GSE Systems, Inc. (GVP) CEO Kyle Loudermilk on Q1 2022 Results - Earnings Call Transcript

May 17, 2022 1:36 AM ETGSE Systems, Inc. (GVP)
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GSE Systems, Inc. (NASDAQ:GVP) Q1 2022 Earnings Conference Call May 16, 2022 4:30 PM ET

Company Participants

Adam Lowensteiner - Vice President of Lytham Partners

Kyle Loudermilk - President & CEO

Emmett Pepe - CFO & Treasurer

Conference Call Participants

William Bremer - Vanquish Capital

Operator

Good day and welcome to the GSE Systems, Inc. Reports First Quarter of Fiscal Year 2022 (ph) Financial Results. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Adam Lowensteiner, Vice President at Lytham Partners. Please go ahead, sir.

Adam Lowensteiner

Thank you, Chuck. Sorry, everybody for the delay. Good afternoon, everyone. Thank you for joining us today to review the financial results for GSE Systems for the first quarter ended March 31, 2022. With us on the call representing the company today are Kyle Loudermilk, President and CEO of GSE Systems; and Emmett Pepe, Chief Financial Officer of GSE Systems.

Before we begin, I'd like to remind everyone that the statements made during the course of the conference today 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 considering 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 the result of new information, future events or otherwise.

On this call, management may refer to EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS, 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. 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 or performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures in accordance with SEC Regulation G can be found in the company's earnings release.

With that, I'd like to now turn the call over to Mr. Kyle Loudermilk, President and Chief Executive Officer of GSE Solutions. Kyle, please proceed.

Kyle Loudermilk

Thank you, Adam. And I'd like to welcome everyone to GSE's first quarter fiscal 2022 financial results conference call. Earlier today, we issued a press release detailing our financial results. Hopefully, you've had a chance to review this news release, but if not, a copy can be found on our website at www.gses.com under the News section.

Pulling out the agenda for today's call, I’ll plan on opening my remarks with a brief discussion on the industry, then drill down into commentary on the quarter's highlights and the status of each of our divisions, including our Engineering segment also known as Performance Improvement Solutions, Workforce Solutions, also known as Nuclear Industry Training and Consulting, or NITC, and our Software as a Service based software solutions business. Emmett will then give a recap of the financial results and we'll then open the call to any questions at the end.

As it has been only 45 days since our last call, my commentary on the macro environment will be a bit abbreviated. Since our last call, the overall environment for GSE services continues to be promising. While Q1 displayed a bit of a breather, after a very strong Q4 and a solid second half of the prior year, it still was a solid quarter consisting of “meat-potato type of business,” which is a steady stream of projects coming in. The macro environment continues to evolve from the worst parts of the pandemic with businesses still transitioning to getting back to pre-pandemic levels.

Our end-user markets are focusing on the necessary improvements and maintenance required to keep the facilities up and running in the most efficient manner. The Omicron variant likely caused some delays in orders in the quarter, yet the high energy prices that are making headlines across the world continue to place emphasis on energy independence and security while ensuring a stable grid in order to supply ample energy to customers. While many governments are currently focused on these issues, many are also focused on meeting decarbonization goals which are additionally putting pressure on energy prices.

That said, it's become very evident that many of these countries are rewriting their plans for both nuclear in the near and longer term. While incorporating renewable energy alternatives, like wind and solar have been important, these energy sources are running into issues due to the variability inherent in those power sources and are struggling to meet long-term power generation goals due to the lack of equipment from supply chain issues, along with the lack of labor for installation as well as obstacles to permitting. As a result, the shortages are putting serious pressure on meeting decarbonization goals. Making up for those losses from supply chain and labor issues could take many years, maybe even a decade or two to catch up.

This highlights the acute need and focus on nuclear power as a long-term component for energy security and meeting decarbonization goals for the grid. As I expressed in the past and driving to Zero Carbon economy, wind and solar simply will not get the west there in and of themselves. Stable, consistent round-the-clock power generation is required and the more wind and solar that comes on to the grid, the more baseload power required. The solution to this is nuclear power. We believe that for these reasons, many countries will maintain and enhance existing nuclear fleets going for the foreseeable future.

