Company Quick10K Filing
GP Strategies
Price13.41 EPS0
Shares17 P/E37
MCap227 P/FCF50
Net Debt105 EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-01
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-05-05
10-K 2014-12-31 Filed 2015-02-24
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-05-01
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-05-02
10-K 2012-12-31 Filed 2013-02-26
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-03
10-Q 2010-09-30 Filed 2010-11-04
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-06
10-K 2009-12-31 Filed 2010-03-04
8-K 2020-11-17
8-K 2020-11-05
8-K 2020-10-08
8-K 2020-09-21
8-K 2020-09-01
8-K 2020-08-07
8-K 2020-07-17
8-K 2020-07-07
8-K 2020-07-01
8-K 2020-06-09
8-K 2020-05-11
8-K 2020-05-07
8-K 2020-03-26
8-K 2020-03-10
8-K 2020-01-10
8-K 2020-01-08
8-K 2019-11-07
8-K 2019-10-31
8-K 2019-08-07
8-K 2019-08-01
8-K 2019-05-15
8-K 2019-05-10
8-K 2019-03-18
8-K 2019-03-15
8-K 2018-11-30
8-K 2018-11-06
8-K 2018-11-06
8-K 2018-08-08
8-K 2018-08-08
8-K 2018-08-02
8-K 2018-07-31
8-K 2018-06-29
8-K 2018-06-20
8-K 2018-05-03
8-K 2018-04-20
8-K 2018-03-06
8-K 2018-03-01

GPX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 a101gpstrategiesconsentand.htm
EX-10.2 a102crawfordseparationagre.htm
EX-10.3 a103stedhamemploymentagree.htm
EX-10.4 a104scottgreenbergtransiti.htm
EX-10.5 a105rsu_2011planstedhamemp.htm
EX-10.6 a106psuagreementgreenbergn.htm
EX-10.7 a107psuagreement2020onetim.htm
EX-10.8 a108rsu2011planform-direct.htm
EX-31.1 exhibit311-gpx93020.htm
EX-31.2 exhibit312-gpx93020.htm
EX-32.1 exhibit321-gpx93020.htm

GP Strategies Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin



Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2020
Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the transition period from                             to                             
Commission File Number 1-7234
(Exact name of Registrant as specified in its charter)
(State of Incorporation)(I.R.S. Employer Identification No.)
70 Corporate Center 
11000 Broken Land Parkway, Suite 200,ColumbiaMD21044
(Address of principal executive offices)(Zip Code)
(443) 367-9600
Registrant’s telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒ No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company in Rule 12b-2 of the Exchange Act. 
Large accelerated filer   ¨Accelerated filer   x
Non-accelerated filer   ¨
Smaller reporting company  Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes   ¨ No   ý

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareGPX
NYSE (New York Stock Exchange)

The number of shares outstanding of the registrant’s common stock as of October 27, 2020 was as follows:
Class Outstanding 
Common Stock, par value $.01 per share 17,161,874 

Part I.Financial Information
Item 1.Financial Statements (Unaudited)
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 6.

