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GP Strategies Corp. (GPX) Q1 2019 Earnings Call Transcript

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GPX earnings call for the period ending March 31, 2019.

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GP Strategies Corp. (GPX)
Q1 2019 Earnings Call
May. 10, 2019, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning, and welcome to the GP Strategies First quarter 2019 Earnings Conference Call. All participants will be in 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 Ann Blank, Vice President of Investor Relations. Please go ahead.

Ann M. Blank -- Vice President, Financial Reporting & Investor Relations

Thank you. Good morning, everyone and welcome to GP strategies first quarter 2019 earnings call. On the call today are Scott Greenberg, Chief Executive Officer; Adam Stedham, President; and Mike Dugan, Chief Financial Officer.

Before we begin, I would like to remind you that today's comments will include forward-looking statements, which are subject to certain risks and uncertainties that could cause our actual results to be materially different from expectations. For a complete discussion of these risks, we encourage you to read our documents on file with the SEC, which are posted on the Investors section of our website at A replay of this webcast will be available on our website for 90 days following today's call. The slides that are being presented today are also available on the Quarterly Earnings Releases page of the Investors section of our website.

At this time, I'd like to turn the call over to our CEO, Scott Greenberg.

Scott N. Greenberg -- Chief Executive Officer

Thank you, Ann. Good morning, and welcome to our first quarter 2019 conference call. Today we will continue with our quarterly format which includes a WebEx presentation. Hopefully you'll find this presentation informative and useful in your analysis of GP strategies. To initiate the call, I'll provide a brief overview of results for the first quarter of 2019. Then Adam, our President will give key updates on our global initiatives. After Adam's presentation, our CFO, Mike Dugan, will present an in-depth financial analysis. And then I'll provide it's summary, and we will conclude with a Q&A session.

This morning, before the market opened, GP Strategies reported it's first quarter 2019 financial results. The company's first quarter results reinforce our positive outlook for the future. We achieved both significant revenue and gross profit improvements. The first quarter operating results showed progress in achieving the company's long term objectives. In addition, we see our new sales structure gaining momentum for future revenue. Our backlog is up to an all time high of $334.7 million which is up 21% from the corresponding period of March 31st, 2018. And a positive attribute of our company is that over 60% of our revenue stream is considered recurring on a year-to-year basis and over 90% of our revenue is typically derived from customers that we've had in the prior year. In addition, we are pleased with our progress with the TTi acquisition and expect TTi to be accretive beginning in the second quarter of 2019. While the Company's first quarter results were negatively impacted by the integration of the TTi acquisition continued Oracle post implementation course and additional severance expense. I believe that the company is building on the foundation discussed on the fourth quarter earnings call.

With that being said, I'll now turn the call over to Adam.

Adam H. Stedham -- President

Thank you, Scott. We're pleased with the first quarter operating results demonstrate that our transformation efforts are beginning to make an impact. We feel confident that our revenue and earnings will continue to grow throughout 2019. It's important to realize a couple of key factors regarding the backlog that Scott mentioned. First GP Strategies has a record backlog without any TTi backlog factored in. The TTi backlog simply adds to the total.

Second we've grown our backlog without depleting our pipeline. In fact our pipeline is up 9% since January 1. This indicates that the increase in backlog is not simply a conversion of pipeline to backlog, but rather a market increase in both pipeline and backlog. Now last call we shared our strategy for the growth of GP Strategies at our Investor Day. At that time we indicated that we had four key pillars to our plan. We're focusing on margin expansion, recharging organic growth, turning around declining business areas and a focused acquisition strategy. We discussed expanding our margin through business expansion outside of North America and expansion of share of wallet for clients within targeted industries.

Q1 GP strategy had the largest percentage of revenue outside of North America in the history of the company. A large portion of the international expansion is a result of the TTi acquisition and we're aggressively working to realize our historical gross margins in these regions. And we feel that we'll be able to do that by the end of 2019. At that point, we'll be able to shift the international business margins back to our historical levels.

