital to fund our anticipated growth but it indicates strong support for GSE from the financial community.

Secondly, for the first quarter of 2004, GSE had revenues of over $7.5 million which compares very favorably to revenues of just over $4.9 million for the first quarter of 2003. Net income for the first quarter of 2004 was $64,000 compared to a loss of $250,000 for the same period last year but more importantly the company exceeded its revenue and net income goals for the first time in a long time. From a cash perspective, we had zero bank borrowings in the first quarter and we remain at zero today. Our backlog, although slightly down from last year, remains at a healthy $26.8 million.

Lastly, our pipeline of opportunities is growing rapidly and now stands in excess of $111 million. But just as importantly, its makeup is more diverse than at any time in the company's recent history. This provides at least a preliminary indication that our business development efforts are taking hold.

In summary, over the course of the fourth quarter of 2003, and the first quarter of 2004, we've refocused the company on its core strength, which is simulation. We've reduced our costs and at the same time we've taken the first significant steps toward extending our simulation capability into the Fossil process and government market sectors. All taken into account, we're making good progress on the goals that we set for ourselves for the year.

This concludes my remarks on the company's first quarter results. And we'll now entertain any questions that you may have. So please stand by for the first question.

Okay. Currently we have three questions. From Bruce Sipper at New Bridge Securities.

Bruce asks, what makes GSE Systems technology stick out against larger and more financially equipped companies? I think, Bruce, I would answer that question by saying, one, our company has been in existence since 1929, at least the roots of it. We've been in simulation longer than any other simulation company in the business, and we believe that our technology is superior, one, because of that. Two, because of the investment that we've made. Specifically, we think that we stand above our competition in our ability to model processes, and this is thermal hydraulic modeling and first principles modeling.

Secondly our simulations operate on all three operating platforms, UNIX, Linux, and Windows NT. Third, we believe we're targeting our R&D expenditures in the right places. We have an R&D project underway which will basically what we call embed the simulation has we do into a classroom-based instruction which we're getting some strong feedback from the marketplace is a great need, and that is taking our full scope simulatorsand basically segmenting them into pieces that then could we parsed out, put on a laptop computer and delivered in the classroom.

Okay, the second question, again from Bruce at New Bridge Securities, can you give us any guidance on revenue and earnings for the second quarter?

Bruce, our policy relative to future projections is that we don't share those with the public. What I can share with you is that one of our goals for the year is to return the company to profitability and thus far we're on target to meet that goal.

Last question, again from Bruce, New Bridge Securities, will the company consider hiring a public relations firm to let investors learn about your company?

The answer to that is, it's a possibility, and we will certainly consider it. My own personal view of investors learning about the company is to create a strong record of earnings and a consistent record of earnings. And I think if we can achieve a strong and consistent record of earnings and revenue growth I think investors will become a little bit more interested in the company, and I think once we've got that track record I think at that point it would make more sense to engage a public relations firm.

Are there any other questions? Right now those are the only three that we have coming in. We'll wait a few more moments.

We do have a -- yeah, it's just -- this is Bruce Sipper at New Bridge Securities in Miami, Florida.

Okay. Well, if there are no more questions, I'd like to thank the participants, and I look forward to discussing our next quarter with you very shortly. Thank you very much.

Thank you, and this does conclude today's program. You may disconnect at any time, and have a great day.