The good news is that when the lives of nuclear facilities are formally extended, at least in the United States, license extensions are usually issued for 10 to 20 years. Lifetime extension of nuclear power facilities is a very favorable trend for GSE for years to come as these facilities can constantly require upkeep maintenance and upgrades as well as new software to make sure they are operating and efficient as possible.

GSE provides many of the essential engineering, design, workforce and technology solutions to facilitate this industry effort. The Biden administration has laid the initial ground work with the bipartisan bill that was signed into law in November for infrastructure. The law includes several billion dollars specifically allocated to the nuclear industry with a focus on investing for maintenance efforts at existing nuclear facilities.

The law also provides fund to accelerate the advancement of next generation nuclear reactor technologies, including SMRs. We believe the dollars from this law are starting to make their way into the economy, but we are also appreciative of the US government recognizing that upkeep of current nuclear fleet is of the utmost important while bridging efforts to the next generation of nuclear facilities.

As a reminder, nuclear power currently provides 20% of the nation's power and over 50% of the nation's 100% carbon-free electricity. As a result, the Biden Harris administration has identified the currently 93 reactors as a vital resource to achieve Net Zero emissions economy wide by 2050. The U.S. Department of Energy, the DoE recently released a notice of intent and request for information on the implementation for the bipartisan infrastructure laws, $6 billion civil nuclear credit program. The nuclear credit program support the continued operations of U.S. nuclear reactors, the nation's largest source of clean power. Both the NOI and RFI are critical first steps to help avoid premature retirement of nuclear reactors across the country, preserving carbon-free power generation at scale for the future while securing thousands of good paying clean energy jobs.

All of this commentary makes abundantly clear. There is tremendous and broad positive momentum for the nuclear power industry. Energy security, Zero Carbon Grid, scalable sustainable gross sub Zero Carbon is now top of mind across the world. As a result of specialized services and technology to industry as a provider of those services and technology to industry rather we believe GSE is well positioned as a result.

One more topic, I'd like to share about the macro level is the recent consolidation we are seeing in the industry, which resumes the consolidation we have been seeing prior to the pandemic. As an example, Westinghouse recently announced their intended acquisition of BHI Energy. As BHI has over 8,500 employees, this is a significant acquisition within the nuclear power industry. BHI has a range of services it provides in the US and Canada primarily servicing the support of all operating commercial nuclear plants.

Another recent deal was the acquisition of Paragon Energy Solutions by Windjammer Capital Investors. Paragon is a small independent provider of critical parts and services for the nuclear energy industry and it's been delivering products to nuclear utility customers and providers for over the past 30 years. Additionally, last fall, Boyne Capital acquired a majority interest in Sonic Systems International. Sonic provides a range of services to the majority of US nuclear reactors, including non-destructive evaluation, QA/QC programs, refueling and reactor maintenance, engineering and project management. While the financial terms of these privately transacted deals haven't been disclosed, this deal flow is important to note as clearly investment equity is flowing into this highly important sector. Specialty assets serving the nuclear sector are clearly in demand.

Now let's dive into some of the key events GSE experienced in the first quarter. Key best in Q1 and market overview dynamics in new orders. Overall, the first quarter produced a good quarter. While quarters were not at the levels of Q4, new orders were solid for Q1 and we maintained our backlog. We suspect that orders ebbed after two strong quarters due to business cycle starting back up in our customers during the quarter as well as likely sluggishness resulting from the Omicron and derivative variants. We have seen over the last 24 months that this business can come in fits with any delays resulting in a spurter business like we experienced in the back of 2021. Even, so [Technical Difficulty] stable as I mentioned, in the quarter and we have lots of work ahead of us. Also the softness that we built for the past few years into a material high value line of business is now looking and feeling like a software business, including the typical timing associated with it.