Regarding organic growth, Q1, 2019 is the first quarter in some time that GP strategy has realized year versus year constant currency organic growth. I'll remind everybody that Q1 is our seasonally weakest quarter and we continue to focus on our organic growth that we're optimistic about the continued ramp up of our sales strategies. The two declining business units that we discussed turning around during the Investor Day were Engineering and Technical services and Organizational Development services. We're pleased with the results in both of these businesses and I'll share a little bit more details about that in just a minute. Our TTi acquisition was the outcome of our focused acquisition strategy, considering the size and price of this acquisition it provides a significant opportunity for shareholder value. Prior to our acquisition TTi operated roughly at a break even EBITDA. This year we're focused on shifting their margin profile through improving sales while simultaneously cutting costs. Thus far we're very pleased with our progress and we feel we're on track for the plan this year.

Now I'd like to shift the conversation a little bit to discuss the segments that we have. Within our Workforce Excellence segment, we continue to see positive trends for our Managed Learning Services business in Q1. I'd like to remind everyone just the three previously announced training outsourcing wins, we're not anticipated to have any impact in Q1 and they'll have minimal financial impact in Q2. The revenue and profit will ramp quickly in Q3 and reach the sustained monthly run rate by the middle of Q4.

Now in addition to those wins, we recently won a previously undeclared $2.5 million per year, three year Manage Learning Services contract in Europe, that contract will begin August 1 of this year. Also we've been verbally awarded another three year $1.5 million per year Manage Learning Services contract that will begin January 1, 2020 starting to begin to build up our book for next year as well. There's an important trend to these contracts, three out of five of the outsourcing contracts I just discussed are exclusively outside of North America. One of the five is a contract with global revenues distributed across regions all over the world. So, these contracts will continue to expand our strategy of growth outside of North America.

Now the Engineering and Technical services business within Workforce Excellence segment, experienced broad based growth in all service lines in Q1. In Q4 of 2018, the alternative fuels business experienced a loss due to the adverse effects of a significant overrun on a single large project. That organization operated at a small gross profit loss in Q1, but the organization currently has a very significant backlog they will be profitable in Q2 and they'll be profitable throughout 2019.

So let's move on to the business transformation segment. This segment includes our sales enablement practice inclusive of the TTi acquisition and the organizational development services practices. For sales enablement, the backlog is up Q1, 2019 versus Q1, 2018 exclusive of TTi. In addition the revenue and gross profit for the segment although it was down slightly versus Q1, 2018 that's primarily due to a shift in a publication schedule for our largest automotive client moving it later into the year.

We've also experienced strong pipeline growth within our TTi acquisition and our historical sales enablement business. The automotive industry is reacting very positively to the combined strength of TTi and GP. Our strategy has helped us achieve incremental growth across multiple automotive clients.

Now moving on to the organizational development practice, the gross profit is up for this practice substantially in Q1, 2019 versus Q1, 2018. Previously we discussed our strategy of focusing our sales efforts around higher contribution, excuse me contribution margin services. This strategy is a key driver for the shift in organizational development. We believe this organization should be able to consistently operate at this higher gross margin model and operate at a higher margin model than the historical run rate. As we scale our revenues by focusing on these higher contribution margin services, we believe this will realize more gross profit on the revenue than we've historically achieved.

So that's an update on the businesses. And now I'll turn it over to Mike for more of the detailed financial analysis.

Michael R. Dugan -- Executive Vice President and Chief Financial Officer

Thanks, Adam and good morning everyone. Starting with revenue and gross profit on Slide 8 of the presentation. We reported Q1 revenue of $139.5 million which is up $14.4 million or 11.5% from the $125 million of revenue reported in Q1 of last year. Breaking the revenue out by segment. The workforce excellence segment reported Q1 revenue of $79.5 million which is up $3 million or 3.9% from the revenue reported in Q1 of 2018. Bridging the revenue drivers in the workforce excellent segment, the MLS practice contributed a net increase of $1.8 million primarily due to a $3.5 million increase in revenue from the IC Axon acquisition which was completed in May of 2018. Partially offsetting this increase was the 1.1 million decrease in the UK job skills training service line due to the UK government changing, how this program is administered and a net $0.6 million decrease in revenue for Managed Learning and Training Content Development services. The ETS practice contributed a net increase in revenue of $3.4 million primarily due to a $1.3 million increase in chemical demilitarization services for the U.S. government, a $0.9 million increase in alternative fuels projects, $8.7 million increase in disaster recovery services and $0.5 million of other net increases within the ETS practice.

