RCMT - Earnings call transcript Q4 2023

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Kevin Miller

Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies. I am joined today by Brad Vizi, RCM's Executive Chairman.

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

and subject to of these changes. are estimates beliefs, Many rapid assumptions

For overview more are and XX-Q SEC other the information risks, reports and factors the on periodic file to our X-K performance as well forward-looking that will that Executive which with Forms they turn the call the releases to now Brad Chairman on from Vizi, subject, we see operating issue as statements we please XX-K, press of provide quarter. an over during our and time. I time the RCM's uncertainties to to

Bradley Vizi

Thanks, against important, morning, We we our with all smart the our generating a at More fourth Kevin. the of Good demonstrates growth EBITDA quarter strategy finished end XXXX businesses growth. believe COVID-free X expectation. traction everyone. healthy and of picture high progress

end Our clearly platform markets resonates. in high-value capabilities of critical

to Our to technical XX facility synergy of to providing groups amongst whether the market, in ability or traction, client for leverage gain continues K platform through points key of to the aerospace solutions continues design grow the collaboration a progress I'm solutions we been of more value to our spoke, ourselves in health across world-class made as detail, excited and care. the to marketplace. with provide discuss our we starting last base divisions, further each Since client increasing differentiating has in delivering

pride leadership in our take the in of XX many considerable aware, through end are As market. we you K

has asset assets, leadership base. best. own to to is commitment paramount. RCM that expanding that In most given is afford do focuses to caring XX nation's our care, what And us strategic key the opportunity believe will leverage developed our do of of to precious health K expand intangible One through its we client an we our

greater and delivery our In addition into care roster effectively of high-performance revenue, standards to is students. to convert success [indiscernible] low our clients is the new of of schools opportunities. a to testament economic This our as the evident approach we progression nationwide, building exceptional

This business underscores model. report resilience Regarding adaptability are units. and comprehensive expansion delighted all business business overall to the our we performance, growth across of

We a promising health for are opportunities, care particularly pipeline of the about robust excited indicating the trajectory group.

through we we to remain satisfaction and commitment client innovation, in upcoming growth. steadfast our move sustainable As year, the

strategic are the contribute confident Healthcare We that the will success of to our initiatives continued division.

Sciences, GP economic be Now financial game over can horsepower the Solutions. strategy points, to measurement, percent and moving revolves value and of GP points. demonstrate contribution Life NOI in improvement by around Data XXXX from basis of improved EBITDA XXX XXX every percent. percent, results our revenue, NOI & selling. and basis solution The This improved seen GP, while

in revenue and service dollar XXXX Nearly excellence. group's pride to $X.XX growth. turnkey converted operational increased I every this a take of to XXXX tremendous software commitment of clear to EBITDA. led implementations from Managed

As XXXX, integrity we through sciences continue our see forward managed data programs. look led to life commercialization, quality toward improvement we and by strong service growth,

for project offshore Services the the year America an in executed York for delivering wind OEMs Services previous from contribution our HCM XX%. transition in Europe. These substation renewable strong Revenue and Energy exceeding a targets were Energy projects utilities and in XXXX, further preferred opened parks. partner large practice will grid projects North results. profit Services. strength year's of a interconnection a Europe. for services its Energy in was be XXXX footprint Continued expand and from and included modernization performance point that for critical become infrastructure Germany engineering energy successfully in office to achieved large-scale the drive increasingly New will a In profit by global area power

innovative German first awarded EPC of X year was projects the system its from Services one Energy the of most Within operators. operation, German transmission

applications U.S. and moat utilities the of planning of more visit ourselves efficiencies value toward X our for application to to The firms set services to technical second and capabilities management our a our Services the strategic trip the data productization with clients. to and major our projects effort, digital XD to TSO award consistent our between successfully solution a with with is position a and their operation. and partners leaders proprietary energy thought offer commitment support note, own client as to and was The project construction delivering enhancing in digital several Broadening developed its to delegation competitive monetization executed. long-term partnerships. concluded strategy from our has This of further Energy partnership. Also step BIM

several respective RCM projects equipment and development. on are patient and markets and The related manufacturing, and a added of contracts employ sustainable customers, new has as commissioned to Kinetics at growing testing designed with projects system lab standardized fully by The profiling has customer supply. engineering carbon test to Thermal equipment an product fuel distillation, established has The contracts Thermal project design unit. fully Kinetics are process technologies. These tests, RCM markets. new capture leaders zero equipment Thermal support active their RCM chemical due lab the and glass have including utilized been crystallization and new XXXX proposal evaporation variety engineering team, in dynamic for has and a Kinetics carbon in crystallization who technologies

did with expertise, projects. quality our XXXX. Regardless, did This systems additional the Though clients during expansion become the receipt is expand a noting within has support at XXXX. we and the our active service being QX. recognize in the crystallizer scheduled trusted Group for it and clients. count that include of Defense plant new and issues base plan. production The the add Future our used for crystallization offering -- unit rectifying involving pilot quarter, crystallizer clients' outlook end of recovery worth clients existing focused now new QX Defense employee is of steady to is to workload base digital and and completion clients software more on provider of supply conversion, a is Aerospace in experienced model-based pilot a a also Aerospace head XXXX. Engineering we plans XX-gallon in

solution has been Our background our arena. industry this within knowledge by informed management team in decades of they approach from possess and and modeled

supply part and base OEMs and challenges experienced received across many the process as material we interest teams OEMs. for such shortages solve in are the availability, help these Since globally, has issues deploying to of have multiple

the in financial our detail. more an to has the discuss the expand software, Kevin continue from sector, teams technical X call within and will systems which solutions, We to in become Mobility turn especially a areas, to [ our draw candidates. I highly ] Air results QX XXXX workforce

