RCMT - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, welcome to the RCM Technologies Third Quarter Earnings Conference Call.

Your host for today is Rocco Campanelli, our President and CEO; and Kevin Miller, Chief Financial Officer.

You may now begin.

Rocco Campanelli

Thank you. Good morning, everyone. President Campanelli, Rocco is and CEO. This the to RCM Technologies Call. Earnings Quarter Third XXXX Welcome by our Kevin today joined I'm Miller, Chief Officer. Financial will begin will and for our with of summarize I each the results the operating Kevin our operating legal report then units. disclaimer, it open discussion. for will we up Then

Kevin Miller

Good everyone. morning,

in Our presentation to assumptions and change forward-looking and these may and currently available will call and of statements. in these contained materially estimates information in to our future. statements forward-looking beliefs, this us, beliefs, matters are the assumptions is rapid contain Many The the based on information changes. estimates subject

For that which and time the they we SEC as file more XX-K, our periodic risks, to please forward-looking subject, Forms factors the with releases from see the other information issue on as that we are reports to well our X-K uncertainties press and statements time. on and XX-Q

Rocco Campanelli

Thanks, Kevin.

quarter our quarter. quarter We consolidated and XXXX are seasonality, third of second quarter a significantly our nearly third Despite pleased segment, XXXX matched in good with very operating our first Care normalized results. particularly, exceeded income our Health

Third XX% quarter I XXX%, gross XXXX discuss income will and division each separately. respectively. by approximately and exceeded operating XXXX revenues, XX%, profit

Engineering segment strong and quarters, its second Following upward trajectory. first continued our

in quarter revenues best Third history. in XXXX. respectively, All over three great Gross contributed quarter. approximately and gross third our and to quarter our Engineering XX% groups years XXXX second quarter million three $X.X profit grew profit and quarter best was the XX%, of dollars our our of

Power Canadian serves third for Group, performer our and which Power Bruce the best Ontario Our Generation. Engineering was mainly quarter

Bruce strong gross Group project, replacement continues are quarter at contract $XXX,XXX component as to awarded high Bruce the scorecard $X.X this center recent motor very and pipeline engineering strong, OPG. project to backlog of year value-based Power, procurement a mentioning XXXX. support are work a million electrical The fiscal We maintenance base year control fourth we and a profit than $XXX,XXX OPG. more tripled Power effort Engineering $X load Three revenues compared we with for were and are and and quarter main XXXX. and awards is at poised an Canada worth remaining believed million grew at grades. nearly The replacement Third XX%, project

Energy Services Our Revenues operates quarter. the grew had of by XX% strong XXXX. both group, approximately approximately $X.X million which gross and and U.S. in XX%, grew another by over profit Canada

the market significant expanded Electric ago Grid few from transmission focus dividends. the coming Our Exelon, FirstEnergy, distribution A following is amount of a Energy. new growth PSEG, Covanta, Con and Edison, Canada, years on to or Power, ND American pay continues Alstom customers:

replacement which have relay budget AEP, with we very attributable recently been strong work relay client replacement is project $X.X on -- and replacement awarded We award to This delivered was directly a AEP. at completed recently time at million satisfaction. on

our objective York, We are office In metals services leverage diversify processing, addition, and industries. and gas process work Thermo-Kinetics, market currently and is of New the work the process to the manufacturing have at we and to industrial and an in will that Buffalo, focus office sectors. into opening chemical on Praxair this in our

and micro We distributed also about involvement very the recent optimistic are in markets. our energy grid

announce with cell high-growth on cells As we and financial to northeast, bankable contract the quarter. solid to a manufacturer the leading we on deployment to this hope demand clients fiscal I And a contract full-scale the fuel -- major solutions as project in cell circuits. major located transmission technology Agreement capitalizing global to in a months. the as in fourth for recent continue engineering utility into our commercial clean Energy resources calls, through a Services to have a cell emerging Service expects mentioned anticipates entity. heading this in probable on backlog generation and our fuel reduction our and performance RCM focused pipeline strong industrial the power XXXX. fuel have with EPC highly market coming award previous well I provide fuel Master of services and

development. relatively business client a manager Aerospace XXXX, business will resources focus a and a flat this Following recently all XX% services large revenues from and adding They new OEM this focus of efforts We Aerospace first Group's our development quarter new XXXX. half clients. third on new our better about senior new over added reorganized that his on grew at to