Overall increases in the Workforce Excellence segment were partially offset by a $2.2 million decrease in revenue due to changes in foreign currency exchange rates. The Business Transformation Services segment reported Q1 revenue was $60 million which is up $11.4 million or 23.5% from the revenue reported in Q1 of '18. Bridging the revenue drivers in the BTS service -- BTS segment. The Sales Enablement practice contributed net increase in revenue of $13.3 million primarily due to a $12.7 million increase in revenue due to the TTi global and TTi Europe acquisitions worked which were completed in 2018.

The organizational development practice had a net decrease in revenue of $1.2 million primarily due to a decline in platform adoption services. Changes in foreign currency exchange rates caused a $0.7 million decrease in revenue within the BTS segment. Within this segment the Sales Enablement practice had revenue in Q1 of '19 that included $5 million of publication services revenue which was $0.5 million less than the publication revenue recorded in Q1 of last year. We are projecting publication revenue in Q2 of '19 to be at $8.4 million compared to $8.2 million in Q2 of '18.

In terms of gross profit, we reported $21.3 million which is up $3.6 million or 20.4% from the gross profit reported in Q1 of '18. The workforce excellent segment reported Q1 gross profit of $13.4 million which is up $2.1 million or 18.1% from the gross profit reported in Q1 of '18. Bridging the main drivers, primary drivers of increasing gross profit in this segment were due to a $1.3 million increase in gross profit in the ETS practice primarily due to the increase in revenue and a $0.8 million increase in gross profit in the MLS practice again primarily due to the increase in revenue which was partially offset by a $0.8 million decrease in the UK job skills training service line due to the revenue decline previously noted.

The business transformation services segment reported Q1 gross profit of $7.9 million which is up $1.5 million or 24.4% from the gross profit reported in Q1 of last year. Gross profit increases in the segment were primarily due to the $1.2 million increase in gross profit contributed by the TTi acquisition. It is also worth pointing out as Adam mentioned the increase in OD, the organizational development practice gross profit even with lower revenue as the strategy has been to focus on selling higher margin services in this practice.

Moving on to SG&A expenses on Slide 9. General administrative expenses are up $2.3 million or 16.4% quarter-over-quarter. The primary drivers are $1.2 million increase in G&A from the TTi acquisition, a $0.2 million increase in amortization from the TTi acquisition, a $0.4 million in increase in bad debt expense in Q1, bad debt expenses as in Q1 of 2019 was up $0.1 bad debt expense versus in Q1 of 18 was a $0.3 million bad debt credit.

There was a $0.2 million increase in severance expense booked in the quarter related to cost savings initiatives and a net $0.3 million increase in miscellaneous other G&A expenses. Within the quarter, the G&A expenses included $0.7 million of continued ERP implementation and postal life support services as well as increased audit fees incurred during the quarter related to the new system. We expect to incur approximately $0.4 million per quarter through the fourth quarter of 2019 as we seek to optimize the ERP platform.

Finally in addition to the $0.2 million of severance incurred in Q1 of 2019 there was an additional $0.4 million of unique expenses incurred during the quarter that are not expected to be part of the run rate going forward. Sales and marketing expense for Q1 is up $1.3 million quarter-over-quarter with the drivers being the investment in the business development, personnel inside sales and the corporate account management program.

Moving on to other P&L items on slide 10. We incurred restructuring charges of $1.1 million in Q1 of 2019 associated with the TTi integration compared to $0.4 million in Q1 of '18 in connection with our prior reorganization and related cost savings initiatives. In Q1, the gain on change in fair value of contingent consideration was minimal, first is the $2.6 million in Q1 of '18 primarily related to changes on the maverick and the McKinney Rogers contingent consideration valuation.

Interest expense is up $0.9 million due to higher borrowings and interest rates under the credit facility and the income tax rate, the effective income tax rate was $30.6 million in Q1 of '19 versus $39.7 million in Q1 of '18. The 2018 tax rate included the true up of $2.9 million of the one time mandatory repatriation tax.

