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Edited Transcript of GVP earnings conference call or presentation 14-Nov-18 9:30pm GMT

Q3 2018 GSE Systems Inc Earnings Call

SYKESVILLE Jan 12, 2019 (Thomson StreetEvents) -- Edited Transcript of GSE Systems Inc earnings conference call or presentation Wednesday, November 14, 2018 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher D. Sorrells

GSE Systems, Inc. - COO & Director

* Emmett Anthony Pepe

GSE Systems, Inc. - CFO & Treasurer

* Kalle J. Ahl

The Equity Group, Inc. - Senior Associate

* Kyle J. Loudermilk

GSE Systems, Inc. - President, CEO & Director

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Conference Call Participants

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* Tate H. Sullivan

Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst

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Presentation

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Operator [1]

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Greetings. Welcome to the GSE Systems Inc. Third Quarter 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kalle Ahl of The Equity Group. Thank you, you may begin.

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Kalle J. Ahl, The Equity Group, Inc. - Senior Associate [2]

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Thank you, Matt, and good afternoon, everyone. Thank you for joining us today. Before we begin, I would like to remind everyone that statements made during the course of this call may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934.

These statements reflect current expectations concerning future events and results. Words such as expect, intend, believe, may, will, should, could, anticipate and similar expressions are words that are used to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks and uncertainties and other important factors that could cause actual performance or achievements to be materially different from those projected.

For a full discussion of these risks, uncertainties and factors, you are encouraged to read GSE's documents on file with the Securities and Exchange Commission, including those set forth in periodic reports filed under the forward-looking statements and Risk Factors section. GSE does not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

On this call, management may refer to EBITDA, adjusted EBITDA and adjusted net income, which are not measures of financial performance under generally accepted accounting principles or GAAP. Management believes that these non-GAAP figures, in addition to other GAAP measures, provide meaningful supplemental information regarding the company's operational performance. Management uses these non-GAAP measures to evaluate the performance of GSE's business and to make certain operating decisions such as budgeting, planning, employee compensation and resource allocation. This information facilitates management's internal comparisons to GSE's historical operating results as well as the operating results of its competitors. Since management finds these measures useful, GSE believes that investors may benefit by evaluating both non-GAAP and GAAP results.

Investors should recognize that these non-GAAP figures might not be comparable to similarly titled measures of other companies.

These measures should be considered in addition to and not as a substitute for or superior to any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to their most directly comparable GAAP measures in accordance with SEC Regulation G can be found in the company's earnings release.

I'd now like to turn the call over to Mr. Kyle Loudermilk, Chief Executive Officer of GSE Systems. Kyle, please go ahead.

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Kyle J. Loudermilk, GSE Systems, Inc. - President, CEO & Director [3]

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Thanks, Kalle. Good afternoon. I'd like to welcome everyone to GSE Systems Third Quarter 2018 Financial Results Conference Call. Also on today's call are Chris Sorrells, our Chief Operating Officer; and Emmett Pepe, our Chief Financial Officer. Earlier today, we issued a press release covering GSE's third quarter 2018 financial results. Hopefully, you've had a chance to review this news release, but if you have not, a copy can be found on our website at www.gses.com under the News section.

I'm pleased to report that GSE's revenue grew 42% year-over-year to $21.8 million, and our adjusted EBITDA increased 68% year-over-year to $1.5 million, driven by contributions from Absolute Consulting, which we acquired in September 2017 and True North Consulting, which we purchased in May 2018. This is by far our best third quarter since I joined GSE and is a testament to our team and our growth strategy. New orders were strong and totaled $27.9 million, which is approximately 3x greater than our orders in the prior year quarter. This quarter's new orders were the highest since the first quarter of 2016. Performance Improvement Solution orders rose sharply to more than $17 million compared to less than $3 million in the third quarter of 2017. Among Performance Improvement Solutions orders, we were awarded a $6.6 million contract from Slovenské elektrárne in Slovakia to update the Mochovce Unit 3 & 4 simulator, which we implemented over a 16-month schedule. Our successful relationship with Slovenské elektrárne goes back to 1990s when we delivered the Mochovce Unit 1 & 2 simulator. Also in Q3, we were awarded a significant contract totaling approximately $1.5 million to upgrade the Korea Hydro & Nuclear Power Company's Kori Unit 2 simulator over a 17-month schedule. This is the 7th full scope simulator in Korea to upgrade to GSE's latest technology for critical simulation and training needs.