Part I. Financial Information
Item 1. Financial Statements 
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
September 30, 2020 (Unaudited)December 31, 2019
Current assets:
Cash $13,206 $8,159 
Accounts and other receivables, less allowance for credit losses of $2,319 in 2020 and $1,132 in 2019
91,169 131,852 
Unbilled revenue39,256 57,229 
Prepaid expenses and other current assets21,690 19,115 
Assets held for sale25,128  
Total current assets190,449 216,355 
Property, plant and equipment23,579 23,746 
Accumulated depreciation(18,646)(17,943)
Property, plant and equipment, net4,933 5,803 
Operating lease right-of-use assets22,637 27,251 
Goodwill154,118 171,563 
Intangible assets, net6,125 16,344 
Other assets11,023 11,586 
 $389,285 $448,902 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable and accrued expenses$73,227 $92,332 
Deferred revenue21,669 23,234 
Current portion of operating lease liabilities6,073 7,871 
Liabilities held for sale2,898  
Total current liabilities103,867 123,437 
Long-term debt43,750 82,870 
Long-term portion of operating lease liabilities19,325 22,159 
Other noncurrent liabilities13,353 10,522 
Total liabilities180,295 238,988 
Stockholders’ equity:  
Common stock, par value $0.01 per share
173 172 
Additional paid-in capital102,339 102,319 
Retained earnings129,849 131,228 
Treasury stock at cost(778)(4,070)
Accumulated other comprehensive loss(22,593)(19,735)
Total stockholders’ equity208,990 209,914 
$389,285 $448,902 
 See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Revenue$115,594 $139,005 $350,019 $427,891 
Cost of revenue94,929 117,338 295,843 361,987 
Gross profit20,665 21,667 54,176 65,904 
General and administrative expenses17,642 15,240 49,106 46,769 
Sales and marketing expenses
1,685 1,830 5,381 5,725 
Restructuring charges
 104 855 1,405 
Gain on change in fair value of contingent consideration, net
Gain on sale of business  1,064  
Operating income (loss)1,338 4,493 (102)12,682 
Interest expense440 1,575 2,025 4,852 
Other income (expense)196 184 (493)272 
Income (loss) before income tax expense (benefit)1,094 3,102 (2,620)8,102 
Income tax expense (benefit)573 961 (1,241)2,408 
Net income (loss)$521 $2,141 $(1,379)$5,694 
Basic weighted average shares outstanding17,094 16,901 17,082 16,773 
Diluted weighted average shares outstanding17,507 16,939 17,252 16,807 
Per common share data:    
Basic earnings (loss) per share$0.03 $0.13 $(0.08)$0.34 
Diluted earnings (loss) per share$0.03 $0.13 $(0.08)$0.34 
See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Net income (loss)$521 $2,141 $(1,379)$5,694 
Foreign currency translation adjustments2,823 (3,451)(2,858)(2,118)
Comprehensive income (loss)
$3,344 $(1,310)$(4,237)$3,576 
See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Stockholders’ Equity
Three Months Ended September 30, 2020 and 2019
(In thousands)

at cost
Balance at June 30, 2020172 100,023 129,328 (1,366)(25,416)202,741 
Net income— — 521 — — 521 
Foreign currency translation adjustment— — — — 2,823 2,823 
Repurchases of common stock— — — (7)(7)
Stock-based compensation expense— 2,592 — — — 2,592 
Issuance of stock for employer contributions to retirement plan
1 264 — 482 — 747 
Net issuances of stock pursuant to stock compensation plans and other
— (540)— 113 — (427)
Balance at September 30, 2020$173 $102,339 $129,849 $(778)$(22,593)$208,990 

Common stockAdditional paid-in capitalRetained earningsTreasury stock at costAccumulated other comprehensive lossTotal stockholders’ equity
Balance at June 30, 2019172 104,187 119,592 (9,830)(20,357)193,764 
Net income— — 2,141 — — 2,141 
Foreign currency translation adjustment— — — — (3,451)(3,451)
Stock-based compensation expense— 783 — — — 783 
Issuance of stock for employer contributions to retirement plan— (585)— 1,322 — 737 
Net issuances of stock pursuant to stock compensation plans and other— (1,394)— 2,463 — 1,069 
Balance at September 30, 2019172 102,991 121,733 (6,045)(23,808)195,043 

See accompanying notes to condensed consolidated financial statements.


Condensed Consolidated Statements of Stockholders’ Equity
Nine Months Ended September 30, 2020 and 2019
(In thousands)

at cost
Balance at December 31, 2019172 102,319 131,228 (4,070)(19,735)209,914 
Net loss— — (1,379)— — (1,379)
Foreign currency translation adjustment— — — — (2,858)(2,858)
Repurchases of common stock— — — (1,833)— (1,833)
Stock-based compensation expense— 3,805 — — — 3,805 
Issuance of stock for employer contributions to retirement plan
1 (1,309)— 3,634 — 2,326 
Net issuances of stock pursuant to stock compensation plans and other
— (2,476)— 1,491 — (985)
Balance at September 30, 2020173 102,339 129,849 (778)(22,593)208,990 

Common stockAdditional paid-in capitalRetained earningsTreasury stock at costAccumulated other comprehensive lossTotal stockholders’ equity
Balance at December 31, 2018172 105,850 116,039 (13,802)(21,690)186,569 
Net income— — 5,694 — — 5,694 
Foreign currency translation adjustment— — — — (2,118)(2,118)
Stock-based compensation expense— 1,739 — — — 1,739 
Issuance of stock for employer contributions to retirement plan— (1,546)— 3,746 — 2,200 
Net issuances of stock pursuant to stock compensation plans and other— (3,052)— 4,011 — 959 
Balance at September 30, 2019172 102,991 121,733 (6,045)(23,808)195,043 

See accompanying notes to condensed consolidated financial statements.


Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2020 and 2019
(Unaudited, in thousands)
Cash flows from operating activities:  
Net income (loss)$(1,379)$5,694 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Gain on change in fair value of contingent consideration, net (677)
Gain on sale of business(1,064) 
Depreciation and amortization6,204 6,992 
Deferred income taxes(1,639)(258)
Non-cash compensation expense6,131 3,939 
Changes in other operating items:  
Accounts and other receivables36,092 (10,997)
Unbilled revenue18,050 19,296 
Prepaid expenses and other current assets(5,591)(6,628)
Accounts payable, accrued expenses and net change in operating leases(8,897)(12,188)
Deferred revenue(180)(1,840)
Net cash provided by operating activities45,369 4,551 
Cash flows from investing activities:  
Additions to property, plant and equipment(1,284)(1,905)
Acquisitions, net of cash acquired 850 
Proceeds from sale of business3,328  
Capitalized software development costs and other(45)(2,261)
Net cash provided by (used in) investing activities1,999 (3,316)
Cash flows from financing activities:  
Proceeds from long-term debt109,165 120,350 
Repayment of long-term debt(148,285)(123,700)
Change in negative cash book balance(3,213)(1,329)
Repurchases of common stock in the open market(1,833) 
Other financing activities(364)(421)
Net cash used in financing activities(44,530)(5,100)
Effect of exchange rate changes on cash and cash equivalents2,209 (1,813)
Net increase (decrease) in cash5,047 (5,678)
Cash at beginning of period8,159 13,417 
Cash at end of period$13,206 $7,739 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$1,902 $4,681 
Cash paid during the period for income taxes4,490 2,148 
 See accompanying notes to condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements
September 30, 2020

(1)Basis of Presentation

GP Strategies Corporation is a global performance improvement solutions provider of training, digital learning solutions, management consulting and engineering services. References in this report to “GP Strategies,” the “Company,” “we” and “our” are to GP Strategies Corporation and its subsidiaries, collectively.
The accompanying condensed consolidated balance sheet as of September 30, 2020, the condensed consolidated statements of operations, comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 have not been audited, but have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, as presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 2020 interim period are not necessarily indicative of results to be expected for the entire year.

Effective July 1, 2020, we began managing our business under a new organizational structure on a regional basis through our three geographic markets, North America, Europe Middle East Africa ("EMEA") and Emerging Markets (Latin America and Asia Pacific countries). These became our reportable segments in the third quarter of 2020. Prior to this change, our reportable segments consisted of two global practices, Workforce Excellence and Business Transformation Services, which focused on providing similar and/or complementary products and services across our diverse customer base within target markets.

Effective July 1, 2020, all U.S. employees in salaried benefited position changed from a paid time off policy ("PTO") to a flexible time off policy. Under the new policy, U.S. exempt employees no longer accrue PTO but instead are given the opportunity to take as much time off as each individual deems consistent with his or her duties, their manager's and the Company's obligations to its customers. As a result, all paid time off earned but not used as of July 1, 2020 was reversed.
The condensed consolidated financial statements include the operations of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make     assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the condensed consolidated financial statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience including considerations for potential impacts of the coronavirus ("COVID-19") pandemic, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly.

Please refer to Note 1- Significant Accounting Policies of the Notes to Consolidated Financial Statements included in our 2019 Form 10-K for a discussion of other significant estimates and assumptions affecting our consolidated financial statements.



Notes to Condensed Consolidated Financial Statements
September 30, 2020
(2)Recent Accounting Standards

    Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326), which requires companies to record an allowance for expected credit losses over the contractual term of financial assets, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. We adopted the standard on January 1, 2020 and began recognizing an allowance for credit losses based on the estimated lifetime expected credit loss related to our financial assets, which primarily includes accounts receivable and unbilled revenue. The adoption of Topic 326 did not have a material impact on our consolidated results of operations or financial condition. During the nine months ended September 30, 2020, we incorporated the forecasted impact of future economic conditions into our allowance for credit losses measurement process including the expected adverse impact of COVID-19 on the global economy.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements. The guidance promotes a framework to help improve the effectiveness of disclosures in the notes and is effective for annual and interim periods beginning after December 15, 2019, although early adoption is permitted. We adopted the standard on January 1, 2020. The new standard did not impact our consolidated results of operations or financial condition.

Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general tax accounting principles and simplifying other specific tax scenarios. The new standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact that adopting this guidance will have on our consolidated financial statements.
For a discussion of other accounting standards that have been issued by the FASB but are not yet effective, refer to the Recent Accounting Standards section in our Annual Report on Form 10-K for the year ended December 31, 2019. These standards are not expected to have a material impact on our results of operations, financial condition or cash flows.