Moving on to the earnings slide summary on Slide 11. Net income for Q1 was $0.3 million compared to $2.6 million in Q1 of last year. Diluted earnings per share was $0.02 per share compared to $0.16 per share in Q1 of last year, and for adjusted earnings per share the aggregate of special items in Q1 totaled a net $0.14 per share impact which results in an adjusted EPS of $0.16 for Q1 of '19. Adjusted EBITDA was $8.8 million for Q1 of '19 versus $8.1 million for Q1 of 2018. A reconciliation of both the adjusted EPS and the adjusted EBITDA is in the appendix to this presentation.

Moving on to some balance sheet highlights on Slide 12. Our debt net cash is up $5 million. If you recall in our last earnings call, AR net unbilled and deferred revenue excluding the TTi acquisition was up approximately $15 million primarily as a result of the disruption associated with the implementation of the new ERP system. In Q1, while we managed to stay materially even in terms of the net balance of these accounts only being up $1.7 million, we did not reduce these balances as we would have liked to, as the disruption from the ERP system carried over into January and February. As teams were focused on the first quarter close and the subsequent audit support.

It wasn't until March, that we saw the billing cycle returned to a more normal timing and begin to catch up with the billings backlog. For some metrics on this, in January and February billings averaged $37 million per month, for March and April billings averaged $61 million per month. While we still have a little more back -- billing backlog to clear in early May, we anticipate the May billing cycle returned to normal and that any delayed billings will have been completed at that time -- at this time. For the March, April and the early May catch up billing items, it should take roughly 30 to 60 days from the date of the respective invoices for the AR to convert to cash.

Debt outstanding at the end of Q1 was $116.6 million compared to $116.5 million at the end of 2018. The leverage ratio as of Q1 of '19 was 2.9 compared to 2.9 as of Q4, 2018. In addition to the $8.4 million of cash on hand, as of Q1, 2019 there was $13.1 million of available borrowings under our credit facility based on a maximum leverage ratio of 3.25.

Moving on to Slide 13 backlog. Our backlog as of Q1, 2019 was $334.7 million which is up $58.2 million or 21.1% compared to the $276.5 million of backlog at Q1 of 2018. Excluding the Q1 TTi backlog of the $33.3 million backlog is up $24.6 million or 9% over Q1 of 2018, approximately 90% of our backlog will be recognized as revenue within the next 12 months.

This concludes the financial update and I'll now turn the call back to Scott.

Scott N. Greenberg -- Chief Executive Officer

Thank you, Mike. As you can hear from Mike and Adam, we've made great progress in Q1 of 2019. You heard about a few things such as strong pipeline integration of TTi as a major priority despite the positive results seasonality Q1 is our weakest quarter. And then Mike explained some of the expenses impacting G&A and how we expect it to trend in the future, all positive things.

As far as the company overall, the company uses free cash flow from operations in 2019 and sale of any non-core assets to strengthen its balance sheet by reducing debt and improving its leverage ratio. And that's really a key from now till the end of the year. As far as investor relationships in the next few weeks to come we actually will be very active in presenting an investor conferences. We have Needham in New York City on May 21st, B. Riley in L.A, May 22nd and Barrington in Chicago, May 23rd. We look forward to seeing many of you at the conference and updating you after the second quarter.

With that moderator, I'll turn it over to the Q&A session.

Questions and Answers:


We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Alex Parris of Barrington Research. Please go ahead.

Chris Howe -- Barrington Research -- Analyst

Good morning. This is Chris Howe sitting in for Alex Parris.

Scott N. Greenberg -- Chief Executive Officer

Good morning, Chris. How are you?

Chris Howe -- Barrington Research -- Analyst

I'm good. First I wanted to start on the sales structure. Could you maybe pass through some of the incremental benefits that you saw in the quarter from the new sales structure that drove the increase in backlog of 9% and following up on that, how has that led to the success that you're seeing internationally with the three out of five outsourcing contracts outside of North America. Can you provide some additional color on, just what you're seeing as far as the success with the sales structure this quarter.

Scott N. Greenberg -- Chief Executive Officer

Absolutely. So, I think -- so there is -- it's two different answers for the two different parts. So first with the sales structure. So with the sales structure what it's really enable a big positive that it's enabling for us is with a centralization of much of the sales force and the sales investment rather than having it distributed across the enterprise, historically with the sales force distributed across the enterprise relatively equal to revenue, each person was focusing on their individual business regardless necessarily the opportunity at any given point in time for that business.