In the United States, we continue to benefit from a contract for the continuation of support services to 2 government engineering laboratories dedicated to the support of the U.S. Navy. GSE is serving 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 from February 2018 to February 2019, with 4 additional optional years that would bring the total contract value to approximately $19 million.

I'd like to provide an update on the once-in-a-generation order we received in 2016 from a major nuclear plant operator to design, engineer and deliver 3 full scope simulator systems. A project of this magnitude has not been undertaken in the United States in the last 2 decades, and I'm proud to say that our team has done phenomenal work successfully executing all areas. This landmark project will contribute modestly to our 2019 financial results as we wind down and enter its final phases. It's contributed over $10 million in annual revenue in the past 2 years but on a much lower gross margin than our overall Performance Solutions segment. It is another important accomplishment for GSE and showcases our ability to provide comprehensive world-class solutions that meet and exceed our clients' complex needs. Our quarter end backlog remained strong at $74 million compared to $71.4 million at the end of 2017. Total backlog consisted of $50.8 million for Performance Improvement Solutions backlog and $23.2 million of Nuclear Industry Training and Consulting backlog. These are solid numbers given the burn-down of backlog related to the significant full scope simulator project for the Southern Nuclear utility operator, which all [told] accounted for roughly $28 million in backlog for Performance Solution when signed over 2 years ago. The solid backlog reflects the potential of our portfolio solutions we are creating as we scaled by executing our Vision 2020 strategy of rolling up a fractured vendor ecosystem serving the nuclear power industry.

In conclusion, we are focused on growing a revenue and EBITDA by executing operationally in our backlog, driving sales and effectuating our corporate development strategy with discipline. I'm very proud of our team's execution in the first 9 months of the year and believe we are on the right path to deliver long-term, sustainable growth and value creation to our stakeholders.

I'll now turn over the call to Chris Sorrells, our COO. Chris, please go ahead.

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [4]

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Thanks, Kyle. As Kyle noted, we are pleased with our third quarter and year-to-date performance. We like our prospects heading into 2019 and are excited about our acquisitions to date as they continued to perform well. The first 9 months of 2018 represents one of the best periods in the company's history, and our goal is to take this momentum and build off it in 2019, both organically and inorganically. GSE's strong financial performance demonstrates the significant potential of our strategy to scale the company and create value through rolling up a fractured vendor ecosystem in the nuclear power industry.

Regarding our acquisitions. Hyperspring continues to perform at or above expectations. True North's business is performing in line with expectations, even though we encountered some revenue and profit delays this quarter due to True North's transition from a cash-based accounting to GAAP percent complete accounting on fixed-price projects. This is very typical in the first year of an acquisition previously using the cash-based system with a heavy mix of fixed-price contracts.

Finally, Absolute's adjusted EBITDA was up over 70% from the preacquisition period and is performing close to our internal plans, and we made some recent changes to benefit Absolute in 2019.

As I noted on our last call, we are working exceptionally well on cross-selling opportunities with True North. For example, in the third quarter, we bid on an innovative software project that would not have been possible if we were independent of one another. Despite intense competition, we were shortlisted to the final presentation round of the RFP process and are now awaiting a final decision. This is a great example of how we intend to leverage and build out our platform, driving expanded market share and mindshare with the customer. Increasingly, we are getting a seat at the table with client executives who are defining and driving our customer strategies.