We had several renewals and new logo sales close at the end of last fiscal year and Q1 involved a lot of business development activities to drive what we will be a solid Q2 and another strong year. As a results, investors should now look at our software business as a hockey stick as we progress through the fiscal year just as it has last few years. Our goal is for the X-axis of this, excuse me, the goal is for the Y-axis of this hockey stick chart to grow larger for each year, just as it has for each of the prior three years. This is exciting progress.

Before getting a bit more granular, Q1, in general was a bit tepid for the industry. Admittedly, it was off the hills of a very busy second half of 2021. We believe customers took a pause, whether it be the Omicron variant or strong back half of 2021 either way, it is an unusual industry to experience such spending puts and takes from quarter-to-quarter. The good news is, we secured a solid cross-section of new orders in Q1, despite lower industry spend. In addition, some of our work that was expected to start at the beginning of Q1 was shifted to the end of the quarter or move further to the right and should commence in the coming quarters.

For the first quarter, total orders were $11.1 million, which was lower from Q4 and Q1 a year ago. That said, the industry has showed overall signs of renewed strength compared to the recent past. In the quarter, our Performance Engineering division managed to improve orders over the last year as we continue to work with a variety of customers in different projects. The makeup of these orders were highly diversified by order type primarily across our specialty engineering and non-simulation engineering businesses and also relatively similar in monetary size, thus the meat-potato aspect of a steady stream of orders.

Workforce Solutions is where we experienced with [Technical Difficulty] ‘21. That said, the division did win several key orders some sizable of nature. We also made some new investments into the division during the quarter with the addition of sales and recruiting personnel and expect those investments to start contributing in the coming quarters as these resources should debottleneck our ability to generate revenue from the business. Although, new order levels are pre-pandemic levels, we are very pleased to be trending in the right direction.

The new orders awarded in the first quarter combined with the acceleration we experienced in the second half of 2021, we feel has created great momentum for the remainder of 2022. Also with the financing, we conducted in the first quarter, GSE is in a very strong position competitively bid for new business and make the necessary investments to improve organic growth through sales and product development efforts. Aligning our business has been a big effort through the pandemic and now we have significantly improved our capital structure.

One thing is for certain three key catalyst still are at the forefront for the nuclear industry: one, the need for a stable grid; two, the drive towards energy, security independents; and the three, the decarbonization of the power sector. The drivers have provided increased visibility for other business pipeline and we are excited for the year. I'll remain important catalyst for the power industry, and we'll continue to gain momentum as we continue to suffer from higher energy costs and geopolitical issues causing energy security concerns. It is these catalysts that give us confidence that the nuclear industry will be in high and increasing demand for the foreseeable future.

Now let's review a bit into each operating segment. Our Engineering Performance, also known as Performance Improvement Solutions saw revenue decrease slightly sequentially from the fourth quarter and when compared to the year-ago period. Orders for this division continue to be robust in the first quarter to $6.4 million, up 15% from the same quarter a year ago. This increase was attributable to several new contract wins specifically coming for our DP Engineering and True North divisions. The specialized engineering services, these two divisions offer are showing solid demand with an array of customers on an assortment of different engineering projects from a transmission -- transmitter replacement to assisting a client with remediation work on the tank farm.

I highlight these wins as they have been able to show our breadth and depth of services and capabilities for our clientele. Looking further into the Engineering Performance division, our True North Consulting and DP Engineering units performed well compared to the first quarter a year ago as more customers are investing in these essential services that we provide to the industry. While the division is still in the midst of recovering from the pandemic, we are seeing customers start to put more work out to bid and inquire specifically of our unique solutions. There has been a large uptick in the opportunity pipeline as a result of this increased activity because of this, we have reason to be confident that the industry is emerging from the pandemic related slowdown in spends and do expect additional business within this division over the longer term.

Our pipeline opportunities overall for this segment has clearly improved as nuclear budgets and the focus on energy, security and independents increases and for good reason. As a result, our focus is working diligently with our customers and potential customers to convert these bids into orders and subsequently revenue has experienced during the quarter with new -- several new key orders that we have received.

