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GP Strategies Corp. (NYSE:GPX)
Q3 2019 Earnings Call
Nov 7, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the GP Strategies' Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Ann Blank, Vice President of Investor Relations. Please go ahead.

Ann Blank -- Vice President of Investor Relations

Thank you. Good morning, everyone and welcome to GP Strategies' third 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 gpstrategies.com. 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 third quarter 2019 earnings conference call. Today, we will continue to use our quarterly format, which will include a WebEx presentation. Hopefully, you'll find this informative and useful in your analysis of GP Strategies. To initiate the call, I'll provide a brief overview of the results for the third quarter. Then, Adam, our President, will give key updates on our global initiatives with a focus on organic revenue growth opportunities. After Adam's presentation, our CFO, Mike Dugan will present the summary financial analysis. Then I will provide a summary concluding with a Q&A session.

This morning before the market opened GP Strategies announced results for the third quarter of 2019. In addition to realizing both a 12% increase in revenue and a 10% increase in adjusted EBITDA to $10.8 million in the third quarter of 2019, we have made significant progress in both our business development efforts, and strengthening our balance sheet.

The Company generated $10.9 million of operating cash flow for the quarter and our net debt position after subtracting cash was reduced to $10.5 million as of September 30th, 2019 compared to $113.5 million as of June of 2019. In addition, I'm sorry, $105.5 million was our reduction term. So, in addition to October 2019, the Company sold its tuition program management service businesses which had trailing 12-month revenue of $6.4 million for approximately $20 million.

The Company has used these net cash proceeds to further reduce its net debt. A positive attribute of our Company is that over 60% of our revenue is considered recurring on an annual basis. We currently have approximately 125 of the Global 500 companies as clients. With that being said, we are making positive inroads in both increasing wallet share and winning new customers by leveraging our global footprint.

I will now turn the call over to Adam.

Adam H. Stedham -- President

Thank you, Scott. I'd like to start by providing an overview of the business. At this point, we're almost halfway through the fourth quarter of 2019 and we have visibility into 2020. Now last year during our Investor Day we discussed that our overall strategy is to have organic growth of 6% per year as well as driving additional growth by leveraging free cash flow generation to make key accretive acquisitions.

We do expect to deliver mid single-digit organic growth in 2020. Now, as I say this. I realize it may raise some questions. And I'd like to take a minute to elaborate on our optimism. Excluding the impact of foreign currency as well as revenue from acquired and divested businesses in 2018, GP Strategies has delivered organic revenue growth of approximately 3% for the first nine months of 2019. But our results were impacted what we -- by what we believe to be a one-time decrease in revenue with the client that was our single largest multi-year outsourcing client in 2018. The agreement with this client was renewed in 2018 and it has ultimately settled into a lower baseline than our prior agreement. This combined with the impact of currency has resulted in a 14% year-to-date year-over-year decrease in revenue with this client. We do not anticipate a decrease from this level in 2020. Now, once this client stabilizes at that level, our success in business development in other areas will be more visible. So looking forward, we do believe we're on track for growth in 2020.

Now I'd like to share some more details with you about our sales and business development processes. The first stage is pipeline management, the second stage is backlog creation and then revenue generation is the third stage of the business development process. Through the first nine months of 2019, we have over $700 million in open sales pipeline opportunities, which represents a greater than 50% increase compared to 2018.

We've closed $265 million of new opportunities from this pipeline during 2019, which is a 16% increase year-on-year versus 2018. In addition to the pipeline growth, the current backlog of $338 million is the highest backlog in the history of the Company.

So now I'd like to shift the conversation a bit to review the results for our segments in the quarter. Looking first with our Workforce Excellence segment, which includes both the Engineering and Technical Services practice and the Managed Learning Services practice, the segment revenue was up 2.5% in the third quarter compared to the same period last year. Now the Engineering and Technical Services practice revenue was down 8.7% in Q3 versus 2018, primarily due to project completions in our alternative fuels business and the recovery services work we're doing in Puerto Rico.