As we continue to curate a tightly woven group of complementary acquisition candidates providing highly technical solutions with high barriers to entry, we expect to elevate GSE's profile further with our customers. In addition, we are working on projects that may require us to utilize a combination of employees from the various subsidiaries to perform work that solves critical challenges for industry. As our platform grows, we expect this opportunity to allow us to further distinguish ourselves from the competition.

Moving onto M&A. Our pipeline remains robust, and we remain very disciplined in the approach. Through strategic acquisitions, we have an opportunity to build meaningfully on our base in a way that is accretive to earnings and shareholder value. Given the current pipeline, we remain confident that we can maintain an appropriate cadence of acquisitions to achieve our Vision 2020 goal of over $200 million in revenue and between $20 million to $30 million of adjusted EBITDA on an annual run rate basis by the end of 2020. The M&A database has grown to over 400, including more than 100 potential targets that provide core engineering services in our newly focused area of transmission and distribution. The goal remains to close 2 value-creating strategic deals per year. Currently, we're engaged in some meaningful discussions, mostly in the nuclear technical engineering, staffing/training segment. We would expect the combination of cash, seller notes, earn-outs and possible equity in the 2019 deals.

Finally, as mentioned on our prior call, we have launched a more proactive investor outreach program. Examples of the recent activities include a non-deal roadshow in New York, a full day of meeting at the security conference in September and the commencement of new dialogues with several sell-side analysts. We were pleased to see that Maxim Group initiated coverage on GSE a few weeks ago and hope to add to our list of covering analysts of 2019 and beyond. This is the first time we have had non-sponsored research coverage since 2012 so a major accomplishment for the team.

Tomorrow, I will be presenting at the Southwest IDEAS Conference in Dallas and on November 27, Kyle will be in Minneapolis for another non-deal roadshow. We feel we had a great story and are excited to share it with the investment community. In the coming months, we hope to get a chance to meet and speak with many of you. With that, I'd like to turn it over to Emmett, who will review the third quarter financial results.

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [5]

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Thank you, Chris. I'll begin with a review of new business. Our Performance Improvement Solutions segment bookings totaled $17.2 million in Q3 of '18 compared to $2.9 million in Q3 of '17. The increase in Performance Improvement Solutions orders is a result of the significant contracts awarded for nuclear and process work that Kyle detailed previously. Nuclear Industry Training and Consulting orders totaled $10.7 million in Q3 '18 compared to $6.3 million in Q3 2017. Our Nuclear Industry Training and Consulting segment continues to receive additional funding to support a few significant customers, additionally given the aging of the nuclear workforce, we are spending a lot of time and effort to proactively onboard and develop young, talented GSE, which is not only positioning our company for long-term success but also helping us address our clients' short-term staffing needs.

Now on to a review of our financial results for the first -- for the third quarter. Total revenue in Q3 2018 increased 42% to $21.8 million from $15.4 million in Q3 of '17. Nuclear Industry Training and Consulting revenue rose 79% to $12 million in Q3 2018 from $6.7 million in Q3 '17. This growth is a direct result of our Q3 2017 acquisition of Absolute Consulting, which contributed $6.2 million of revenues in Q3 2018. The Performance Improvement Solutions revenue in Q3 2018 increased 13% to $9.8 million from $8.7 million in Q3 2017. The growth in the Performance Improvement Solutions segments is primarily a result of our acquisition of True North earlier in 2018, which contributed $2.4 million of revenues in Q3 2018.