For Software Solutions, moving on to our cloud-based SaaS solutions. As I've mentioned in the past, while this is technically categorized under our Engineering Performance division is a very exciting and unique component of our business and one which I believe warrants its own conversation. Revenue from our Software Solutions was $0.4 million for the first quarter compared to $0.8 million in the same quarter a year ago compared to $2.4 million in the fourth quarter.

As I mentioned earlier, our Software business has developed into a nice division for GSE with lots of predictable high margin revenue. That said, given the conversion from license to SaaS over the past few years, many of revenues from software ramps up towards the end of the year. GSE recognize this revenue on a ratable basis for SaaS software quarterly over the lifetime of the contract. We made a significant push to convert our perpetual licenses to term licenses with our customer, as well as capture net new business delivering the SaaS solution via the cloud. We've been successful in converting several of our clients to these SaaS-based license agreements are in discussions with several more clients and new opportunities about onboarding them with these solutions.

We've already made investments in bringing on more people into our sales force, so we fully expect this investment to deliver further enhanced results in the second half of the year. It’s gratifying to see what was a nascent effort when we first joined, develop over the past three years into a significant and growing software business as part of GSE. We continue to be excited about these high value, high-margin software solutions, which have demonstrated the potential for continued above average growth rates, while bringing strong predictability to the software license business.

Last year, it represented nearly 10% of our total revenue for GSE and we are focused on growing this business. It is proven to be an excellent follow on to the company’s legacy business of Power [indiscernible]. In addition to the recurring revenue of our Software Solutions, it provides very high gross margins typically 80% to 90% for GSE. We are happy with our growth in this area and look forward to continuing the transformation to make this segment a larger part of our business.

Workforce Solutions, now moving to Workforce Solutions, also known as our NITC segment. Sales were $5.8 million in the first quarter which was basically in line with the $6 million from the quarter -- first quarter a year ago. Ordered showed a bit of a pause in the first quarter, coming in at $4.7 million due primarily to Omicron which put some orders to the right, as clients paused certain decision-making to assess the impact to their respected workforce on-premise efforts. We continue to make smart investments in the business by adding new sales and recruiting professionals for the division in order to improve organic growth. Getting a bit more specific to division did receive four key orders from our customers with two very sizable orders one with a major utility, any other with the construction services company.

So to summarize, I'm very proud of our team and the results produced in the first quarter. We clearly have additional work to do. We are now in the position to do so with a strong balance sheet. We've begun to make necessary investments to be able to win more orders as they are starting to pick up, especially as a pandemic related constraints as time goes on. In the meantime, the company has been aligned to the market opportunities and our diversified business mix that we purposely built over the past few years has proven resilient throughout this time.

We believe it has position the company to broadly benefit from the macro trends that bode very well for GSE's future. We are an essential part of the power industry ecosystem and our clients rely on us to keep their assets up and running while creating a highly efficient and safe environment. The strong reputation we have in industry and the relationships we maintain with our customers and the value-added engineering workforce and software technology we offer the industry should position us well to beat out the competition as more business goes into the vendor ecosystem for nuclear and broader Zero Carbon power generation.

As the industry continues to develop a resilient grid that will advance the goal of decarbonization, GSE is at the forefront of providing sub-solutions and ready to partner with the power industry to achieve these goals. In addition, industry tailwinds are extremely strong for GSE as governments and society is becoming educated to the fact that in order to achieve net Zero Carbon emissions and have a stable grid with energy independents, nuclear must be an integral and growing part of the solution. We've all read the headlines, we are seeing today from the energy turmoil in Europe erupting as a result of the Ukraine-Russia conflict to climate change necessitating an accelerated path to Zero Carbon grid. Nuclear is now recognized as a critical part of the world's power mix.