Through the centralization of it we're able to focus the sales force more clearly on high value, high opportunities that give us a great chance to win and they give us the type of revenue and profit we'd like to achieve. So that's a big part of the sales structure, really ables us to focus where we wanted to be focused and that's driving that result. It's also giving us a higher win percentage so which is contributing to the backlog. So our pipeline conversion rate has gone up.

The other thing I'll point out on the international piece. So if you look at our outsourcing practice, historically our outsourcing wins, you know we had a very high success rate in North America with pipeline conversion for training outsourcing in North America. We had a much lower success rate for pipeline conversion our training outsourcing in Europe. So what we did was as part of the reorganization, we centralized that as well, our proposal management team for training outsourcing specifically. So these are the teams that actually write the proposals and put together the models and put together the pitch. All of that (inaudible) so we have the same team that historically had a high pipeline conversion in the U.S. now handling Europe and they're getting a much better pipeline conversion in that region. Does that answer the question for you?

Chris Howe -- Barrington Research -- Analyst

That does, that's helpful. It leads me to another question. Just about your opportunities for margin expansion whether it be through pricing, the international opportunities that you are highlighting or other strategic industries. Can you characterize what our expectations should be for margin expansion in the remainder of the year and perhaps the cadence of improvements that we should see moving forward?

Adam H. Stedham -- President

How about if I characterize the process for how we think we're going to get the margin expansion. I don't think at this point we want to give a specific target of what we think that the margin expansion will be, in terms of the number or the percentage. But let me explain the process for margin expansion and why we feel comfortable with it. There is two parts today. One is the recent TTi acquisition, historically operated at a lower margin then GP historically operated at, and we're implementing a strategy and we think that will improve the margin of that business which is going to contribute to the overall margin profile over the firm.

In addition to that, the key to our expansion of our margin profile is really selling a high valued incremental services within our existing accounts. So these additional services are typically more niche services that's a marketplace pays a premium on them and they deliver a lot more value to the customer. Therefore you're able to realize a higher margin on them. So, a big part of our account management strategy is, is those account managers are attempting to introduce additional services that will simultaneously provides far more help to our customer, but it also provides far greater margin to us or gross margin percentage to us.

So it's really driven by our account manager strategy and we've experienced a significant amount of cross-selling. I think you're onto a good thing and on the next call, we'll provide more information on the amount of cross-selling that's happening which is an leading indicator for that gross margin increase, that's how it is -- that's how we achieved it.

Scott N. Greenberg -- Chief Executive Officer

And if I could add to that -- in that, if you looked at GP strategies in the last year, one of the industries we've been particularly interested is the pharmaceutical industry and we made an acquisition in the beginning of 2018 and that high (inaudible) and the level of the sophistication of that work tends to give us higher margin profiles. So as Adam mentioned, a lot of our business development effort or lot of our strategic effort is going into programs that tend to have the high end margin portions of the company.

Chris Howe -- Barrington Research -- Analyst

Okay. Great. And then, I just had one more question on the UK job skills training. Can you provide an update on what you're seeing in regard to your marketing efforts and being this will be the last difficult comparison. How we should look at this business going forward?

Scott N. Greenberg -- Chief Executive Officer

So a couple of things. One is we previously thought that Q2 would be the crossover quarter where Q2, 2019 would be above Q2, 2018. Right now we don't think that will be the case. Q2 it'll still be a little bit below, this is driven by a couple of things foreign exchange is not acting favorably for us so that's going to create a downturn. In addition the ramp up of the sales force hasn't happened as quickly as we'd anticipated. Now with that said, so that's based upon the current forecast without a doubt Q3 will be higher than Q3 last year. So we're very comfortable with that.

In addition to that which we don't know the impact of this yet, but what we're seeing is April was the best month for starts that we've had in 18 months. We had a very strong starts month in April, part of that is a contribution from the change in the policy from a 10% on the non refunding model, on the non-levy work to the 5%. So that government change, that was intended to increase the volume of apprenticeship participants appears to be having a positive inset effect. We had a very favorable April actually with our April is better than what we anticipated. So that may give us optimism for the quarter, right now we're anticipating it'll be a little bit lower in Q2 this year than Q2 last year. But if this current trend continues to pick up, it is not possible that we actually are favorable this quarter as well.