But on our last call, we announced a new large contract for this practice in the aerospace sector. This project is progressing well and ramping up. We expect this contract as well as other opportunities to drive our year-on-year organic growth in the practice during 2020. Our Managed Learning Services practice has shown strong revenue growth in Q3 2019 versus '18, increasing 8.8%. The increase reflects the ramp up of the previously announced multi-year outsourcing contract wins. In addition, the UK job skills business delivered year-on-year growth for the quarter of 15% at a constant currency compared to 2018 and we believe that this business is on track for continued growth in 2020. The main factor to consider when evaluating Managed Learning Services is that we are seeing greater activity in the training outsourcing marketplace. Our opportunities have grown in 2018 and in 2019 as opposed to previous years. I'll discuss this more when I discuss our outlook. But this trend is important to the excess of Managed Learning Services practice.

So now I'd like to shift the conversation to our Business Transformation segment that includes the Sales Enablement practice and the Organizational Development practice. During the third quarter of 2019, this segment delivered revenue growth of 31% driven primarily by the Sales Enablement practice that was up 70% due to the contribution of TTi and organic increases in automotive sales training. These increases were offset some by a decline in publications revenue due to a shift in timing of magazine publication mailings compared to last year.

Going forward, the TTi business continues to exceed our acquisition pro forma revenue expectations and we expect the business to generate improved gross margins in line with the rest of our automotive services for 2020. Now turning to the Organizational Development practice revenue was roughly flat in Q3 of 2019 versus 2018 and our year-to-date revenue was down 4% year-over-year.

However, the gross profit has improved by $1.2 million year-to-date and gross margins had increased from 13.1% to 15.3% year-over-year. This revenue decline and profitability improvement is partially a result of our strategy of discontinuing certain parts of the business and focusing on our higher margin revenue streams.

In addition, as we complete the rollout of our Find, Win, Grow sales model, throughout this practice, we are confident that this strategy will drive growth in revenue and earnings in 2020. Next I'd like to discuss the overall outlook for GP Strategies going forward. During this year, the multiple contracts that were won in the back half of 2018 have ramped up through the first half of 2019, but the bulk of the financial contribution to the Company did not begin until Q3. Looking forward into 2020, we expect those revenues from the multi-year awards to contribute across all four quarters of the year. As we get closer to year end, similar to last year, we're experiencing a significant increase in request for proposal activity for Managed Services contracts. We're encouraged by this increase in outsourcing opportunities and believe it will translate into revenue for the Company. At this time, we've already been selected for one multi-year $1 million contract and are actively pursuing seven other contracts of equal or larger one particularly larger value. The combined revenue opportunities these contracts alone to be $20 million per year.

In addition to these multi-year opportunities are several large one-time projects that we're currently pursuing. We believe that this strong and full pipeline will drive long-term growth for the Company. Now on previous calls, we discussed our goal of expanding share of wallet within our existing customer base. We continue to execute on this strategy and part of this strategic planning for 2020, we've analyzed and prioritized account activities for our 50 key clients from 2019.

These key 50 clients account for approximately two-thirds of GP Strategies' annual revenue. Growth within this client group will be a key metric that we will track and report moving forward. Currently, we expect to deliver at least high single-digit growth within this high value target group of clients in 2020. In conjunction with these key 50 client strategy, the automotive industry continues to be an area focus for us and we expect to see double-digit growth of this business area in 2020 versus 2019.

We expect the multi-year multi-billion dollar contract wins that I mentioned earlier, to be a driver of incremental growth in both the key 50 clients and the automotive industry business. So overall, as we near the end of 2019, we are confident that this business will grow in 2020 and beyond and driving long-term shareholder value.

So now I'd like to turn the call over to Mike to review the Company's financials in more detail.

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

Thanks, Adam, and good morning, everyone. Starting with Q3 revenue and gross profit on slide 8 of the presentation. We reported Q3 revenue of $139 million which is up $15.4 million or 12.5% from the $123.6 million of revenue reported in Q3 of last year. To break the revenue out by segment, the Workforce Excellence segment reported Q2 revenue of $82.5 million which is up $2.5 million or 2.5% from the revenue reported in Q3 of '18.

Within this segment, the MLS practice contributed net increase of $5.6 million primarily due to a $4.8 million net increase for MLS training and content development services due to the recently announced outsourcing contract wins and new content development contracts. There was also a $0.8 million increase in vocational skills training services provided by the UK government.