The industry news items that I previously shared are but a few of the many exciting developments in the nuclear industry right now and we feel extremely confident about GSE's future. Our unique solutions are at the forefront of making nuclear power generation technologies and plants operate and run safely and efficiently produce more power from those assets over time.

I will now turn the call over to Emmett Pepe, GSE’s CFO, who will review the first quarter financial results. Emmett, please proceed.

Emmett Pepe

Thank you, Kyle. With the numbers highlighted in detail in the press release, let me focus my comments on a few areas and provide added color, where I can. Revenue during the first quarter of 2022 was $12.3 million, a decrease of 6.3% compared to $13.1 million in the first quarter of 2021, and compared to $13.9 million in the fourth quarter of 2021. The revenues were lower, primarily from Q4 to reflect the emerging seasonality in the software business, whereby many renewals occur. The year-over-year results were slightly lower and due to certain project flow that was not recurring in nature and stemming from the company's legacy business of nuclear simulators.

Engineering Performance revenues were $6.4 million in the first quarter of 2022, compared to $7.1 million in the first quarter of 2021 and compared to $6.8 million in the fourth quarter of 2021. The sequential and year-over-year change was due to lower orders within the simulator part of our business, which is extremely cyclical in nature. However, while that part of the division isn't growing and at times difficult to predict, we have several key projects in the coming quarters, as we've seen this business segment pick up in the second half of 2021, when orders increased 63% over the first half of 2021.

Workforce Solutions revenue in the quarter was $5.9 million compared to $6 million in the first quarter of 2021 and compared to $7 million in the fourth quarter. While the year-over-year [Technical Difficulty] was due to a reduction in field professionals needs for two major customers. In response, we are working with new business development teams and recruiting hires made in the quarter to drive future growth.

Gross profit in the first quarter of 2022 was $2.4 million or approximately 19.8% of revenue. This compared to approximate of [Technical Difficulty] of revenue in the first quarter of 2021 and [Technical Difficulty] of revenue in the fourth quarter 2021. Gross margin was down primarily due to specifically lower margins from Workforce Solutions as we have some transition in that segment and a reduction in revenue from our legacy GSE performance, which is typically one of our margin business. While the gross profit can fluctuate to [Technical Difficulty] gross profit improvement over time.

Operating expenses, restructuring, depreciation and amortization expense for the first quarter of 2022 were $4.6 million compared to $3.9 million in the first quarter of 2021 and $4.6 million in the fourth quarter of 2021. The increase in Q1 was partially due to many other companies in our industry and across the economy, we are seeing now higher expenses for corporate insurance, and other inflationary pressures, part of which was reflected in the Q1 results and with other increases be in other corporate expenditures that are one-time in nature. Despite these pressures, we continue to closely monitor our operating expenses and continue to expect them to be in the similar range in the future.

Net loss for the first quarter of 2022 was $3.4 million or a loss of $0.16 per basic and diluted share, compared to $2.2 million or a loss of $0.11 per basic and diluted share in Q1 of 2021 and compared to $1.9 million or a loss of $0.09 per basic and diluted share in Q4 2021. As reflected in our non-GAAP disclosure, $1.1 million of the net loss is due to non-cash related expenses, roughly $700,000 related to our convertible debt and $400,000 related to stock compensation.

Adjusted EBITDA was a loss of $1.7 million in the first quarter of 2022, compared to $800,000 in Q1 of 2021, and loss of $1 million which was reported in fourth quarter of 2021. Company’s backlog remained healthy and stable during the first quarter at $40.1 million compared to $41.3 million at the end of the fourth quarter of ’21. The Performance Engineering segment backlog was fairly stable at $31.9 million. The Workforce Solutions division burned off some backlog and was at $8.2 million at the end of the first quarter and compares to $9.5 million at the end of the fourth quarter. These backlog figures really highlights the company's performance, whereby we burned off some older orders, but still have a good amount of those orders in the back half of ‘21 still in front of us for the remainder of ’22.