Significant Accounting Policy
We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606). Revenue is measured based on the consideration specified in a contract with a customer. Most of our contracts with customers contain transaction prices with fixed consideration, however, some contracts may contain variable consideration in the form of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and other similar items. When a contract includes variable consideration, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. This can result in recognition of revenue over time as we perform services or at a point in time when the deliverable is transferred to the customer, depending on an evaluation of the criteria for over time recognition in ASC Topic 606. Further details regarding our revenue recognition for various revenue streams are discussed below.
Nature of goods and services
Over 90% of our revenue is derived from services provided to our customers for training, consulting, technical, engineering and other services. Less than 10% of our revenue is derived from various other offerings including custom magazine


Notes to Condensed Consolidated Financial Statements
September 30, 2020
publications and assembly of glovebox portfolios for automotive manufacturers, licenses of software and other intellectual property, and software as a service arrangements.
Our primary contract vehicles are time-and-materials, fixed price (including fixed-fee per transaction) and cost-reimbursable contracts. Each contract has different terms based on the scope, deliverables and complexity of the engagement, requiring us to make judgments and estimates about recognizing revenue.

Under time-and-materials and cost-reimbursable contracts, the contractual billing schedules are based on the specified level of resources we are obligated to provide. Revenue under these contract types are recognized over time as services are performed as the client simultaneously receives and consumes the benefits provided by our performance throughout the engagement. The time and materials incurred for the period is the measure of performance and, therefore, revenue is recognized in that amount.
For fixed price contracts which typically involve a discrete project, such as development of training content and materials, design of training processes, software implementation, or engineering projects, the contractual billing schedules are not necessarily based on the specified level of resources we are obligated to provide. These discrete projects generally do not contain milestones or other measures of performance. The majority of our fixed price contracts meet the criteria in ASC Topic 606 for over time revenue recognition. For these contracts, revenue is recognized using a percentage-of-completion method based on the relationship of costs incurred to total estimated costs expected to be incurred over the term of the contract. We believe this methodology is a reasonable measure of proportional performance since performance primarily involves personnel costs and services provided to the customer throughout the course of the projects through regular communications of progress toward completion and other project deliverables. In addition, the customer is required to pay us for the proportionate amount of our fees in the event of contract termination. A small portion of our fixed price contracts do not meet the criteria in ASC Topic 606 for over time revenue recognition. For these projects, we defer revenue recognition until the performance obligation is satisfied, which is generally when the final deliverable is provided to the client. The direct costs related to these projects are capitalized and then recognized as cost of revenue when the performance obligation is satisfied.
For fixed price contracts, when total direct cost estimates exceed revenues, the estimated losses are recognized immediately. The use of the percentage-of-completion method requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed, and anticipated changes in estimated salaries and other costs. Estimates of total contract costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. When revisions in estimated contract revenues and costs are determined, such adjustments are recorded in the period in which they are first identified. Adjustments to our fixed price contracts in the aggregate resulted in a net decrease to revenue of $0.4 million for the three months ended September 30, 2020 and a net increase to revenue of $0.4 million for the three months ended September 30, 2019. It also resulted in a net decrease to revenue of $0.9 million and a net increase to revenue of $1.3 million for the nine months ended September 30, 2020 and 2019 respectively.

For certain fixed-fee per transaction contracts, such as delivering training courses or conducting workshops, revenue is recognized during the period in which services are delivered in accordance with the pricing outlined in the contracts.

For certain fixed-fee per transaction and fixed price contracts in which the output of the arrangement is measurable, such as for the shipping of publications and print materials, revenue is recognized at the point in time at which control is transferred which is upon delivery. 

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the


Notes to Condensed Consolidated Financial Statements
September 30, 2020
standalone selling price of each distinct good or service in the contract. As of September 30, 2020, we had $286.4 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 85 percent of our remaining performance obligations as revenue within the next twelve months.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenue (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheet. Amounts charged to our clients become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. When billings occur after the work has been performed, such unbilled amounts will generally be billed and collected within 60 to 120 days but typically no longer than over the next twelve months. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within the next twelve months. These assets and liabilities are reported on the condensed consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the nine-month period ended September 30, 2020 were not materially impacted by any other factors.
We recognized revenue of $1.9 million and $1.5 million for the three months ended September 30, 2020 and 2019, respectively, and $13.3 million and $17.2 million for the nine months ended September 30, 2020 and 2019, respectively, that was included in the contract liability balance at the beginning of the year and primarily represented revenue from services performed during the current period for which we received advance payment from clients in a prior period.
Disaggregation of Revenue
See Note 14 (Business Segments) to these Condensed Consolidated Financial Statements for our disaggregated revenues.

