GSE Systems Announces Third Quarter 2010 Financial Results
GSE Systems, Inc. (GSE) (NYSE Amex: GVP), a leading global provider of real-time simulation and training solutions to the power, process, manufacturing and Government sectors, reported that revenue for the three months ended September 30, 2010 was $11.9 million, a 16.5% increase from the revenue reported for the three months ended September 30, 2009 of $10.2 million. Revenue recognized on the Company’s $23.8 million contract to provide a new nuclear power plant operator training simulator to a Slovak power plant totaled $3.6 million in the three months ended September 30, 2010 versus $1.9 million in the third quarter of 2009.
Gross profit percentage for the three months ended September 30, 2010 and 2009 was 20.2% and 25.0%, respectively. Included in the Company’s $23.8 million contract to provide a new training simulator to a Slovak power plant is approximately $16.4 million of hardware, the largest portion being a Siemens digital control system. The Company accrues the cost of the digital control system based upon its estimate of the work completed by Siemens. As the purchase price of the digital control system is denominated in Euro, the Company must remeasure the accrued costs into U.S. dollars each quarter based upon the quarter end exchange rate. For the three months ended September 30, 2010, the Company recognized an unrealized currency loss of $506,000 on the accrued costs of this system, which was recorded in cost of revenue, versus an unrealized currency gain of $47,000 for the three months ended September 30, 2009. Excluding the currency impact, gross profit would have been 24.4% for the three months ended September 30, 2010 versus 24.5% for the three months ended September 30, 2009.
Operating expenses increased by $602,000 or 28.3% for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009. The increase is mainly attributable to (1) the acquisition of TAS Holdings Ltd in the second quarter of 2010, (2) higher business development expenses due to the Company’s 2010 Simworld user conference and the hiring of additional business development personnel and (3) the costs of the change in executive management with the retirement of Mr. Moran, the Company’s Chief Executive Officer, and the hiring of Mr. Eberle as Chief Operating Officer and subsequent promotion to Chief Executive Officer.
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