COLUMBIA, Md.–(BUSINESS WIRE)–GSE Systems, Inc. (“GSE” or “the Company”) (Nasdaq: GVP), a leader in real-time high-fidelity simulation systems, training/consulting and technology-enabled engineering solutions to the power and process industries, today announced that the Company acquired True North Consulting, LLC (“True North”), a respected provider of specialty engineering solutions to the nuclear power industry.
Founded in 1999 in Montrose, Colorado, True North generated revenue of approximately $11 million, of which over 85% came from the nuclear power industry, for the year-ended December 31, 2017. True North employs roughly 60 full-time and part-time professionals with expertise in areas such as in-service testing for engineering programs focused on ASME OM code including Appendix J, balance of plant programs, thermal performance, in-service inspection for specialty engineering including ASME Section XI, and software solutions.
Kyle Loudermilk, GSE’s President and Chief Executive Officer, commented, “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.”
GSE acquired 100% of the equity interest of True North for $9.75 million, subject to customary pre- and post-closing working capital adjustments. The transaction closed on May 11, 2018. GSE projects that True North will generate on an annualized basis revenue of approximately $10 million, add approximately $4 million to GSE’s backlog and, after identified synergies are implemented, contribute adjusted EBITDA of approximately $2 million. GSE also projects that the transaction will be immediately accretive to GSE’s adjusted earnings per share. For reporting purposes, True North will be included in GSE’s Performance Improvement Solutions segment.
Chris Sorrells, GSE’s Chief Operating Officer, commented, “Our purchase of True North is expected to be immediately accretive to GSE’s adjusted earnings per share and will add a stable revenue stream to the GSE platform with attractive EBITDA margins and strong cash flow potential. 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.”
Amended and Restated Credit and Security Agreement with Citizens Bank
On May 11, 2018, GSE entered into an amended and restated credit agreement with Citizens Bank (the “Lender”), consisting of a five-year $5 million revolving line of credit and a five-year $25 million delayed draw term loan facility to fund acquisitions approved by the Lender. GSE drew on the term loan facility to fund the acquisition of True North. Following the transactions associated with the acquisition, GSE will owe $9.75 million on the term loan facility.
“Providing acquisition financing that supports GSE’s growth strategy and longer-term Vision 2020 objectives is an example of how Citizens delivers substantial value for our clients,” said Daniel K. Fitzpatrick, President of Citizens Bank, Mid-Atlantic Region, and Head of National Industry Verticals Banking. “At Citizens, we try to think about the needs of our clients from their point of view and offer a range of solutions.”