Partially offsetting these increases, the ETS practice experienced a net $2.2 million decline in revenue, primarily due to a $1.1 million decrease in revenue from alternative fuels projects and a $1.1 million decrease primarily due to a decline in our disaster recovery services and a decline in our energy product business line.

Within this segment, there was a $1.4 million decrease in revenue due to changes in foreign currency exchange rates. The Business Transformation Services segment reported Q3 revenue of $56.5 million which is up $13.9 million or 31.3% from the revenue reported in Q3 of '18. Within the segment, the Sales Enablement practice contributed net increase in revenue of $13.9 million, primarily due to a $13.3 million increase related to the TTi Global and TTi Europe acquisitions which were completed in 2018 and a $1.5 million increase in automotive sales training services, largely due to an increase in new vehicle launch events and technical training services.

Partially offsetting these increases was a $0.9 million decline in publication revenue due to the timing of shipment of the 2019 fall publication. The Organizational Development practice revenue for third quarter of 2019 was consistent with the third quarter of 2018. And within the segment, there was a $0.4 million decrease in revenue due to changes in foreign currency exchange rates. The publication revenue and the Sales Enablement practice in Q3 was $0.7 million, which was $0.9 million less than the pub revenue recorded in Q3 of last year. This decline was due to the entire 2019 fall publication being shipped in Q4 of this year, versus, in 2018, a portion of the fall pub shift in Q3. We are projecting publication revenue in Q4 of '19 to be $9.8 million compared to $8.8 million in Q4 of '18.

In terms of gross profit we reported Q3 gross profit of $21.7 million, which is up $2.5 million or 12.9% from a $19.2 million of gross profit reported in Q3 of '18. Gross margin excluding $1 million of severance in the quarter was 16.3% versus 15.5% in Q3 of last year. The Workforce Excellence segment reported Q3 gross profit of $14.3 million or 17.3% of revenue. Which is an increase of $0.9 million or 6.6% compared to the gross profit of $13.4 million or 16.6% of revenue for Q3 of '18. The primary driver of the increase in gross profit in the Workforce Excellence segment are the revenue increases previously noted.

The Business Transformation Services segment reported Q3 gross profit of $7.4 million or 13.1% of revenue, which is an increase of $1.6 million or 27.2% compared to the gross profit of $5.8 million or 13.5% of revenue for Q3 of '18 gross profit increases in this segment were primarily due to the gross profit contributed by the TTi acquisition and improved gross margins in our OD practice.

Moving on to the slide 9, our year-to-date revenue and gross profit. To touch upon some year-to-date highlights for the Company. Year-to-date revenue was up $45.6 million or 11.9%. Gross margins, excluding 2019 severance are improving and running at 15.8% year-to-date versus 15.6% last year. Looking forward to 2020 with one of the focus areas being to bring TTi gross margins in line with the rest of the business, we should see further improvement in our gross margin percent. Year-to-date organic growth is at 3.1%. While the 2019 year-to-date organic revenue growth is not yet at the targeted rate of 6% that we announced at our Investor Day last year. The trend has flipped from a negative organic growth rate for 2018 to a positive year-to-date 2019 increase of 3.1%.

Each quarter of this year has seen the organic growth rate increase over the prior quarter. So the trend has been positive and improving each quarter. As we look forward, our strong proposal pipeline and contract backlog would support the trend to continue to move toward achieving our targeted organic growth rate. Finally, with the recent -- recently announced divestiture of the tuition business, to help calibrate the impact on our Q4 revenue projections, this business was projected to contribute roughly $2.5 million of revenue in Q4, had it not been divested.

Moving on to SG&A expenses on slide 10. General and administrative expenses are up $3 million or 24.6% from the $12.2 million in Q3 of 2018. The primary drivers are, a $1.2 million increase in G&A including amortization from the TTi acquisition, a $1 million increase due to internal labor cost that in Q3 of 2018 were capitalized in connection with our financial system implementation, but are included in G&A expense in 2019. There was also a $0.4 million increase in bad debt expense, with the majority related to -- related to past due AR on a disaster recovery project in Puerto Rico related to Hurricane Maria recovery efforts. This project is funded through FEMA and GP along with every other supplier of similar FEMA-backed services to Puerto Rico is experiencing a delay in payment due to bureaucratic delays within FEMA to release the committed funds.