In addition, as Chris mentioned earlier, True North Consulting experienced some revenue and profit delays due to transition from a cash-based accounting to GAAP accounting. Based on Q3 orders of $3.5 million, we still anticipate True North to meet our revenue expectations for a full calendar year. Gross profit in Q3 2018 increased 28% to $5.4 million or 25% of revenue from $4.2 million or 27% of revenue in Q3 2017. The Performance Improvement segment's gross profit increased 25% to $3.6 million in Q3 '18 from $2.9 million in Q3 '17. During Q3 2018, we were able to recognize significant cost savings on a few major percentage of completion projects, which allowed us to capture additional margin on work completed in prior quarters. The most significant savings relates to a project started in Q1 2016 where we reduced our budget as we near completion of the project. The budget reduction resulted in the one-off recognition of revenue, which went straight to the bottom line. The Nuclear Industry Training and Consulting segment's Q3 2018 gross profit increased 35% to $1.8 million from $1.3 million in Q3 of '17. The gross profit year-over-year increase is primarily attributable to a full quarter of Absolute Consulting, which contributed $800,000 of gross profit in Q3 2018 compared to $100,000 in Q3 of 2017.

SG&A expenses in Q3 2018 totaled $4.4 million or 20% of revenue compared to $4.4 million or 28.4% of revenue in Q3 2017.

Despite our revenue increasing by 42% year-over-year, we were able to maintain the same level of SG&A expenses. This begins to demonstrate the effects of operating leverage as we scale the business. And if you exclude certain onetime expenses incurred in the quarter, it's even more dramatic. Net loss in Q3 2018 was approximately $500,000 or $0.03 per basic and diluted share compared to a loss of $600,000 or $0.03 per basic and diluted share in Q3 of 2017.

Non-GAAP adjusted EBITDA, as defined in our earnings release, increased approximate -- to approximately $1.5 million in Q3 2018 compared to approximately $900,000 in Q3 of 2017. Our cash position at September 30, 2018, totaled $9.8 million. Delays in one of our larger projects cause a temporary decline in cash as of September 30. As we collect on our contract receivables over the next quarter, we expect our cash position to return to normal operating levels, excluding any new use of cash such as acquisitions. As Chris detailed previously, we are diligently working to execute on our acquisition strategy. Currently, we have approximately $15 million in capital available under our delay draw term loan and another $2 million to $3 million of cash that could be available for deployment on a transaction. I'll now turn the conversation back to Kyle.

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Kyle J. Loudermilk, GSE Systems, Inc. - President, CEO & Director [6]

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Thanks, Emmett. Operator, please open the floor for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Tate Sullivan from Maxim Group.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [2]

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Can you -- just the first question on True North. I think -- can you refresh on how much backlog when you bought True North, that True North have? And so it appears a meaningful step-up in that backlog. And does that backlog that you disclosed, the $5.6 million, exclude the COBID software project you mentioned in your opening, Chris?

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [3]

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Tate, this is Emmett. The backlog is relatively flat. We brought it in about $5 million-or-so, and so the $5.6 million is we've maintained that backlog. Yes, the backlog does not contain that proposed project, it has not been awarded yet.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [4]

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It has not been awarded. Okay.

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [5]

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That's right.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [6]

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And then Chris, you gave an update on the Absolute deal from a year ago, and it sounds like, would it be fair to say, I mean, EBITDA has been above your expectations, revenue a little below, or can you go back over that, please?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [7]

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Sure. When -- if you recall when we put out the press release and then Page 15 in our investor deck. We bought a company that at the time had a trailing 12 months, and this is all in 8-K, had about $40 million of revenue, trending down a little, had some contracts that -- frankly, it needed to be rebid and rethought. And then had in its standalone form about $1 million of EBITDA. We looked at that and thought, through process improvements and optimization, we would get that over time to approximately $2 million, and this is what we identified in the slides, again, Page 15 of the investor presentation. In that, we said that did include these identified synergies, didn't necessarily specify whether those will be captured in 90 days, 180 or 365, but we had to. We delivered, and this is what I said, we delivered a 70% improvement. So on a trailing 12 months since acquisition, Absolute has delivered approximately $1.7 million of adjusted EBITDA versus approximately $1 million as a standalone. Hence, the 70% increase. So we look at it and say, a little bit below where we would like it to be. But we've made some recent adjustments, optimistic that it still comes in close to the numbers that we have outlined and expected. So we're happy with the performance today.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [8]

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Okay. And in the quarter, I just saw your Q came out, too. Can you update on the accrual for taxes versus net operating losses and how long -- how much NOLs you currently have too, I didn't see that?