We between that are focused developing clear also those existing focused. externally on and maintaining that such existing and senior restructured there delineation is managers our the managers clients

strong pipeline our and group. remains backlog Our in Aerospace

division, million quarter at division school Absent QX. for the job, began. built-in strong Care working year excellent period placing fourth XXXX. Health with our due more fiscal completing Care XXXX, exceeding Health a a XX-week for school Chicago to school third At we we significant both is had the we gross quarter the XXXX, got experienced and set quarter growth in districts, of seasonality and There the professionals, therapists importantly, profit, quarter the lot $XX to which our school Much and start an power look surprises, strong at have think in nice very new school client's XX excited summer closings, by be We XXXX. any new nurses compared being division within to by far the New a in XX%, with approximately fiscal new Our as revenue did XXX both respectively. to Hawaii XXXX. very XX% 'XX school in about City, about X,XXX staff have employees off and XXXX and of growing end a end as This we September shot as contracts. X,XXX districts to greatest we about of a third records revenue over third the of York our

continues Information Our group struggle. Technology to

growth President a assist QX committed early Giorgio remain sciences, a seasoned experience and C&S initiated Senior as of IT plan in progress our many with future retained we place. Bob around recovery life short-term look putting a turning executive, calls. result, us Robert 'XX, sales businesses act We plan. to this with is in reporting reorganization to a growing of Vice services Giorgio sectors. in to and years on and operating engineering in IT have to and and forward We business interim of As on

our have $X.X it yet recover, turned of I'm their all for has sympathies mainly that quickly. to will contractors heartfelt out take don't of group million in it report how happy operations upside life and IT Rico injured. Puerto major but Rico impact don't Rico all been Puerto happen XXXX. We employees office an can engineering none has to people a both the very My Maria. our Rico. safe, imagine, IT in in and as to revenue long had our and in many go provides We Our lives are we Maria impacted sciences, staff. to Hurricane posted know down. of about Puerto But in QX office by QX were will that Puerto you believe and

the committed little but will we valuable situation 'XX, in a about our by best Puerto so over of make billing of at our QX while are of We to we $XXX,XXX far dropped Rico can. former XX% supporting only revenues as employees and in the remain Our QX 'XX, performance. best

probably in Rico revenues Our time and down be in significantly in Puerto will QX for XXXX. some

XXXX for questions. had you to attending RCM's on XXXX we experience conference for not lower a utilization. on quarter and may have fiscal Thank finishing look it note, few historically months. open Additionally, fiscal we updating due in bench a call. high We time I'll to that third up you forward

Operator

Bill question from Instructions] Benchmark comes Sutherland first The Our from [Operator Company.

Bill Sutherland

hear ago? a you from and correctly? So X,XXX placed you I that's pairs, did year double a Remarkably, almost

Kevin Miller

all can't of be ads Health coming of at a you lower day, our September Well, XX snapshot of power, work -- pure a -- Health professionals sort the misled numbers they're that's work think bill some don't for XX of And hours. number in XX I first XX. XX hours, our September that is much some just all, of hours, some one staff. Care rates. new X,XXX lot as and Care sort Also the versus know, We really of includes work by be because it

school So our as we're if is, that to some you don't more pretty But in want add as we well. point the in going revenues to Hawaii draw double because conclusion significant particularly, that but power New any to also going we're see York City, there growth not. we're

growth, the that good we being on fourth believe going we go-forward for will as accounting obviously, have XX going of million. normal, we're revenue, which new of see very over new to the million. terms Rocco some quarter be third XX over But And our So in of chance mentioned, a And we think of sort be nice our be a normal forward. base revenue quarter's will that in hopefully, seasonality all basis. should the

Rocco Campanelli

Kevin Health our like only Care X,XXX said, program. for Health so, Care -- the he the was it's X,XXX only And said schools

Bill Sutherland

I just... I no. No, understand that.

