RCMT - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the RCM Technologies Fourth Quarter Year Earnings Conference Call.

Your host today is Bradley Vizi, will now begin.

Bradley Vizi

Good morning, everyone. This is Brad Vizi, Executive Chairman of RCM Technologies. Welcome to the RCM Technologies 2018 fourth quarter earnings call. by our today Financial joined am Kevin Chief Miller, Officer. I units disclaimer begin for I business up with will and questions. each opening for the our results Kevin operating legal then it the will of before summarize Kevin?

Kevin Miller

morning, Good everyone.

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

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

Bradley Vizi

Thanks Kevin.

quarter are fiscal and XXXX our performance. with We pleased fourth

XXXX. over Our fiscal approximately by XXXX XX% adjusted grew EBITDA million $X.X fiscal of

fiscal More importantly, will we for division are discuss poised we performance believe XXXX. each I separately. in strong

Our of Staffing by fourth $XX.X the with X.X% over quarterly million quarter another Specialty revenue Group growing Healthcare XXXX. record set

Our quarter major XXXX. of million of XXXX fiscal fiscal was million $XX.X of versus the generated growth We school our of fourth $XX.X driver XXXX our contracts, business. from in quarter the school XX%. by the XXXX $XX.X of in fourth XXXX revenue The exceeded all million

in the growth XXXX school million year, from $XX.X contracts prior revenue fiscal million XX%. $XX.X Our was of versus

started HIM healthcare, you expect XXXX XXXX. in robust to recall, be XXXX We we continue throughout to are school year, start off growth Locum and businesses we great and a and in Elsewhere Greenfield. Tenens may to

Locum nicely overall of revenue both with report hit businesses to of stride in revenue performance. and proud $XXX,XXX accretive are finished have XXXX. from million $X.X are XXXX up that to Tenens We

is for softness was in healthcare placement saw cyclical in approximately of line contribution. noting our within business Fiscal high XXXX million underperformance to consolidated million which EBITDA XXXX. health permanent of revenue our Our perm If with division, be in business. versus its not trend margin in $X.X our XXXX placement in $X.X million HIM group of growth would $X.X Worth XX% XXXX. in performance $X.X relative million the versus most revenue business, five year XX% permanent care is

The XXXX. other major increase gross wage delusion were hour. a York of This York minimum we as margin get contributor impacted New $X per to professional power the was unable XXXX our margin to increase in state in City rate gross New

minimum being will XXXX. bill in anticipate headwind City a to quarter, gross a year-over-year XXXX and increases. in healthy will York to We that to However, cover both from fourth a sales wage tier get In lead XXXX improvement indication we and one the in continued sequential performance anticipate growth in increase of rate uptick retroactive partners operating this the combination XXXX received we XXXX. we New that our margin in

million our of third as in take $XX.X to forward in performance quarter of to and RCM. the acquisition the The We our of of Thermal in was of welcome driver the like was would strength team Kinetics quarter $XX.X Thermal XXXX. million primary -- to Kinetics. opportunity fourth this $XX.X to with revenue the year another XXXX, health XXXX fourth looking compared engineering saw the are We care. We rebound quarter of in record to million

to as out business. build have industrial process expectations this in for we We continue our high group

first softness in major As may the result engineering we occasionally quarter end several group, come see have in in XXXX. of an to the which projects

timing into backlog of XX is Pipeline within have be that activity very However, days. large can will very we term projects pipeline next strong. EPC The long believe large we uncertain. projects several in our the move

leaders, to technology overlaying position diligently model. We the solutions worked our as into XX months thought value in in added marketplace last have ourselves delivery the

are enter on focus relationships geographic adding investing leveraging and with markets. strategic in to client a resources new We also development business

clients. you will servicing core sustainable for of further of better number and half expect who to of current with pipeline content many business detail internal We as investment have capabilities. providing are follow As in engineering, increased Increased support strong forward RCM XXXX, been growth second a aware ourselves are visibility. activities levels, in convert Based historically of development to going backlog further monetizing handful and to quarters. set activity on experience we we very initiatives on a a an we our up look even subsequent XXXX that to

divested saw of revenue We group revenues $X.X transitory in see margin quarterly solutions. The since among staffing relative Worth is noting, contributed revenue XXXX comparable which for quarter our quarter reasons. information was million than fourth technology a basis units of fourth revenue quarter divested quarter due came million $X.X technology the includes utilization in major on of expected on at low of drivers salaried staff, in grow second holidays this Though fourth our the end million XX%. were XXXX, of Microsoft of in business the Several quarter we from seasonal downturn unit, Microsoft and our to to technology business of fiscal Accounting growth information of XXXX. group This $X.X target, information the margin the from our outperformance highest the gross growth revenue, growth. sequential lighter to continue fourth higher to XXXX. was with revenue XXXX.