(4)Significant Customers & Concentration of Credit Risk

We have a market concentration of revenue in both the automotive sector and financial & insurance sector. Revenue from the automotive sector accounted for approximately 24% and 28% of our consolidated revenue for the nine months ended September 30, 2020 and 2019, respectively. In addition, we have a concentration of revenue from a single automotive customer, which accounted for approximately 13% of our consolidated revenue for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, accounts receivable from a single automotive customer totaled $12.0 million, or 13%, of our consolidated accounts receivable balance.

Revenue from the financial & insurance sector accounted for approximately 16% and 17% of our consolidated revenue for the nine months ended September 30, 2020 and 2019, respectively. In addition, we have a concentration of revenue from a single financial services customer, which accounted for approximately 9% and 11% of our consolidated revenue for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, billed and unbilled accounts receivable from a single financial services customer totaled $8.1 million, or 6%, of our consolidated accounts receivable and unbilled revenue balances.

No other single customer accounted for more than 10% of our consolidated revenue for the nine months ended September 30, 2020 or 2019 or consolidated accounts receivable balance as of September 30, 2020.


Notes to Condensed Consolidated Financial Statements
September 30, 2020

(5)Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
Our dilutive common stock equivalent shares consist of restricted stock units computed under the treasury stock method, using the average market price during the period. Performance-based restricted stock unit awards are included in the computation of diluted shares based on the probable outcome of the underlying performance conditions being achieved.

The following table presents instruments which were not dilutive and were excluded from the computation of diluted EPS in each period, as well as the dilutive common stock equivalent shares which were included in the computation of diluted EPS: 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 (In thousands)
Non-dilutive instruments33 30 67 87 
Dilutive common stock equivalents413 38 170 34 


Sale of IC Axon Division

Effective October 1, 2020, we sold our IC Axon Division pursuant to a Stock Purchase Agreement with CM Canada Acquisitions, Inc., a wholly-owned subsidiary of ClinicalMind, LLC. The upfront cash purchase price was $28.0 million, of which $1.5 million was placed in escrow for 12 months, subject to an adjustment based on the working capital of the IC Axon Division as of October 1, 2020. In addition, up to $2.0 million may be paid to us if IC Axon achieves certain revenue objectives for the year ending December 31, 2020. As of September 30, 2020, the IC Axon Division's assets and liabilities were classified as held for sale. The assets held for sale were primarily $14.2 million of goodwill, $7.0 million of intangibles, and $2.8 million of account receivables. The liabilities held for sale were primarily $1.9 million of deferred taxes. The IC Axon Division was part of the North America segment.

Sale of Alternative Fuels Division

Effective January 1, 2020, we sold our Alternative Fuels Division pursuant to an Asset Purchase Agreement with Cryogenic Industries, LLC. The upfront cash purchase price was $4.8 million, which consisted of an advance payment of $1.5 million received on December 31, 2019 and $3.5 million received on January 2, 2020, offset by a $0.2 million cash payment to the buyer in March 2020 in settlement of the final net working capital as defined in the asset purchase agreement. In addition, up to $0.5 million of the purchase price is subject to the achievement of certain milestones under an assigned contract through the period December 31, 2021. We recognized a pre-tax gain of $1.1 million, net of $1.3 million direct selling costs, on the sale of the business. The gain represents the difference between the purchase price and the carrying value of the business, which primarily included net working capital of $0.1 million and goodwill of $2.6 million. The Alternative Fuels Division was part of the North America segment.