Kevin Miller

placed period. a And in them we six week

pretty But was it weeks a So crazy had. all six those people... guys these

Rocco Campanelli

and that few nurses to quite and in. was directed and that they be to them the going various of Some a but were in and there schools recruited had therapists, to returning were were certified, work due

Bill Sutherland

to are win you the lining cycle next for school selling the year? on try up given a Now for ones, to these couple contracts big

Kevin Miller

Of just new schools. the quite schools do. new But are Chicago, course. that always There constantly York schools. looking aren't and few. out for City lot spend of there like we're frankly, a We're New with a Hawaii They

hire I clients schools, wouldn't largest are them a -- temporary systems And XX as other the XX on I of are but we Philadelphia but contribute they large many is But and school they some district. professionals significant none have school any cumulative any the them that just yet. do. of other a -- school about as The revenue, that's basis, the one of don't consider in think district, Philadelphia less workers

Bill Sutherland

right. You're Right.

what million education using this point? proportion at as number number, just XX So that is of a

Kevin Miller

don't say, exact but I you I an XX%. Bill, have would number for around

Bill Sutherland

Okay. XX%?

Kevin Miller

Yes, XX%. about

Bill Sutherland

couple been although guys mixed part income are kind talking forward. bag from they're order a it's going rates What care of that in business? your you of larger seeing then, about is, staff the of And health a better

Kevin Miller

order In terms the rates schools? of in

Bill Sutherland

No, no.

non-education? The XX% other, that's the

Kevin Miller

sure. seeing for We're impact from an that

just is biggest the think the problem I uncertainty. probably

think of I hospital definitely we're to We're the afraid in tightening -- a and make Travel. of they're just they're their our So commitments are just afraid seeing clients that lot to seeing belts. sort

In fact, Travel Nursing business. in the

think yes. definitely So I impacting from a it's impact, us. We're an don't Travel, significant definitely that. Outside impact of but seeing it's

Bill Sutherland

within that new in Energy This Services, correct? Buffalo Engineering, office Okay. so would for be

Kevin Miller

Correct.

Bill Sutherland

Okay. And it's de novo.

there an going bringing out in. not in? that operator There's You're you're not

Kevin Miller

sorry, I'm Bill?

Bill Sutherland

You're just... right? you're not Or acquiring a little business,

Kevin Miller

fully risks. least see at no. or so two taking no, all and to utilized No, quickly hired they X is. then people and growth possible one what business But for we'll without as build any step partially significant try We and a step as avenue it's new of going utilized, are that's the us. We're

So different we're really industry. a into get to completely excited

Rocco Campanelli

our clients. feel We're brings different and diversifying sector be And industry. potentially us. could we a Right. support utilize services this a for growth Buffalo into our other completing that in to focused industry this offices We And always pretty our strongly could on us the area. resources

Bill Sutherland

But this then And that of you focused pieces a business? with couple like did on you've... actually of end of up and area kind

Rocco Campanelli

the door. we was hire. best they're walking The business, the the best Bill people hired, walked -- to people Those into are the that

Bill Sutherland

the building And had initially falling it? at all this faster sounds place? System we it how do or look point even than you is finally at into business, If characterize you of little expected it's Power like a kind it

Rocco Campanelli

we The deliver period and time, probationary once a and quality especially and to clients. product. our distribution. happens of clients. is start on to we we've through budget one new see with -- existing business a several good purchase in well is X clients with on slowly delivered due months, quickly go happened And of And our you -- same I becoming schedule there and AEP. use went with past that start thing Con the delivery was on that becoming a delivered product what happen. that the to you transmission over -- from that you're amount has is Exelon. our example benefiting to new budget, continues very what at Edison product, -- we is, had Well, with started of we we're generally as a And AEP mainly And and Covanta in tremendous they that going orders client spend to and best want

mainly is that own. years on And to come a So the couple are business starting business old. And really into long power focused transmission only and generation distribution companies our it's of and a time. transmission for distribution its

Bill Sutherland

see you you and between at XX% Do kind would it were -- Is it's you XX% prior margin the nice gross -- bounce say a I last in really the you quarter. or... had of where XX% quarter year. in and XX% something you

Kevin Miller

Yes. great of work. we a mean, utilization really groups. range. had price also had fantastic had fixed nice that's We good a three Engineering them margin how worked that And quarter. Yes, I want couple through all contracts to you a

Engineering And see I so those margins I'd margins, certainly I to don't QX kind anticipate every it. wouldn't quarter. necessarily say like the of But

Rocco Campanelli

by impacted utilization. the very our couple you as margins And Yes. strong know, increases of over Bill, small past And our gross in directly is been months. are a really utilization

Bill Sutherland

put him expecting with or being -- I should takes the a provide to think do of him IT attention map you is XXXX kind road as early on the you see to to Giorgio. say, it of kind expecting as Are board, Good longer?