Chris Howe -- Barrington Research -- Analyst

That's great to know. Those are all my questions for right now and I'll hop back in the queue. Thank you.

Scott N. Greenberg -- Chief Executive Officer

Thank you.


Our next question comes from Jeff Martin of ROTH Capital Partners. Please go ahead.

Jeff Martin -- ROTH Capital Partners -- Analyst

Thanks. Good morning guys.

Scott N. Greenberg -- Chief Executive Officer

Good morning, Jeff.

Jeff Martin -- ROTH Capital Partners -- Analyst

Was just curious at your Analyst Day back in the fall you talked quite a bit about the longer lead generation sales cycle for parts of the business. Was just curious you know our six, seven months passed that now if you could give us an update on how those longer lead time sales cycles are starting to trickle in.

Scott N. Greenberg -- Chief Executive Officer

Sure, absolutely. So I can give you the update on that and then help you understand how to think about it in the future, right. So the longer sales cycle businesses had primarily not exclusively but primarily those are awarded during Q4 or the beginning of Q1. Because if you look at our sales enablement business in our Managed Learning Services business which are the two long sales cycle businesses. Those types of initiatives customers have a tendency to align to annual budget cycles. So, therefore they're going to participate in some sort of procurement activity in Q4, end of Q3 and then it will take place in the next year. So we had a good selling season Q4 of last year, not as high as we would like it to be, but substantially higher than it has been for the last several years. But even with that, so you win that work in Q4, then you're doing all the setup and then it starts to kick in, so that's why I mentioned earlier that our three outsourcings that we won, didn't contribute anything even though we wanted in Q4, they didn't contribute anything in Q1. We'll have a minimal impact in Q2 and then they kick in far stronger in Q3 ramping fully up in Q4.

So what that means for it is, the other thing that we're doing is in Q3 and Q4, we're preparing for a strong selling quarter in Q4 of this year. And as long as we have a high success rate in Q4 which will report out on that during the quarter then it'll continue to materialize next year. Now the one thing that has happened which historically didn't happen that frequently, I just announced we won another training outsourcing or another managed learning services contract. So we won that mid-year and we've won that because the client is changing their supplier because their dissatisfaction with their current supplier. So they're transitioning to us out of cycle because they're excited to lose to us.

I also announced another outsourcing that we just won -- and it won't start until 2020. Similar situation, they're switching from a supplier that they want to switch away from and switch to us. So that's how those long sales cycles work predominantly you win them toward the end of the year and then they ramp up revenues throughout the rest of the year. And since there are multi year contracts, if you win that more than next year that's where you get the stacking effect of one on top of the other. That makes sense.

Jeff Martin -- ROTH Capital Partners -- Analyst

It does. It does that's helpful. In terms of your 9% organic growth in backlog. Should we anticipate your organic growth rate over maybe looking out three or four quarters to correlate to that growth in backlog.

Michael R. Dugan -- Executive Vice President and Chief Financial Officer

This is Mike, Jeff. So the backlog is more of a general indicator for us, it's not something that you can kind of take that finite calculation and say a 9% growth quarter-over-quarter on a comparison and translate that to organic it's more of a general health indicator for us. So while we're, we feel strongly about the organic growth objectives that we had out there, I wouldn't directly tie those two together.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. And then you mentioned (multiple speakers) right, you mentioned the sale of -- potential sale of non-core assets was just curious what areas those assets might be in. And is there, is there a timeline on that?

Scott N. Greenberg -- Chief Executive Officer

Yeah, I mean Jeff, we are currently evaluating a few of those non-core assets. Some of it is going to be based upon market conditions and value. So I think the goal would be to get some done in the second half of the year but right now I would say that nothing is at this stage where its imminent. And you know I don't think it will be a major portion obviously of the company, its just pieces in different areas.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. That's helpful. Thanks guys.


(Operator Instructions) And our next question comes from Zach Cummins of B. Riley FBR. Please go ahead.

Zach Cummins -- B. Riley FBR -- Analyst

Hi, good morning. Thanks for taking my questions and congrats on the strong start to the year.