Notes to Condensed Consolidated Financial Statements
September 30, 2020

(7)Intangible Assets

We are required to assess goodwill for impairment annually, or more frequently if circumstances indicate an impairment may have occurred. We perform the annual impairment assessment for each of our reporting units as of October 1st of each year. The Company concluded that the recent segment reorganization indicated that a triggering event occurred during the third quarter of 2020. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. As a result of our reorganization, we have six reporting units for purposes of goodwill impairment testing. Our North America operating segment is comprised of three reporting units based on our primary solution sets. The remaining three reporting units are our EMEA, Latin America and Asia Pacific operating segments. We considered our current projections, our share price in relation to the share price when the quantitative assessment was performed as of September 30, 2020 and the margin by which the fair values of the reporting units exceeded their carrying values. We concluded that each of our reporting units had excess fair values greater than their respective carrying values and that there was no indication of impairment. The Technical Performance Solutions and Latin America reporting units had fair values that exceeded their carrying value by less than 5% and 15%, respectively, as of the September 30, 2020 testing date. If the Technical Performance Solutions or Latin America reporting units fail to meet their financial projections, or if other adverse market conditions occur (such as a sustained material decrease in our stock price) which would lower the fair value of the business, we could incur material goodwill and other intangible asset impairment charges in the future. We will continue to test for impairment on an annual basis or on an interim basis if events and circumstances indicate a possible impairment.

We determined the fair value of our reporting units using both an income approach and a market approach, and weighed both approaches to determine the fair value of each reporting unit. Under the income approach, we performed a discounted cash flow analysis which incorporated management’s cash flow projections over a five-year period and a terminal value was calculated by applying a capitalization rate to terminal year projections based on an estimated long-term growth rate. The five-year projected cash flows and calculated terminal value were discounted using a weighted average cost of capital (“WACC”) which takes into account the costs of debt and equity. The cost of equity is based on the risk-free interest rate, equity risk premium, industry and size equity premiums and any additional market equity risk premiums as deemed appropriate for each reporting unit. To arrive at a fair value for each reporting unit, the terminal value was discounted by the WACC and added to the present value of the estimated cash flows over the discrete five-year period. There are a number of other variables which impact the projected cash flows, such as expected revenue growth and profitability levels, working capital requirements, capital expenditures and related depreciation and amortization. Under the market approach, we performed a comparable public company analysis and applied revenue and earnings multiples from the identified set of companies to the reporting unit’s actual and forecasted financial performance to determine the fair value of each reporting unit. We evaluated the reasonableness of the fair value calculations of our reporting units by reconciling the total of the fair values of all of our reporting units to our total market capitalization, and adjusting for an appropriate control premium. In addition, we made certain judgments in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and     assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. A significant assumption in our goodwill impairment test as of September 30, 2020 was an estimate of how long and the extent to which we expect COVID-19 to impact our revenues and gross margins. If the pandemic last longer than we assumed or has an adverse impact for a longer period than assumed in our projections, we could incur material goodwill impairment charges in the future. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on


Notes to Condensed Consolidated Financial Statements
September 30, 2020
an ongoing assessment of events and circumstances that would indicate a possible impairment. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.

Changes in the carrying amount of goodwill by reportable business segment for the nine months ended September 30, 2020 were as follows (in thousands):
North AmericaEMEAEmerging MarketsTotal
Balance as of December 31, 2019$131,047 $29,853 $10,663 $171,563 
Assets held for sale(9,249)(3,333)(1,648)(14,230)
Divestiture(2,594)  (2,594)
Foreign currency translation(361)(152)(108)(621)
Balance as of September 30, 2020$118,843 $26,368 $8,907 $154,118 

Intangible Assets Subject to Amortization
Intangible assets with finite lives are subject to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as follows (in thousands):
 Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
September 30, 2020
Customer relationships$19,272 $(7,011)$12,261 
Customer relationships - Assets held for sale(10,198)3,197 (7,001)
Intellectual property and other3,334 (2,469)865 
 $12,408 $(6,283)$6,125 
December 31, 2019   
Customer relationships$22,348 $(7,473)$14,875 
Intellectual property and other3,915 (2,446)1,469 
 $26,263 $(9,919)$16,344 

(8) Stock-Based Compensation

We recognize compensation expense for stock-based compensation awards issued to employees on a straight-line basis over the requisite service period. Compensation cost is based on the fair value of awards as of the grant date.
The following table summarizes the pre-tax stock-based compensation expense included in reported net income (in thousands): 
Three months ended September 30,Nine months ended September 30,
Restricted stock units2,059 243 2,588 968 
Board of Directors and other stock grants533 540 1,217 771 
Total stock-based compensation expense$2,592 $783 $3,805 $1,739 
Pursuant to our 2011 Stock Incentive Plan, we may grant awards of non-qualified stock options, incentive stock options, restricted stock, stock units, performance shares, performance units and other incentives payable in cash or in shares of our


Notes to Condensed Consolidated Financial Statements
September 30, 2020
common stock to officers, employees, members of the Board of Directors and other individuals providing services to the Company. During the three months ended September 30, 2020, the total stock-based compensation expense included $1.7 million as a result of a new transition agreement with the Company's former Chief Executive Officer and the termination of several key executives. As of September 30, 2020, we had restricted and performance stock units outstanding under these plans.