XXXX. performance see compared to a to forward. wide expect gross expect strong XXXX We improved going a we basis, On margin company to have

quarter long we to continued for prepared the this may caution and the XXXX. the a we project call first group, quarter of first success. large engineering that Despite the we open position softness, the particularly to demonstrate strong technology timing in to people up due questions. remarks. invest concludes This in mainly period At comparable our However, year-over-year softness, time, and will business term our for

Operator

Please coming first [Operator would question go Sutherland. Our Instructions] from Bill be ahead.

BillSutherland

Brad Thank and Good you. morning Kevin.

little a going get to is you think just color how year on be the wanted more to out. starting I So

it You've as as of you and like be sounds would trending full timing well? services engineering issues kind and got but for IT expect health year some the then should it care

Bradley Vizi

care Health have strong a have Yes, good Bill. should quarter, fourth should a

expect we to The -- that statutory thing little which is the expect to a in We taxes. in the employment engineering. one IT. softness is increase across the the have payroll revenues see in quarter particularly see our really of the all And in lines decent first quarter bit first out of we

and you're in higher often. pronounced out just higher eventually sort salary But, various QX you people frontal XX margins impact the individuals way helping Security because the taxes and the see of that of paying board. a states more typically has. It's around taxes everything of never actually away, taxes. quarters if and hurting So that also salaried in unemployment sort of companywide unemployment the that QX, we is and The But gross sort and because biggest if the then know. as strip Social will more QX, QX to not as so compared one point those the decrease you in you always work things else across margin strip everything typically basis generally there's

So that little IT will certainly hurt a bit.

first we the the a IT concerned, into issues carry an going is quarter. as the little As over margin in utilization of quarter a as some to to but the those bit that impact the gross We've well. the little issues have in bit are fourth on experienced far of addressed they're going fourth quarter

certainly softness but some probably the in year on. We first gross the continue that expect the up to expect goes see the although quarter, pick decent we revenues as we'll for margin to in IT quarter in in the first

BillSutherland

us and forward looks they for little on you? perform going color can Okay. Thermal Can you Kinetics guys give performed like a it how

Bradley Vizi

million -- on time. Well in with $X.XX they fourth historically gross XX%. very Thermal margin capable good they're two large but up Kinetics putting some the a thing because in or roughly working three typically Sure. projects of quarter contributed numbers, is are pretty at about they The with lumpy they're of revenues

at So their caution you that expect is historic performance pretty the when the with from lumpy X-K just you I can you quarter-to-quarter. there, at the forward out which see financials pull a look their we that's performance of historically type performance going fourth of quarter out to look putting think and

BillSutherland

then mean, are want the to prior looking quarter relation Power you – to the helpful was I but I don't and all. at granular, And Arrow each for tie quarter. Systems Services get Canadian in too other Energy and

Bradley Vizi

aerospace to It's client just we're Yes. units terms base and very more power arrow diversify of both expect growth of and engineering We've got and forward. to in The Services the that space. of issues expect saw quarter seeing our we of case very a we systems. for services We're in fourth frankly energy we've see those and our units in continue something weakness real a Industrial seen focused strong some we our that's in those driving But to Process and, units. two really going on. Energy

BillSutherland

so north? power Not much up systems

Bradley Vizi

on is No, coming more had outside the consistent of certainly line XXXX. the spend they've with major a performance in there out But serve to we two than I necessarily because top not certainly unit. that expect systems mean, significant power consultants. have that we're potential counting growth clients we business lot

engineering is not that the for significant So counting growth. to really on but overall the potential we're drive there

BillSutherland

to for about dramatically the think growth was mean should there up Okay. the your piece is of I I and Then moving entering New school headcount the relationship York. you up I the best. healthcare, over double-digit -- called mean, think trajectory and now to in paraprofessional Hawaii biggest we for year kind education

Bradley Vizi

nice continue there seen see well. we've increases expect to and we growth as Yes, in both, to

not in will for kind going increases any we the see bill XXXX new the driving that. that But top see of in schools in headcount. rate we because we increases just and contracts line I we're saw think see will aren't growth XXXX, there to

sort Right. is exciting So there. is there. drive growth What we're operating of a care in about some nice we health will leverage that I to think particularly position see

not in the that still nice growth nice going see gross growth in in dollars top growth can So, XXXX some XXXX, think I income. profit the and saw kind see contribution of to in we line some while we're operating probably we