Moving our discussion to the company's balance sheet. It too improved as the company entered into an agreement for a convertible debenture in the first quarter. We exited the quarter with $5.7 million in cash and repaid in full the $1.8 million that remained on our prior credit facility, which as a result, removed many restricted covenants and the going concern language in our filings. These achievements are very valuable to our capital status and the timing of the new capital couldn't have been better, especially given recent moves in interest rates and markets. Net unrestricted cash also improved in the quarter and was $1.9 million at the end of the first quarter, up from $1.7 million in the fourth quarter.

Lastly, we received $1.1 million of ERC refunds from the IRS during the first quarter, which also enhanced our capital structure and we anticipate the additional $3.1 million ERC refund still outstanding in the coming months. With receipt of these funds in the first quarter, the company had a cash flow breakeven quarter. I'm pleased with the actions in the first quarter to improve our capital structure, and I believe we have positioned ourselves for stability and renewed growth in the coming periods.

I'll now turn the conversation back to Kyle.

Kyle Loudermilk

Thank you, Emmett. To summarize, first quarter was a good quarter and showed progress we have made along with the value we've added by creating a company with diversified number of offerings. We are feeling more confident in our future as the pandemic is getting behind us and customers are getting back into the marketplace.

We have entered the year with an improved capital structure and have utilized our progress to make certain key investments and hires to bolster our organic sales efforts and improved cross-selling opportunities to make sure that we have as many touch points as possible with our customers. Our team is highly focused on improving order flow, and I believe we're in a solid position to capitalize on helping our customers upgrade and maintain their existing fleet of facilities. This really bodes well for GSE in the near to mid-term.

I'd like to conclude that we believe that the company has worked hard in the past year to stabilize the operations and we continue to work on pursuing newer contracts for the industry, it resumes upgrades and maintenance facilities and their workforce. Bidding in recent months continues to improve and many of our customers are coming back to the table and a need for upgrades and upkeep services.

While the timing in this business is still hard to pinpoint has seen in the first quarter, which showed a pause relative to the flurry of order flow at the back half of 2021, we believe, we see the business in front of us and GSE is well positioned to win our fair share of opportunities and with a leaner cost structure. Given our very unique situation as a heavily tech enabled provider of the essential services to the decarbonization of the power sector and nuclear power industry, we remain very confident in our opportunity to create substantial long-term value.

With that said, operator, please open the floor for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Adam Lowensteiner

This is Adam Lowensteiner of Lytham Partners. If I may, I would like to pose a few questions to the management team.

Operator

The floor is yours.

Adam Lowensteiner

Kyle, you mentioned a little bit about some new investments and hires in the quarter. Maybe share with us how long that takes to see some of those moves to start to perform and make their way into the business?

Kyle Loudermilk

Sure. So specifically, the investments we've made in new hires really are geared towards bringing on a couple of new salespeople and a couple of new recruiters for our Workforce Solutions business. The recruiter is making immediate impact where they have really helped us debottleneck our ability to reach out into our proprietary database of employees and connect workers and connect them to opportunities that we're looking to fill as part of our Workforce Solutions contracts that are in place. So as they've come in, we've seen a relatively quick impact in filling open slots for that business. So that's been great, and we continue to look for more. So the business is there.

For salespeople, we typically -- look, they're hard to find, it’s very hard to find good salespeople, especially in a tight environment. But as we find them, we bring them on and we brought on a couple over these past 90 days. And it typically takes a quarter to two quarters for them to begin to ramp up and make a full speed impact. With that said, its -- one of the hardest positions to fill if they do well, they get paid really well; and if they don't, we constantly groom our workforce to make sure we're bringing in and focused on making sure people are productive in sales roles, hitting their targets, and if they are not, we look to bring in new people. So this is -- it’s not a once and done. This is an ongoing efforts, but we're in a position with the balance sheet restructure really take some incremental steps there, nothing dramatic to industrial and organic growth, so that's really promising with that has happened.

Adam Lowensteiner

Okay. Regarding the bipartisan infrastructure and jobs that was passed in November. Are you starting to see some of the effects of that? The money is obviously there? How long does it take to make its way into the economy?