On November 30, 2018, we entered into a Credit Agreement with PNC Bank, National Association, as administrative agent and a syndicate of lenders (the “Credit Agreement”), replacing the prior Credit Agreement with Wells Fargo dated December 21, 2016, as amended on April 28, 2018 and June 29, 2018 (the "Original Credit Agreement"). The Credit Agreement provides for a revolving credit facility, which expires on November 29, 2023, and consists of: a revolving loan facility with a borrowing limit of $200 million, including a $20 million sublimit for foreign borrowings; an accordion feature allowing the Company to request increases in commitments to the credit facility by up to an additional $100 million; a $20 million letter of credit sublimit; and a swingline loan credit sublimit of $20 million. The obligations under the Credit Agreement are guaranteed by certain of the Company's subsidiaries (the "Guarantors"). As collateral security under the Credit Agreement and the guarantees thereof, the Company and the Guarantors have granted to the administrative agent, for the benefit of the lenders, a lien on, and first priority security interest in substantially all of their tangible and intangible assets. The proceeds of the Credit Agreement were used, in part, to repay in full all outstanding borrowings under the Original Credit Agreement, and additional proceeds of the revolving credit facility are expected to be used for working capital and other general corporate purposes of the Company and its subsidiaries, including the issuance of letters of credit and Permitted Acquisitions, as defined.

Borrowings under the Credit Agreement may be in the form of Base Rate loans or Euro-Rate loans, at the option of the borrowers, and bear interest at the Base Rate plus 0.25% to 1.25% or the Daily Adjusted London Inter-bank Offered Rate ("LIBOR") plus 1.25% to 2.25% respectively. Base Rate loans will bear interest at a fluctuating per annum Base Rate equal to the highest of (i) the Overnight Bank Funding Rate, plus 0.5%, (ii) the Prime Rate, and (iii) the Daily Adjusted LIBOR, plus 100 basis points (1.0%); plus an Applicable Margin. Determination of the Applicable Margin is based on a pricing grid that is generally dependent upon the Company's Leverage Ratio (as defined) as of the end of the fiscal quarter for which consolidated financial statements have been most recently delivered. We may prepay the revolving loan, in whole or in part, at any time without premium or penalty, subject to certain conditions.

The Credit Agreement contains customary representations, warranties and affirmative covenants. The Credit Agreement also contains customary negative covenants, subject to negotiated exceptions, including but not limited to: (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) restricted payments, including stock dividends, and (vii) certain other restrictive agreements. The Credit Agreement also requires the Company to maintain compliance with the following financial covenants; (i) a maximum leverage ratio, and (ii) a minimum interest expense coverage ratio. On May 7, 2020, we entered into an amendment to the Credit Agreement that increases the maximum leverage ratio we are required to maintain from 3.0 to 1.0 to 3.75 to 1.0 for the fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020, and 3.00 to 1.0 for fiscal quarters ending March 31, 2021 and thereafter, and a minimum interest expense coverage ratio of 3.0 to 1.0. The leverage ratio is computed by dividing our Funded Debt by our Consolidated EBITDA, as those terms are defined in the Credit Agreement, for the trailing four fiscal quarters, and the interest coverage ratio is computed by dividing our Consolidated EBITDA by our Consolidated Interest Expense for the trailing four fiscal quarters. As of September 30, 2020, our leverage ratio was 1.7 to 1.0 and our interest expense coverage ratio was 7.9 to 1.0, each of which was in compliance with the Credit Agreement. In addition, the amendment to the Credit Agreement reduced the borrowing limit under the credit facility from $200 million to $140 million.

As of September 30, 2020, there were $43.8 million of borrowings outstanding and $51.2 million of available borrowings under the revolving loan facility based on our leverage ratio.
For the nine months ended September 30, 2020 and 2019, the weighted average interest rate on our borrowings was 2.9% and 4.7%, respectively. As of September 30, 2020, the fair value of our borrowings under the Credit Agreement


Notes to Condensed Consolidated Financial Statements
September 30, 2020
approximated its carrying value as it bears interest at variable rates. There were $1.2 million of unamortized debt issue costs related to the Credit Agreement as of September 30, 2020 which are being amortized to interest expense over the term of the Credit Agreement and are included in Other assets on our consolidated balance sheet.