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [9]

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NOLs are hovering around the $20 million, and that's -- yes, we fully expect to utilize them. I don't think the first tranche expires till the end of 2020. So...

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [10]

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What will you accrue for in the quarter? Just -- I see about $300,000 of tax expenses this quarter in 3Q.

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [11]

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Yes. I'm not sure I follow your question, Tate. As identified in the 10-Q, we have $300,000 as our tax provision for the quarter, if that's what you're asking.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [12]

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Right. Okay. And then on the simulator order, I -- it sounds like you had some profits drop to the bottom. But I figure, are you well past peak revenue and margins on that order, or do you have potential to recognize to reduce the budget at final delivery, which sounds like it's still early '19?

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [13]

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There's still opportunity as we close out, right? On the 3 simulators, we still have a lot of work to be done between now and early '19. So I would not say that we're at the very end, but we are getting close to that.

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Operator [14]

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(Operator Instructions) The next question here is from Mike Smith, a private investor.

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Unidentified Participant, [15]

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My question is a lot of companies, including yourself, are reporting adjusted EBITDA or non-GAAP EPS. But you guys are showing a minus for GAAP EPS. You making any predictions on when you think it'll become positive on a GAAP basis?

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [16]

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Chris, you want to take that?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [17]

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Yes. We don't provide guidance. So let's start there. When you look at the adjusted net income, for us, it's a really, very clean number. The bulk of that adjustment, the number one piece is amortization of intangible assets related to acquisitions. Each time we do an acquisition, we have to go through a valuation allowance, and we take the assets and allocate value outside of receivables, cash receivables minus payables, very simplistic. We then -- we have a valuation third-party expert tell us what is the intangible piece, and then the plug is goodwill. And the 2 deals we have, about $12 million in goodwill, that has been allocated, and that is over 3 deals. And then we have on a run rate monthly -- or quarterly basis, about $600,000 of amortization related to the intangibles. Number two big thing is stock-based comp. And the stock-based comp has been trending downwards as the amortization from that expense has been going away, but it still trails or still runs at about $500,000 a quarter. That's down from last year, about $627,000. So both are noncash and a total of the addback, 90%. There's a tiny bit for restructuring, which was $70,000 in this period, and then we have a little change in derivative instrument through the hedges on foreign currency, which is typically very de minimis, and it was 59k. And then the tax, we end up with tax, [like paid] this quarterly at $314,000 of accrued tax that took that loss even more, but when you really look through that, how much of that was true cash, given the NOLs, not totally accrue to tax number or cash tax number.

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Unidentified Participant, [18]

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Did you say that your stock-based compensation number is going to be going down or is going down?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [19]

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It has. [That] not projecting into the future, but that is why it has been as it's rolled off. When the management team came in, there were some grants to induce that came [it], as you may know, there's largely an entirely new team over the past 3 years. So those onetime grants were early in the system and many have not -- not many, but at least probably a majority have amortize often, they continue to amortize with each passing quarter. Now new grants or new employees get factored into that, and that's where it's difficult to predict what the future holds for that. But at least year-over-year or quarter-over-quarter, it has gone down from $627,000 to $507,000. Then you have acquisitions too, as you would guess, acquisition comes in, stock may be given to raise employees as retention or enticement, constant moving target.

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Unidentified Participant, [20]

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When do you think you'll get over the hurdle of goodwill amortization and show profit after that -- $2.5 million of intangible expense?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [21]

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A very difficult thing to gauge. Each deal was different.

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Unidentified Participant, [22]

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(inaudible)?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [23]

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Well, it depends on the pace of the transactions. So I mean, it's a fairly onerous calculation, or it can be. And frankly, you get into a decision of would you rather you want it as goodwill and sitting on the balance sheet, or do you want to amortize it through? People complain when they see the goodwill grow at such scaling, and then people like yourself are pointing out the noncash impact to the financial statement. So we run it through a third-party and...

