Specialist
Former director at GP Strategies Corp
Agenda
- GP Strategies' (NYSE: GPX) segmentation and performance across business lines
- Growth drivers and outlook for GP Strategies
- Competitive positioning of GP Strategies vs rivals and threat of customers insourcing learning
- Potential evolution of GP Strategies as part of Learning Technologies Group (LON: LTG)
Questions
1.
What has become of the demand environment for training budgets – how has coronavirus impacted it? What’s your outlook for training budgets into H2 2021-22 and beyond, relative to pre-coronavirus?
2.
Are there any market data points around the historical growth rate of training budgets? How do you expect this to develop?
3.
Budgets and market spend seem to be focusing on different areas but have largely returned to pre pandemic levels, but what are the likely growth drivers for GP Strategies’ product set and markets? The company’s offerings include OPS [Organisational Performance Solutions], TPS [Technical Performance Solutions] and APS [Automotive Performance Solutions]. It also covers specific industry verticals such as tech, finance, aerospace and defence. How would you assess the respective growth and demand drivers?
4.
GP Strategies reported a significant decrease in revenue across regions and the three product lines over 2020, even if we discount the pandemic impact and divestments. Organic growth for 2019 was about 5% across the regions. What do you think has underpinned the company’s choppy performance? Is the market structurally volatile or have internal company issues, performance or execution led to these results?
5.
You alluded to challenges in GP Strategies’ employee retention and certain management losses. Were the personnel losses in specific departments or company-wide? Do you think GP’s new management team and restructurings have helped to rectify these issues?
6.
Has GP’s employee attrition broadly been across the board or has there been a greater brain drain in certain areas of the business or specific positions?
7.
What would you highlight about the customers insourcing trend? Presumably the costs to insource learning and development rather than outsource to a player such as GP Strategies holds increasing appeal. Is this what’s happening? How do you expect the trend to evolve?
8.
What typically dictates a customer win for GP Strategies? Is it mostly price? You said the OPS team is largely based in India and other lower-cost regions. Roughly what proportion of the employee base is in these areas? Is price ultimately dictating GP’s wins, rather than specialisation in particular markets?
9.
Could you elaborate on the challenges around new client acquisitions? In 2020 and 2019, 95% and 90% of GP Strategies’ annual revenue respectively was generated from client relationships that existed in the prior year. Are new client acquisitions tough because market dynamics are limiting the demand for outsourcing, or is GP losing out to rivals?
10.
What about some of the top accounts? You mentioned GM, which must be the 14% of revenue. GP Strategies also has a finance client accounting for about 9% of revenue – that’s a couple of clients generating over 20%. How much risk is there in having two clients account for a considerable proportion of revenue? Are these strong relationships?
11.
What could be the key pros and cons of GP Strategies being acquired by Learning Technologies Group?
12.
Clearly a big driver of the deal for Learning Technologies Group is GP Strategies’ big blue-chip install base. Based on GP’s customer base, is it compelling to take on the LMS [learning management systems] solutions of a company such as Learning Technologies? The acquisition will be common knowledge and there will naturally be presumptions that GP is only pushing these because it is required by Learning Technologies.
13.
Do you think there is the opportunity for Learning Technologies Group to be successful in cross-selling into the GP Strategies install base? Larger customers will probably have some element of an LMS already installed. Do you think it will be tough to try and cross-sell these to the customer base?
14.
What is your outlook for GP Strategies, the market, the competitive trends, the internal pressures at GP and what Learning Technologies Group could offer?