While we expect full payment under this contract once a bureaucratic logjam is removed under our reserve policy, we've taken a reserve for a portion of this past due AR. Lastly there was a $0.4 million increase in other G&A expenses. Sales and marketing expenses in Q3 are up $0.5 million quarter-over-quarter primarily due to the investment in business development, personnel, inside sales and the centralization of our account management team, some of who were previously reported in cost of revenue in 2018.

Moving on to other P&L items on slide 11, we've incurred restructuring charges of $1.4 million year-to-date, which is associated with the TTi integration compared to 2.9% year-to-date in '18. In connection with the prior reorganization and related cost savings initiatives. Interest expense in the quarter is up $0.5 million due to higher borrowings and interest rates under the credit facility.

Other income had a $1 million improvement for the quarter, primarily due to a $0.5 million gain related to our royalty on the licensing of a product associated with the divested business for which we had a $0.3 million loss on disposal in Q3 of '18. As a note due to the accounting rules associated with accounting for the divested business, the license royalty was reported in other income instead of gross profit. The effective income tax rate year-to-date was 31% and we are projecting a year-end tax rate of 30%.

Moving on to earnings summary on slide 12, we reported net income of $2.1 million for the quarter and EPS of $0.13. Adjusted EPS for Q3 was $0.24 versus $0.27 for Q3 of last year and adjusted EBITDA for Q3 was $10.8 million versus $9.8 million for Q3 of last year. Moving on to slide 13 and some balance sheet highlights. Operating cash flow for Q3 was $10.9 million and for the year is $4.6 million. Debt, net of cash at the end of Q3 was $105.5 million which is an $8.1 million improvement from Q2 of '19. Unbilled revenue was down $20.8 million from December of 2018 and $12.4 million from Q2 of '19.

I'm pleased to be able to report that the delay in billings associated with the new financial system are now behind us. With this recent surge in billings, AR is up $8.3 million from December of '18. This is the last area where the impact of the new financial system is showing up on our balance sheet. During Q4 we will be focused on ensuring at the recent surge in billings, converts to cash. And for an update with the proceeds from the sale of our tuition business and continued cash generated from operations, our debt, net of cash as of November 4th stands at $84.8 million, which is down $20.7 million from the September number.

Turning to backlog on page 14, backlog as of Q3 of 2019 was $338.1 million which is up $73.7 million or 28% compared to the $264.4 million of backlog at Q3 of '18. Excluding the TTi backlog of $24.2 million, our backlog is up $49.7 million or 18.8% over Q3 of 2018. I would point out that some of the increase in backlog during this quarter relates to funded contracts with the period of performance beyond 12 months.

With that being said, we do still expect that approximately 90% of our backlog will be recognized as revenue within the next 12 months. It's also important to note, as we've stated on prior calls that long-term multi-year contracts or projects that are funded each year only including backlog, the definitized funding amount which typically does not go beyond 12 months. This concludes the financial update. I will now turn the call back to Scott.

Scott N. Greenberg -- Chief Executive Officer

Thank you, Mike and Adam. We entered 2019 with three strategic initiatives. One, organic revenue growth; two, strengthening our balance sheet; three, completing our ERP implementation. As you've heard today, we've made significant progress on all these key initiatives and look forward to an improved 2020. In 2020 we hope to return to the clean pristine statements without all the pro forma adjustments, that has been a trademark of GDP strategies in the past.

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

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeff Martin, ROTH Capital Partners. Please go ahead.

Jeff Martin -- ROTH Capital Partners -- Analyst

Good morning, everyone.

Scott N. Greenberg -- Chief Executive Officer

Good morning, Jeff.

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

Good morning, Jeff.

Jeff Martin -- ROTH Capital Partners -- Analyst

I thought I got this correctly, but just wanted to clarify, the $1 million severance in the quarter that was all in the cost of sales item and excluding that, the gross margin was 16.3%. Is that, did I catch that right?

Scott N. Greenberg -- Chief Executive Officer

Yes, that's correct.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. And is that kind of a normal level going forward or is there some fluctuation that brought margin number up for the quarter.

Scott N. Greenberg -- Chief Executive Officer

When you say normal level, the severance normal or gross profit?