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Unidentified Participant, [24]

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Well, the goodwill amortization expense is kind of a hurdle rate to justify your acquisitions, that's why they're charging your P&L. Put another way, your free cash flow, what do you think that's going to be in the coming year or so? I mean, it's a really true number of what the cash -- how much cash, profit the business is throwing off.

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [25]

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Well, if you look at the cash flow statement year-to-date and take out working capital, which was generally timing. We have the 9 months this year and 9 months last year, we generated over $2.5 million of cash. We don't have generally CapEx, we have de minimis. We did have some CapEx in the P&L this year, and that was a leasehold improvement. But last year, as an example at $64,000 of CapEx, the 5, 10 issue in CapEx, a good chunk of that was leasehold improvement piece. And that has really been -- it would have a de minimis amount of software. So when you look at the 9 months number this year, you'll see a number that shows $2.5 million, $2.7 million of cash generated before working capital and make your assumption on what the CapEx is. So it's pretty good cash generating. We have a -- we tracked a number sort of looking at modified cash, and we take a cash -- LTM cash flow from operations, less CapEx before the working capital and then we compare that to LTM-adjusted EBITDA, you'll see what sort of the cash conversion cycle is, it hovers in the 50% to 70% range depending on a given quarter.

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Operator [26]

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Our next question here is from Tate Sullivan from Maxim Group.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [27]

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A couple of follow-up. On the accounts receivable collections cycle for the simulators. Is it -- are you receiving cash for those orders as you execute, or does the bulk of that cash come in when all 3 are delivered?

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [28]

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This is Emmett, I'll take it. We get cash, roughly speaking, on execution, but it's really tied to different milestones and sign off on those milestones. So there could be -- if there's a factory acceptance testing that has to get signed off on, and there's a delay, then obviously, that delays invoicing and collection over cash. But we do build regularly throughout the project on the various milestones and then subsequently get paid. So there could be a delay, if there's any delay in the project, then ultimately, that dominoes into some delay in the cash collection cycle.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [29]

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Okay. And then -- sorry, go ahead. Maybe that was an...

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [30]

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Well, the billing and related collections. So yes.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [31]

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Okay. And then on the -- with True North adjustments after the acquisition to do percent of completion method. Did you do the same exercise after? Do you have to do the same approach after the Absolute deal as well? And I imagine, as you said, just onetime in the quarter.

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Emmett Anthony Pepe, GSE Systems, Inc. - CFO & Treasurer [32]

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Well, it's -- there's a couple of moving parts. First of all, Absolute is really a timing material-based business. So they're not really as impacted as something like True North or as our core GSE performance that has percentage in completion contracts, fixed-price where you have to go through the estimated budget and your cost incurred against that budget as you go through it. So there's -- it's just a different type of business, is where -- so Absolute did not fall into that.

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Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [33]

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Okay. And Chris, your deal pipeline. What was it? Did I hear a 400 number when you discussed that? Is that the total opportunities evaluated, or did I mishear that?

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Christopher D. Sorrells, GSE Systems, Inc. - COO & Director [34]

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That's good. We have a landscape map of all the verticals. We're currently naming all potential companies. That's sort of a totally universe number. It's not to say we've had conversations with each. Each is for sale, each is a fit. It's just this is the ecosystem, and we build on that almost on a weekly but certainly, monthly and quarterly basis.

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Operator [35]

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This concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

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Kyle J. Loudermilk, GSE Systems, Inc. - President, CEO & Director [36]

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This is Kyle. I'd like to thank everybody for joining us. In closing, I'd like to say how pleased we are with our progress and reiterate our focus on a continued improvement and execution of our strategy. Thank you, again, for your time and interest in GSE. Have a great day.

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Operator [37]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you, again, for your participation.