Rocco Campanelli

we He senior as to long-term, pretty to really it in very to position. good we'll him. someone very He takes to the he's and footing. for doing long interim, as it solid replace look is get on good But is But this focused. this find committed think

so Bob, he how experience has. you know You much know

have him board. to happy very we're So on

Bill Sutherland

amount what But you make Do mean, a you think do reasonable a think, and for I it -- him in will to take you significant think difference? are expectations of...

Rocco Campanelli

quick. it's going to be not to No, quick. not be going It's

we that when late question talk us again you answer. February, better give in we'll Ask

Operator

Zaro Instructions] John [Operator BCM. from comes question Our from next

John Zaro

thing you about of the up are to cleaning sort Can -- and on looks and just you talk done receivables everything good sheet balance this a where job, you've whole continuing better.

some a debt, You little you down can bit? talk the about just paid of that

Rocco Campanelli

I mean, know wanting capital allocation? I about Sure. you're to assume

John Zaro

Yes.

Rocco Campanelli

we're receivable payments going the last We when It out get do. some on not And our a That's -- payments quarter. I Yes. million in a it's think have like small do the fourth to we a because be hasn't looks are going make, Well, has quarter on and of door fourth as fourth huge potential. QX. going $X.X of earn to seriously make about we growth quarter we decision of think amount call, see make see the in the what our terms to of we're how up will mentioned November, to a in end the then do in also we little some jump kind of although acquisition board lot the in $X revenues. -- fourth because to out quarterly as to are a It's closed acquisition, very much a -- big our going close to a go and about million. the looking at what And we another definitely we're in quarter receivables to yet. going

end in the make past, in final allocation on that. But doing a maximizing very, the November, as makes to you decision board on shareholders and that of we whatever get early sort is we focused the capital very very to and told interested when of returns we'll sense. John, So December,

that any very will very and good is in. absent at end that, there And sort we'll seriously something changes year-end And I November, I we will you dividend. the chance a I the of think of the of terms tell pretty seriously know So that some in at look between dividend. issue can board you're now a something interested very is dividend. look that's

John Zaro

I it rapidly. brought he standpoint, Is his Great. he the list in. you you I to guy potentially of going that business? -- with things you a it's the this charge, up set moving say, great is his -- mean, And is do as even Is technology think from the more just... should that things Or

Rocco Campanelli

people group. some already working good really is that. have is, that, The right. that good the doing He the recognize doing we started fact has in He news he

terms serious good a leadership need well capitalize. and need can some better a going what immediately better leadership, of where we're to that just And changes some certain and I have we is seeing people to it. people. some grow to focus areas he We Rocco we and see, and some real We some as grow on little in And add have bit strength.

John Zaro

has in changed and that much so the years? business If as last the in you -- have discussed last I X

Rocco Campanelli

changes It rapidly. It's...

John Zaro

It's a not as of as used to be. it great source

Rocco Campanelli

business plenty there's of No, but out there.

shrinking we more small more we becomes we feel about not good business and more people not it's -- nucleus and good it make industry. and -- a more that -- in a in some few good It's make But feel and the just more think a areas. And some there's key about a and have. competitive. And it's really brought to difficult need the to So bring here. we've some we we changes --

John Zaro

on I And taken distribution and the one then driven it York, Is is you a the New gen industry? is more upstate transmission that it clients as Congratulations. power starting one you've said, in more really area, of last off. with lot in new done this going some is or in has by thing, and the these what's of just mean, --

Rocco Campanelli

get bring to we diversification with focused that's mentioned And area that general, as renewables industries, we cells. manufacturing growth try But to But about same an the that, good clients feel a could chemical it's credibility that into a different diversified leverage the and we process, some talk encore when real well. for product we driven the work strongly a we're by going would in us And industry, other to fuel in the bring where deliverable Actually, in forge on on the industry. client. the to you grab you you client, our also organization.

areas, of the term. intermediate see those within promise we both in short both So and

John Zaro

of of some it or And from coming is themselves utilities these the... some

Rocco Campanelli

No.

don't cell really end the client not is -- or You our a business, with believe not, it fuel utility.

And As control those many I a play working with currently cells country, the financial strategy sizable that micro mentioned call, very to to think into the we a system grid we and in or jobs. which immediate -- throughout a the which wants we're have is institution more leverage going jobs distributed to fuel in future, we're our a that job power get have they over.