Jeff Martin -- ROTH Capital Partners -- Analyst

The margin level. That's something I think, before keying in on.

Scott N. Greenberg -- Chief Executive Officer

Yeah. I think that we are within a bandwidth expecting improved gross profit margins. So I don't know if this is the exact level, but we are expecting improved gross margins in 2020.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. And then on TTi margin improvements, a big initiative there as well. How far are you along in getting those margins to where you expect them to be, if you could maybe be specific on what the margin is currently? Where it was when you bought it? And where you think you can get it to?

Scott N. Greenberg -- Chief Executive Officer

So right now, when we first bought TTi we gave some EBITDA guidance on what we thought we could do. And right now the margin, our gross profit margin is approximately 12%. Our goal is to get it for 14% to 15%, which will put us in the range. The one thing I will like to talk or would like to talk about is in addition to that we are working on a major initiative with a large automobile company. I mean, it's almost of joint venture type of program where we're investing approximately $200,000 per quarter currently.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. And then on your key 50 client initiative, is this something that has come about this year? Is that the new strategy? And what is kind of the underlying approach to that strategy?

Scott N. Greenberg -- Chief Executive Officer

So it's an expansion of historical strategy. Going into this year, we looked at a subgroup of 35 clients. We've expanded that to 50 and we've gone through a little bit of a refinement. The key to this as we have said, our goal is to increase share of wallet. What we're looking for is a meaningful measure that allows us to rationalize operating the business and articulate our success at increasing share of wallet. So this key 50 number as we were able to report it and we're able to report growth on that. That will be able to give investors an understanding of our track record in our increases of share of wallet, plus it helps us to guide our business development strategy.

Jeff Martin -- ROTH Capital Partners -- Analyst

Okay. And then could you provide an update on the job skills market and how that's trending? Are you expecting to see acceleration of growth there and maybe give us a sense of what the outlook for 2020 is there?

Scott N. Greenberg -- Chief Executive Officer

We don't expect to see an acceleration of growth, but we expect to see it to continue to grow at the same rate that it's been growing this year. So now that we're past the break over point and quarter versus quarter we're in a positive situation. We expect to be quarter versus quarter positive going forward throughout next year. And at this point. Beyond that.

Adam H. Stedham -- President

And the one thing to add to that, Jeff, is when the Skills Funding change their model and required the co-pay, we were a 100% small company provider of this type of training service. With the changes and the voucher system. We're now approximately 50% large company and 50% small company. So we really have pivoted our model to become a provider of these services to companies that are really the typical type of GP Strategies customer.

Jeff Martin -- ROTH Capital Partners -- Analyst

That's all. Thank you.

Operator

Our next question comes from Alex Paris, Barrington Research. Please go ahead.

Chris Howe -- Barrington Research -- Analyst

Good afternoon, this is Chris Howe sitting in for Alex, I should say, Good morning. Hi. First just following up on the previous question or your comments on the large automotive customer for TTi, you mentioned the investment that's required per quarter. Can you comment on just where you are with this customer, the timeline and should there be another large automotive customer in the pipeline would it require a similar investment or is this from specific.

Scott N. Greenberg -- Chief Executive Officer

So to start off, you know, we're very excited about where we are in the automotive sector, if you look at our business today. It's approximately 25% of GP Strategies overall revenue. We are now currently dealing with the 10 largest manufacturers of one will be companies in the world and the combined entity of TTi and GP Strategies gives us the ability to the Liberty services. I'm a global basis. But not just sales training, which historically has been with GP Strategies has had a lot of inroads by technical training as well.

I believe this program that we entered into is really unique to this customer, and you shouldn't seeing elsewhere. At the end of the fourth quarter, we'll give more granularity into what we're actually doing. But it is a unique program to this one supplier who is a top -- would be a top 10 customer of GP Strategies. There are, our second largest automotive supplier and we feel there is an opportunity to add significant increase with them. So that's what's driving the strategy.

Chris Howe -- Barrington Research -- Analyst

That's great, I appreciate the color. And just moving on to this 6% organic growth rate that we're moving toward, you shared some insights in addition to the large automotive customer. The contract that you won in aerospace, can you comment just on the different growth drivers, you are seeing on a segment level basis perhaps beyond what you've already mentioned, they kind of get you toward that organic growth rate or more specifically what organic projections are you expecting on a segment level basis.