Scott N. Greenberg -- Chief Executive Officer

Thank you, Zach.

Zach Cummins -- B. Riley FBR -- Analyst

Yeah, in terms of contribution from TTi in the quarter, I think you said there is 12-point (ph) million in the BTS segment, I mean is there anything in the workforce excellence segment, I was just wondering if you could provide a little more color around the split between the TTi revenue among those two segments?

Scott N. Greenberg -- Chief Executive Officer

Yeah. So Zach, we're tracking all of the TTi acquisition, is rolled up within our sales enablement practice. So that $12.7 million is the entire component of the TTi acquisition which is embedded in sales enablement.

Zach Cummins -- B. Riley FBR -- Analyst

Understood. That's helpful. And then just going back to the sales structure specifically within the organizational development group. Can you talk about the progress within that and also within that same organization. Can you talk about you're now focused toward the higher margin services that are being sold. What do those typically look like versus the services that you've been providing over the past couple of years?

Scott N. Greenberg -- Chief Executive Officer

So the progress with the sales force, we shared in the Investor Day fall of last year that we had a significant turnover in that sales force and we shared that then. So now, I would classify the sales force as it's now maturing. A lot of the new hires that were hired in fall we expect them to be at their full run rate typically inside our model. A new salesperson typically takes somewhere between nine to 12 months to consistently contribute positively on a monthly basis, in terms of their cost to the organization versus the incremental profit that their sales bring in on a monthly basis, right. So we're hitting that point now. So, we feel pretty good about that.

So in terms of the selling of the work, historically there's a few things. Some of the services that we were trying to sell, Mike mentioned, within platform adoption some of the services that we were selling before had a significant cost associated with investing in the technology, investing in the capability to sell those services. And so, we had incrementally make investments that were well beyond the incremental profits that we were making off the sales. So for those services we've just stopped emphasizing selling them. We continue to generate revenues off and we continue to experience backlog from them -- from historical sales and repeat customers, but we're not looking to add any new customers to that. Because the customer acquisition cost is just too high. So that's there, in addition we have new products within leadership development and other areas that we've designed specifically to have a higher contribution margin and we're selling those -- we're focusing on those within the sales force.

Zach Cummins -- B. Riley FBR -- Analyst

Got it. That's helpful. Yeah, it's really helpful. Thank you for that. And then, Scott just one final question for you. I mean in terms of the cash balance on the balance sheet at this point you've outlined a few different ways to address that. Is there really any concerns in the near term and it sounds like you should be starting to get some cash contributions from the accounts receivable line here in Q2, but just kind of your thoughts about the balance sheet positioning as you're going forward into the rest of 2019?

Scott N. Greenberg -- Chief Executive Officer

Yeah, typically we generate 50% to 60% of our EBITDA and free cash flow and that's really been our model. When you look at our projected EBITDA or adjusted EBITDA that we show, we have a lot of onetime expenses in the first quarter, we had the various severance expenses. So obviously as we go through the year, and we don't have those expenses in future quarters. We expect to return to the cash flow that the company has historically generated which is usually pretty strong in relationships with our EBITDA.

Zach Cummins -- B. Riley FBR -- Analyst

Understood. That's helpful. Well thank you again for taking my questions and best of luck in the upcoming quarter.

Scott N. Greenberg -- Chief Executive Officer

Okay. Thanks, Zack, and we'll see in a few weeks at the conference.


This concludes our question-and-answer session. I would like to turn the conference back over to Scott Greenberg for any closing remarks.

Scott N. Greenberg -- Chief Executive Officer

Thank you, moderator. You know we are pleased with the positive results in the company and we like the momentum on where we are. And we look forward to updating you after the second quarter and seeing lot of you at the investor conferences. Thank you for participating today.


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

Duration: 43 minutes

Call participants:

Ann M. Blank -- Vice President, Financial Reporting & Investor Relations

Scott N. Greenberg -- Chief Executive Officer

Adam H. Stedham -- President

Michael R. Dugan -- Executive Vice President and Chief Financial Officer

Chris Howe -- Barrington Research -- Analyst

Jeff Martin -- ROTH Capital Partners -- Analyst

Zach Cummins -- B. Riley FBR -- Analyst

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