Operator

from question [Operator Instructions] comes ahead. Our next Kelly. go Frank Please

Unidentified Analyst

to the you point have a for at if profit and a gross and to the in hard look and because looking Is at go One, been profit, both questions. dropped And thing revenues, I year-over-year, the year-over-year, the couple seems a out revenue then mean, the just years I'm work I I gross now. margin line? both back of on is and over a guys, revenue, additive guys commended Health just stuff over coming line But for through they're progressive, there the couple lot that top quarter-over-quarter is of that... as have on they just I X.X. Care, we're think the should there doing steady, a reason gross those we the in not feeding on the of the noticed, lifting. these why they've really a heavy really, up one there profit be performers

Kevin Miller

a There side. few. really gross is for drop margin in There's one reason the the not

XXX% that $XXX,XXX go the of versus look we the are weeks, the obviously, in as in you the drops that. but know, weeks profit. less XX costs It's that gross very XX against you revenues. perm SG&A If have And profitable, at

fact, in it much did the half to know, only you we And had because as pretty that perm can from as dramatic pretty $XX,XXX it a about in QX decline impact first the year So as QX. did perm QX haphazardly. be the -- has

We dozen few good A last single gave orders. client have big that a client year. us a

got So down last then the a the normalized big wonderful more back the had spike But revenue a at perm in was to half we time. which levels. it first of year,

still our last come a and In versus down. and of addition we've pay a put love the in seen And the are great that's rates. And mostly We just net is hot factors. this The nursing pay margins. are margins travel, of you've what pay year them in in got that to you But bit demand our that, business. due rates. to a if little seen gross business. year, decline have margins nurses lot in to leverage them, to you've to work, you got over negotiate want The to competitive we'd have

come have of business of down. used down north And XXs that first the and still They're XX%. a on any come Our They're HIN when factor bit. much of started little they've we to competition. they But that's sort still be so not a margins fantastic.

you selling we just to that margin. business, grow try the As can't keep

in so whole of You of And There is never third what much affect in then new can't the worked us. added us business also out business bunch keep that only flowing there. quarter a the we lastly, XXs. have for is that powers

are X. So or expenses starting employment tax from there

of So -- the like 'XX next coming are they for back they unfortunately, maybe reset September again we when June you will Because until year. as January. those 'XX, until know, won't in year see reset people of

September. a lower that So we September normally didn't they have had in -- whole they margins than of added powers in would bunch

host So factors there's of Frank. a

think you margins if from to somebody equation. at I a compared you gross if the -- if you -- and competition, look perm look exclude -- look you at our of we As our at our lot

very, You the look very it's even attractive care at our staffing gross health other lot companies, number. margin of lower versus at

drive a answered margin. to XXXX. of as we'll but gross seeing are margins normalized to grow going lot to those continue I And don't in kind we gross top jumps probably that margins gross that I perm. margin. see But where So a the come hopefully of a Again, is a haphazard possible. of contribution And your actually seeing we're unless see question. now not lot in. that's you're always our continue We're The information we're gross which more driving lot the revenues a margins, perm that probably more up, our line, bit back to

Unidentified Analyst

my exactly And permanent to be was straight escaped Yes, thing actually focus does. exactly may a the that and that dropped The the because perms. that's what something perms a that, placement that's memory becomes are the it bottom.

Rocco Campanelli

seen sort line focus but of at something jagged is a you a I've ours, focus. that a of perm it's when a dedicated It It company the look have is doesn't never revenues.

get while. our it's know hot ours, You for a But of you good any recruiters, if them and a perm send way. focus

Unidentified Analyst

Congratulations at the the on of Great. the management side of least IT. turnaround

to with some I a one you're going think sheet. well think we're see looking -- it's senior that's balance -- guy like to And And the that. glad thing there. needed. I I'm but Giorgio, turnaround on

slide If to like it to Board the in the in the pose which the we're balance out above is a we've a seen you the it And return fourth of to looks you go as coming fair? shape you we like key do were really quarter. shareholders, of over Directors, as probability, $XX see good if middle sheet, dividend into the

Rocco Campanelli

the we X. do I And Yes. would the think best that and do is we probability our the say for it. what is of But company. will on shareholders diligence due

Operator

are There this Instructions] [Operator at further no time. questions

Rocco Campanelli

We Thanks for to your you Thank you, February. in everyone. participation. updating again forward look

Operator

our this concludes Ladies conference. and gentlemen,

You may time. this disconnect at

RCM (RCMT) 5 Nov 172017 Q3 Earnings call transcript