Scott N. Greenberg -- Chief Executive Officer

All right. So to go through the things you mentioned, so for example, the Aerospace contract that you mentioned. This year we expect that contract will contribute less than $1 million in revenue, primarily in Q3 and Q4 more heavily weighted toward Q4 next year that same contract, which should be north of $6 million in revenue. So right there from a year versus year perspective. Just on the same contract, you have a ramp up on that. On top of that, if you look at our Managed Learning Services contracts that have contributed to the growth in Managed Learning Services in Q3 and Q4.

Those contracts run at a certain baseline. That baseline is going to continue into Q1 and Q2 of next year. So from a year versus year comparison perspective, Q1 and Q2 of next year versus Q1, Q2 of this year that baseline of those contracts will put us at an elevated level that's independent of whether any of the deals in our sales pipeline materialize into revenue generation. We -- important point to that is we introduced the concept on a previous call of long sales cycles and short sales cycles, the long sales cycles we win them and it takes a while for the revenue to ramp up. So now that the revenue has ramped up, it should support the revenue growth in the first half of next year.

On top of that, as we had success in our sales process during Q4 of this year, those new wins would then contribute to the sales growth in the second half of next year versus this year. So that's how we anticipate the organic growth will materialize.

Chris Howe -- Barrington Research -- Analyst

That's very helpful. And it lead me to another question. The backlog increase that you're seeing, how should we think about the sales cycle in terms of your backlog short versus long.

Scott N. Greenberg -- Chief Executive Officer

So we have seen a little bit of a shift from backlog and Mike mentioned that, in that we have a couple of customers that have funded some projects a little more than a year. It's not material overall. I would say in general the way we view backlog as it although backlog doesn't give you a direct indication of revenue over any given period of time. Backlog increases definitely an indicator of improved business outlook and improved jobs that we have to execute against which then generate revenues in the incoming -- on coming quarters.

Chris Howe -- Barrington Research -- Analyst

Great. All those comments were very helpful. I think that's all I have for now. I'll hop back in the queue. Thanks, everyone.

Scott N. Greenberg -- Chief Executive Officer

Thanks.

Operator

[Operator Instructions] Our next question comes from Zach Cummins, B. Riley FBR. Please go ahead.

Zach Cummins -- B. Riley FBR -- Analyst

Yeah, hi, good morning, everyone.

Scott N. Greenberg -- Chief Executive Officer

Good morning, Zach.

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

Good morning, Zach.

Zach Cummins -- B. Riley FBR -- Analyst

I just had a quick question around the sale of the tuition management business to Bright Horizons, more so interested on the strategic partnership you announced with them is there really any sort of customer overlap that you have with Bright Horizons right now. I'm just trying to get a little more detail on the potential opportunity just sell your services within their customer base.

Scott N. Greenberg -- Chief Executive Officer

Yeah. Actually there is significant potential customer overlap. That's one of the things that really drove the spirit of this partnership. If you look at Bright Horizons and if you look at our tuition business and if you look at our training business, combine those three together, historically our tuition work has been purchased by the benefits department within human resources and then we've been -- we've cross sold into the training department within human resources and we've had some success in doing that.

With that said Bright Horizons does multiples more tuition business than us multiples more benefits work to us. So if you look at their penetration inside of the human resources department of these large customers, it's significantly deeper and broader than our penetration, just because of the size of their firm. So the ability for us to cross sell into their customer base, I attended their customer forums that they had just recently. So we're looking for that cross-selling to come in. Likewise, the benefit for them is, as we have relationships with all of these training departments, they're able to get introductions into the training side at these human resource departments. All of that said the last piece in addition to that is, -- there is potential synergy between our UK job Skills business and Bright Horizons business in the UK as well.

So we do, we are optimistic about this strategy of cross-selling and partnering to work with each other in a go-to-market strategy.

Zach Cummins -- B. Riley FBR -- Analyst

Understood. That's really helpful detail. So thank you for that. And Adam, you mentioned that there was a 14% year-over-year decline with one of your larger outsourcing customers this year. Can you provide a little more detail around that decline this year and kind of the expectations that they should moderate or potentially reverse as we go forward?