(10)Income Taxes

Income tax (benefit) expense was $(1.2) million, or an effective income tax rate of 47.4%, for the nine months ended September 30, 2020 compared to $2.4 million, or an effective income tax rate of 29.7%, for the nine months ended September 30, 2019. The change in tax rate was primarily due to changes in the jurisdictional mix of earnings and the tax effects of a decrease in pre-tax earnings. Income tax expense for the interim quarterly periods is based on an estimated annual effective tax rate which includes the U.S. federal, state and local, and non-U.S. statutory rates, permanent differences, and other items that may have an impact on income tax expense.

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, includes various income and payroll tax provisions, as well as provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, and modification to the net interest deduction limits. Tax payment deferrals provided for under the Cares Act resulted in liabilities for deferred payroll tax payments and other deferred tax payments under other government relief programs in different regions of the world where we operate, totaled $10.0 million as of September 30, 2020, of which approximately $4.4 million is included in accounts payable and accrued expenses and $5.6 million is in other noncurrent liabilities. We continue to monitor any effects that may result from the CARES Act.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense. As of September 30, 2020, we had no uncertain tax positions reflected on our condensed consolidated balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and various non-U.S. jurisdictions, and is subject to audit by tax authorities in those jurisdictions. Tax years 2016 through 2019 remain open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have longer statutes of limitations.

(11)Stockholders’ Equity

Stock Repurchase Program

We have a share repurchase program under which we may repurchase shares of our common stock from time to time in the open market, subject to prevailing business and market conditions and other factors. During the nine months ended September 30, 2020 we repurchased approximately 255,000 shares of our common stock in the open market for a total cost of approximately $1.8 million. During the nine months ended September 30, 2019 we did not repurchase shares of our common stock in the open market. As of September 30, 2020, there was approximately $1.9 million available for future repurchases under the buyback program.


During the second quarter of 2020, we initiated restructuring and transition activities to improve operational efficiency, reduce costs and better position the Company to drive future revenue growth. Restructuring charges were not recorded for the three months ended September 30, 2020. We recorded severance expense of $0.9 million for the nine months ended September 30, 2020 which is included in restructuring charges on the condensed consolidated statements of operations and which is expected to be paid by the end of 2020. The total remaining liability under these restructuring activities was $0.1 million as of September 30, 2020, which is included in accounts payable and accrued expenses on the condensed


Notes to Condensed Consolidated Financial Statements
September 30, 2020
consolidated balance sheet. We expect these restructuring activities to be completed by December 31, 2020. In addition to these restructuring charges, we also incurred $6.7 million and $9.2 million of severance expense during the three months and nine months ended September 30, 2020 respectively, relating to cost scaling measures due to the impact of COVID-19 which are included in cost of revenue, general & administrative expenses and sales and marketing expenses on our condensed consolidated statements of operations. The severance expense for the three and nine months ending September 30, 2020 includes $1.7 million stock compensation expense related to severance.


We determine at its inception whether an arrangement that provides us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use ("ROU") asset and lease liability based on the present value of the future lease payments over the lease term. We have elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Certain of our leases include options to extend the term of the lease or to terminate the lease prior to the end of the initial term. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining total future lease payments. As most of our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate on the commencement date to calculate the present value of future payments.
Some of our leases include future rent escalations that are based on the Consumer Price Index or other similar indices. These future rent escalations are not included in the calculation of the ROU asset and lease liability because they cannot be forecasted at the lease inception date. These are considered variable lease payments and are expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any lease pre-payments and initial direct costs of obtaining the lease, such as commissions.
In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.
We have operating leases for office facilities, vehicles and computer and office equipment. We do not have any material finance leases.

Lease expense is included in Cost of Revenue and General & Administrative Expenses on the condensed consolidated statements of operations, and is recorded net of immaterial sublease income. The components of lease expense were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
Operating lease cost$1,737 $1,948 $6,421 $6,819 
Short-term lease cost477 580 937 1,140 
Total lease costs$2,214 $2,528 $7,358 $7,959 



Notes to Condensed Consolidated Financial Statements
September 30, 2020
Supplemental information related to leases was as follows (dollars in thousands):
September 30, 2020December 31, 2019
Operating lease right-of-use assets$22,637 $27,251 
Current portion of operating lease liabilities$6,073 $7,871 
Non-current portion of operating lease liabilities19,325 22,159 
Total operating lease liabilities$25,398 $30,030 
Cash paid for amounts included in the measurement of operating lease liabilities$7,049 $10,137 
Right-of-use assets obtained in exchange for operating lease liabilities$3,693 $