Kyle Loudermilk

All right. So, as we discussed in the script, when you look through DoE, they've gone out for solicitation of ideas about how to deploy the $7 billion back into the existing fleet and so that takes time. So here we are in May, legislation was passed into law in last November. So that's been six or seven months to get to this point and we expect that this money will be allocated out over a broad period of time, likely, over several years, not just all upfront or lump sum. But more important, so that's going to play out over time literally over the next couple of years.

With that said, however, it provides a high degree of confidence to industry immediately that the industry is getting support from the highest levels of the US government and that really changes sentiment and mojo for lack of a better word, like industry is very excited about where it is right now with the IPO of companies like NuScale, with industry vendor consolidation that we've seen. Utility operators are really quite excited by what's going on. Exelon has spun out Constellation Energy over the last quarter as well. So a lot of movement in the industry, a lot of confidence built up in the industry, which is directly resulting from the support from the highest levels of US government. So that's great to see.

Adam Lowensteiner

Okay. We do have an investor here who’d like to ask some questions. So Chuck, please proceed.

Kyle Loudermilk

Sure.

Operator

Yes. Our next question will come from William Bremer with Vanquish Capital. Please go ahead, sir.

William Bremer

Good afternoon, Kyle, Emmett.

Kyle Loudermilk

Hey, Will. Hello.

William Bremer

First question here is definitely on the evolvement with NuScale. During the quarter, they consummated, they uplifted tickers now SMR, I know that you guys have had a long-term standing relationship with them. Maybe give us some color in terms of what we can expect as NuScale has been getting quite a bit of press as well about all these potential SMRs being deployed globally?

Kyle Loudermilk

Yeah. Well, look at a high level, Bill, look this IPO via SPAC for NuScale has been very exciting for the industry. If you look back at last August, single largest American Nuclear Society Conference, Utility Working Conference down in Florida, there was a lot of buzz around SMRs and that really, I think was the catalyst that drove ultimately where we are with NuScale getting a lot of -- number of strategic investors raising capital and creating new excitement around accelerating their path to their first plants and going online, hopefully by the end of this decade. So our relationship with them spans a decade. We're proud of that relationship. It's been very successful mutually for both of us. So the closer they get to building plants and building plants, I think that's going to help out their entire vendor ecosystem ourselves included. So that's very exciting.

William Bremer

Maybe you all provide the services that you are working with NuScale to us sort of break that down a little bit?

Kyle Loudermilk

Sure. Well, publicly available information I’ll point to that and publicly available information points to the fact that NuScale has [indiscernible] simulation technology as part of their engineering design licensing program with the NRC achieving the design basis of license in record time. And they’ve been very open and we're grateful for that about their partnership with us using our simulation technology. Additionally, they use our simulation technology as part of their -- as an integral part of their simulation. So whenever you see their 12 pack units, that's our simulation technology and we've had staff embedded with them from time-to-time. We have former employees that are working there at NuScale. So, this is a very healthy ecosystem we have between the two companies.

William Bremer

So these contracts are multi-year or multi-service contracts that's the way I should look at them then?

Kyle Loudermilk

While effectively they've licensed our simulation technology to use to support their development efforts of their proprietary technology from time-to-time, entering the services agreements with us to use our expertise and know-how. And we certainly, like we would with any client and opportunity, promote further services to them. So I think it's a healthy relationship, which means we're in constant engagement and we're talking mutually about what are the needs and how can we help them accelerate accomplishing their goals.

William Bremer

Great. Now, let's go back to the more the legacy nuclear. Can you give us a sense of what you're seeing in the industry? I know you voiced, there is a lot of activity in terms of maintenance as well as expanding the life of some of these older reactors. What are you seeing out there and more importantly give us a sense of what could be potentially announced in terms of future contracts and the terms of them?