Adam H. Stedham -- President

Sure, sure. So if we go back in 2018. A major point of emphasis for GP Strategies was to renew outsourcing contracts with our two largest customers, both of those came up for renewal in the same year. They comprised over 25% of our total revenue as a Company. So it was a critical to our strategy to win those renewals. We did win, both of those renewals in 2018 and we locked in a substantial base of revenue going forward to go along with the year versus year renewals that Scott mentioned earlier.

With that said, one of those customers, which in 2018, was our largest customer. The new contract involves a rebaseline of some services. So those services went down in the new contract. In addition, a large percentage of the revenues for that financial services customer are generated in pounds. So the devaluing of the pound has contributed to that downturn.

And then thirdly, that particular customer is experiencing some cost pressures and cost constraints right now that we are partnering with them to deal with. All of that has contributed to the year versus year decline in this year. Now looking at 2020. We've had a successful long-term relationship with this customer, helping them to enable cost savings through partnering with us.

And although this year. It's been a negative impact, because of the speed at which the savings had to occur. We believe that our strategy of engaging with them to help them meet their cost savings targets by better engaging with us as well as not anticipating the pound downturn in 2020 the same way we have in '19. All of that combines together to say we're not currently anticipating a decline in '20 versus '19, the way we experienced in '19 versus '18.

Zach Cummins -- B. Riley FBR -- Analyst

Understood. That's helpful. Context. And then, Adam, you were discussing kind of the potential opportunities that you have coming up here at the end of the year. Can you talk about how you're feeling about your positioning in both those multi-year opportunities as well as these large one-time contracts and when we should be getting to the decision point on a lot of these potential deals?

Adam H. Stedham -- President

So we feel good. We feel good for two reasons, one is as I mentioned earlier, if you look at '14, '15, '16, '17, one of our challenges was just the sheer number of deals that were available in Q4 during our selling season in annual budget cycles. The number of deals we were bidding on had gone down. Last year we saw the ramp up of that this year, we see a ramp up of that right now, we have one opportunity that we're pursuing that would be over $10 million a year.

We have a second opportunity, we're pursuing that would be over $5 million a year. It's not to say that we'll win those, but we're encouraged by the size of the deals and the number of the deals that we now have the opportunity to bid on. Previously, even if we had a high success rate, if there was a limited number of deals, it makes it very challenging for us. So having an increased number of deals as well as we did experience an improvement in our win rate in Q4 of last year, we are hoping that same improvement will translate to Q4 of this year and as we did last year, we announced a lot of our successes from Q4 in our earnings call that happened at the beginning of the year.

We would anticipate much of this pipeline, we would have decisions on our next earnings call, and we would be able to give you updates on our success rates.

Zach Cummins -- B. Riley FBR -- Analyst

Great, that's helpful. And then Scott, just one final question. With the sale of your tuition management program to Bright Horizons so you get that $20 million in cash to further strengthen the balance sheet. Can you provide any context into sort of the leverage ratio that you're targeting by year-end.

Scott N. Greenberg -- Chief Executive Officer

Well not year-end. But historically we feel much more comfortable with a leverage ratio below 2 and potentially getting to 1.5. So that is historic GP. And it was hard to predict where we're going to be a year end, as Mike discussed today, the net cash on position at the end of November has improved, so we gave you some insight to where we are. So that's a big step in the right direction from where we were in the second quarter. So we'll continue. I think really we're starting to feel comfortable and we're on the right track.

Zach Cummins -- B. Riley FBR -- Analyst

Understood. Well, thank you for taking my questions and best of luck with the remainder of the year.

Scott N. Greenberg -- Chief Executive Officer

Thank you.

Operator

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

Scott N. Greenberg -- Chief Executive Officer

Thank you, moderator. It's a simple closing today. Hopefully you saw from our presentations that a significant amount of progress was made in both Q3 and so far in Q4. And we really thank you for participating on the call and we'll give you the update when we close our year-end results. So thank you very much.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Ann Blank -- Vice President of Investor Relations

Scott N. Greenberg -- Chief Executive Officer

Adam H. Stedham -- President

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

Jeff Martin -- ROTH Capital Partners -- Analyst

Chris Howe -- Barrington Research -- Analyst

Zach Cummins -- B. Riley FBR -- Analyst

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