BillSutherland

Okay. The the do the you. growth, Kevin. where quarter-over-quarter, – with improved like revenue look Even DSO

you… was it – where do is as what and where your So you expectation exactly

Kevin Miller

not I'm XX.X around to Well if of mistaken, think the days, XX.X. we XX ended year, in compared that's XXXX. And third the quarter I

flare We And in with of utility DSOs we on then quarter. that those number can any that the arbitration going an have DSOs. cause sort have of also really polluting up a our is given clients to major

we'll expect arbitration that quarter, second of by the third quarter end see, third but the maybe We quarter. the conclusion come the to to probably

DSOs improve a of year the by will our alone end the quite bit. that So by

the always and causes getting contracts, that as As major I from flare that prevent get New in schools are continue occasional far to as the fourth York. our administrative expecting see the the under drivers time the far we just But as always like some our the get we paid. just see, -- unfortunately. mean, of they're in schools DSOs from time XXs. for were we issues us our school is is going them ups. -- quarter. in paid, should QX Those because DSOs in The the other issues one administrative to I'm crappy outstanding control, forward, DSOs

DSOs time one the sometimes have from we arbitration, the us I where bit milestone there on projects, schools prevent once from where can little that we contracts. are the either lumpy to with engineering really consistently collections can deliveries I high up the those of a or up big XXs from see the clean flare think time think occasional we be in

business GE instance, for And big you from with want the time some do they Like to business business just terms. and for approve Additionally, there XXX just do do days invoice. drive are that they time, with time GE those are companies the terms. to we the from if we

as with upper should DSOs accept either are the XXs a can do it concerned. we answer as your quarter be we not or relatively when is, clean But anyway, to business them. You far have in question I think

BillSutherland

the then went debt fourth capital obviously on Okay. a primarily. for the bit up and, I assume the last quarter acquisition, terms And plans of in

of use And when for How…. you XXXX priorities so look at your and capital.

Kevin Miller

may is And get flow our get down Well to the XXXX. very expect pay continue have X to flow our debt. priority is generate to to down the we first while lumpy year, time very quarter-to-quarter end nice debt. for cash I we somewhere like bit of one would X.X Typically EBITDA. to to think see, certainly a expect we have pay number to cash when to be We

going little certainly fine as going but like EBITDA and temporary specific debt have X.X no to as generally was it's a see X.X a for above there, leave it's to a in up concerned. above we play We’re although don't on if problem to like it We'd the temporary X.X to far reason. ratio for basis,

don't So when waiver like covenant flare ups, you need get occasional do to that. a go you have these or and anything

So I more line far our we'd see once first pay debt in priority to as to think down is the with it. bring as debt like bill we where

I we are strategy. acquisitions add risk to continuing very low think really that in for look interested growth to that our specialized

As that is talk every remains those probably I to two be are. capital debt acquisitions. can tell and looking and and say thing that board quarter single the we risk I think every down we about the I But small paying strategic as levers, anything structure, meeting, first you low after the all But at far for are would that, allocation what one priorities and seen. look capital that levers single some

BillSutherland

Thank Okay. good. both. Pretty you

Bradley Vizi

Thanks, Have a Bill. great day.

Operator

[Operator next is Instructions] [ph]. coming Our go ahead. from Please Anthony question Hanlon

Unidentified Analyst

Hi, other stockholders? each for the with think is model nothing that to running three still do businesses do you have the correct

Bradley Vizi

as managed you've Anthony. RCM, they following three to following over value had Yes, have but And significant for RCM, has decade. been a deliver RCM been how sure as not for long so I've shareholders. businesses I'm long

a that our we'll as So firm certainly business. to But the strategy. human changes, now, to capital will that, run extent the management we as continue of change

Unidentified Analyst

now couple years? last of think for you're good the really right you doing So

Bradley Vizi

Well, if year or out years. How five thing, majority longer. the That's with versus a you the have in right. long one last has been shareholder our The couple last years us of us, isolation, Anthony? for period you five take of base been with

Unidentified Analyst

to also one is like years. understand you keep XX I doing you And understand great, me that, that This but some doing flat for before because not that seems this period is reason. and reporting period. feeling well, too I the one’s were it great. of

something well where have So effect trades. three have always and that's when multiple you not stock your a on you on and an the different companies, that stock has doing

Bradley Vizi

Understood.

Unidentified Analyst

really few GE a good do very conglomerates but well. few is Very example.

Bradley Vizi

Understood.

Unidentified Analyst

That’s Okay, point make. all. that’s the I wanted to

Bradley Vizi

Thank you.

Operator

Instructions] more are no in [Operator There questions. for callers queue

Bradley Vizi

everyone. joining call you have great Okay and Thank a for our day.

Operator

call. Thank for you ladies today's gentlemen and joining

have day. disconnect a all may time at this and You great

RCM (RCMT) 7 Mar 192018 Q4 Earnings call transcript