Kyle Loudermilk

Well, first of all, as we stated, the industry is really investing quite heavily in itself to keep its plants evergreen, debottleneck themselves or upgrade themselves to produce more power over time from outage to outage bringing in the capital investment, new pumps, pipes, heat exchangers, turbine upgrades et cetera. And all this over time accomplishes couple of things, Bill, it extends the lifetime of the plant. Its keep it evergreen operating safely and efficiently but also certain investments could help plant produce incrementally more power as time goes on.

And so our services that we provide, particularly our workforce development solutions and most notably the solutions that we've provided historically through our True North Consulting Group and GP Group are really geared towards just that, helping these plants facilitate safe operations as well as produce more power from existing plants over time and extend their lifetime. There's a lot of investment that goes into that and those lines of business are right in the Venn diagram would need and ability to spend and desire to execute quickly. And I think that explains much of why we're seeing nice solid performance in those lines of business and we expect that to continue and grow as we move forward.

William Bremer

That's good to hear. My final question is just on the international front versus the domestic. If we had to take a step back and look over the next year. Where do you see more activity or is there a certain trend that you're seeing that’s sort of surprising you as we go through this year?

Kyle Loudermilk

Well, I'll talk about what everyone can read in the headlines and this industry is very exciting. Although, the reasons for -- the compelling reasons for why it's moving so quickly are unfortunate with the Russian invasion of Ukraine, it highlights a number of things such as the need to defund despotic regimes by not consuming their energy, but rather becoming energy independent and achieving energy security. So we're seeing that mindset shift rapidly in Western Europe, and as a result, you see all the former frontier countries, Eastern Frontier countries in the European Union and in Europe to really talk quite openly about the desire to accelerate investment in nuclear power, so they can stand out to be independent from imported power from an adversarial foe to their east.

So Poland has been very open about looking to invest in SMRs and traditional technology as has the Czech Republic and Slovakia, which is already well underway with an investment program. Romania has been very open about wanting to get NuScale plant up and running by the end of this decade. I mean, that -- and there is more to speak along throughout Europe. The United Kingdom is looking to renew its energy program. France is extending the lifetime of its plants. Germany is still a question mark, but I spoke openly about embargoing Russian oil and eventually decoupling from the consumption of gas, which is astonishing compared to where we were a year ago.

So with that said, that's the international perspective, that only highlights the importance of nuclear for energy security and independents. To the United States, we've already had a program underway, mostly driven by the need for Zero Carbon power, but now gasoline prices above $5 a gallon in the US, the more power we generate from nuclear, the less dependent we are upon fossil fuels and they can be diverted to other things such as gasoline and diesel oil production that type of thing. So again, that is only providing an impetus in the United States to further its energy, security and get back to energy independence, if not get to be an energy exporter to help our allies out of Europe.

So that nuclear power is a key part of that and this is a long time building and it's only accelerated as a result of what's happening between Russia and Ukraine. So GSE is well positioned for that. We are excited about where we are. And look, we feel, as I've said in the script, we have a robust pipeline of business that's out there. We have better visibility than we've had in a long time. The drive towards energy security and independents is helping clarify that and we're just pushing and pushing to start getting these deals to come is as this year unfolds.

William Bremer

Well, thank you, well said and should be interesting times ahead.

Kyle Loudermilk

Yeah. Thanks, Bill. Appreciate the questions.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Kyle Loudermilk for any closing remarks. Please go ahead, sir.

Kyle Loudermilk

Well, I'd like to thank everybody for joining us. We appreciate your time and interest in GSE and remain excited about what's ahead of us, as I've said repeatedly in the call. I do want to note, we will be presenting at the Lytham Partners Summer 2022 Investor Conference on June 21 to 22, and we'll be looking forward to speaking with many of you at that time. We're also open to attend other investor calls. So any ideas from our investor community as you hear this, please reach out and let us know where we should be looking in addition to things that we have in place. So if you any questions please reach out to Adam Lowensteiner from Lytham Partners and we'd be happy to schedule a follow-up call and thanks again everyone and wish everyone have a great day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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