GSE Systems Acquires DP Engineering
COLUMBIA, MD – February 19, 2019 – GSE Systems, Inc. (“GSE” or “the Company”) (Nasdaq: GVP), a leading provider of engineering, expert staffing, and simulation software to clients in the power and process industries, today announced that the Company acquired DP Engineering Ltd. Co. (“DP Engineering”), a specialized provider of high-value engineering services and solutions to the nuclear power industry. DP Engineering is known by its clients as a responsive and experienced organization that brings technical knowledge and creativity to their projects.
Founded in 1995 in Fort Worth, Texas, DP Engineering generates over 90% of its revenue from the nuclear power industry. DP Engineering employs approximately 110 full-time professionals with core expertise in: mechanical design; civil/structural design; electrical, instrumentation and controls design; digital controls/cyber security; and fire protection. DP Engineering primarily works under master service agreements as the Engineer of Choice for leading nuclear utility operators. More than 80% of DP Engineering’s revenue is expected to be generated under time-and-materials contracts, with the remainder from fixed-price agreements. 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.
Kyle Loudermilk, GSE’s President and Chief Executive Officer, commented, “We are absolutely thrilled to add DP Engineering to the business. With DP Engineering, GSE adds an outstanding team of nuclear-focused professionals delivering an array of complementary high-value-added engineering capabilities. These capabilities include a core competency in engineering design modifications centered around regularly scheduled nuclear plant outages. In addition to broadening GSE’s engineering services offering, DP Engineering expands and deepens our relationships with several of the largest U.S. nuclear energy providers, while improving GSE’s overall operating margin profile. As one company, we will add greater value to our customers than either could offer independently. The acquisition of DP Engineering is yet another compelling proof point in GSE’s strategy to create value for customers, employees, and shareholders by consolidating a fragmented vendor ecosystem serving the nuclear power industry.”
Transaction Details
GSE 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. GSE drew on its existing delayed draw term loan facility to fund the transaction. GSE also expects that the transaction will be immediately accretive to the Company’s adjusted earnings per share. For reporting purposes, DP Engineering will be included in GSE’s Performance Improvement Solutions segment.
Chris Sorrells, GSE’s Chief Operating Officer, commented, “Over the past 16 months, GSE has acquired DP Engineering, True North Consulting, and Absolute Consulting, establishing GSE as the go-to provider of specialized technical engineering and expert staffing solutions in the nuclear power industry. GSE can now deploy over 500 highly specialized employees to serve the complex needs of the nuclear power industry during a time when it is facing acute shortages of technical talent and expertise. On a pro forma basis, GSE’s revenue exceeds $100 million, making the Company one of the largest independent nuclear service companies in the United States. During our leadership team’s tenure, GSE’s pro forma revenue growth is approximately 130%, while our stock price has appreciated over 110%. We are extremely pleased with our progress. Moreover, GSE’s deal pipeline remains robust, and we continue to work diligently in pursuit of additional acquisitions that can enhance shareholder value in our targeted areas of technical engineering and expert staffing for the broader power industry as well as national laboratories focused on nuclear power.”