Kevin Miller

Thank you, Brad.

gross $X.X grew quarter million. from EPS grew X.X% Consolidated diluted million to results. million. Adjusted consolidated for the XX.X% profit $X.XX. $X.XX XX.X% from $XX.X Adjusted our for fourth the grew by by $X.X million quarter Regarding EBITDA to fourth by $XX.X to from

essentially the health XXXX, remove profit on care segment fourth profit compared quarter to XXXX If revenue was fourth flat. in impact quarter As for the X.X%. we grew COVID estimate the that in of gross gross of XXXX, performance we the consolidated and by

COVID, grew QX behind Sciences profit Solutions gross 'XX 'XX, Engineering our to to However, compared QX grew revenue in XX% the for profit by by grew largely school 'XX. QX. after Life by QX compared over in gross X.X% Data Services & 'XX QX Energy to XX% Group, normalizing QX

with adjusted that to this low for our double-digit open cadence when similar XXXX fiscal will At to EBITDA growth XXXX. This concludes the remarks. least we see XXXX, anticipate As we prepared we questions. compared will as fiscal for consolidated quarterly a compared fiscal time, call at

Operator

Alex come first with And from is Rygiel our Instructions] to Riley. question going [Operator B.

Alexander Rygiel

Nice nice quarter and year.

Obviously, bit. talk capital that. lot if it's and about touch a that you is little of the First, a that There's on majority of occurs could increase we balance little possibly bit. just that that DSO XXXX? probably, sheet coming you spiked in seasonality see Can working improvements the a the

Kevin Miller

quarter we to that which of often too blockage will DSOs, Sure. terms We in XX.X, future. the about expect and we like is right? but QX, believe is I'd administrative bit both in thing much of of frankly, pay, similar cause happy just they which, the the with a schools that to be that sometimes a in Alex, run over into see terms paid, with where that. are where XX was high speak we XX.X, which little be to we of getting issues always a we The be ended

X then sudden, like we'll X And X at once. months get -- of all of all months, or a

Now most of issues. them a every once in pay but pretty into while, regularly, run we

did the Our a that come balance little care quarter. second money $X not pay client, the year. million by in. for largest largest about end the may we even lower, It expect be most December, be July to $XX see. million end purposes, had administrative And from we'll under and already us of at has of that through bit client and the a basically of second this I health

that a years. track. of paying last or client on X us over X So the timely They've we back think we've had great got pretty record

of aside, there's be work that with frankly, where So That a are things problem that of $XX to a to that The terms million, on. should at tends we is the cyclical receivables bit little other WIP just depending really, of putting one high. in end year, the we projects. kind million. And the $XX be few on need

POs everything with of in approved blah-blah-blah. the health getting couple newer rhythm care clients and we're a have that We still of getting terms and

high. too temporary, and But going we million the is get we're down. It's it believe $XX to

below to the the to think get the in should will of at in in low-XXs. but it be QX, below that of the get you way more of I should it is the over next that it level down XX, have we a DSOs get will probably the acceptable QX. the at much we end DSOs it, quarters, we low-XXs, the think couple or -- be end lower level about frankly, won't ideally certainly but and XX should And

Alexander Rygiel

in helpful. bit sort you could the talk very by And outlook Brad, It's about segment growth maybe little XXXX? of a then,

Bradley Vizi

time Yes. in Look, the last planning XX last all are lot segments are grow. to than XXX year. backlogs strategic very And encouraging. it's we Pipelines strong stronger they and a expect spent of doing frankly, of our We were very days. to here X

balancing That we're constantly being growth said, investment. with

profitability in the with So future. growth in productive today, revenue investment

well. we consolidated the forward. X with segments growing a we we But where we're as sit comfortable today basis, on surface, all guidance So underneath the anticipate put

Alexander Rygiel

through about And with buyback of appears been on giving you repurchases then talk your X at? to buying the what dips you've on very stock now authorization Can right year strategically and those view opportunistic stands now. your you lastly, your market be the aggresive right

Bradley Vizi

certainly be look you and less near at good chance to with we No, have have authorization increasing But share capital there's our than it's shares going future. in we allocation overall the respect X million Yes. and outstanding. a to count,

you point share balance of incremental right, that liquid sell about think jointly our we you had that because where tradable want position, trade-off option buy, having and in to to certainly enter at high-class a some investors in to future. a the the for we So liquidity it, stock

With we -- investment to opportunity what a intrinsic frankly, value. view is discount taking steep an in at

position framework. So allocation capital always that. to part going We're do we're our in opportunistic, buybacks to are and of a continue be to

Just float being mindful each certainly from liquidity. with and detracts the share the incremental

table, they So firmly the -- off but the by on table. no means are they're

Operator

next from with to Bill Our is question going come Benchmark. Sutherland

William Sutherland

a gross you performance of Or as gross of forward improvement saw you life 'XX? look are you pickup segments? science at kind any level year-over-year. margin expecting Are in was And you the margin. some in a very The steady into the nice steady-state

Kevin Miller

state. steady probably it's say would I

You'll of see $X steady and have do stop from million bench increase some see somewhere engineering and from when I million whatnot. QX and some $X.X QX. especially to you starts Typically, But do taxes when quarter-to-quarter when an we're gyrations -- state. we between projects in payroll obviously, in think and we go

seasonal impacts yes, that or maintain But net that margin. like margins are, the those we least close gross a that's thing, just and we where think margin impacts obviously, at obviously So and that. can But we right? -- to

William Sutherland

have between On and [indiscernible]? the breakout education care, health you Kevin, Great. do

Kevin Miller

because would ask for know do I I sure it. you

our and see. -- school QX million So in revenue million. let's was was $X.XXX nonschool Education was $XX.XXX

William Sutherland

you Do just case make to want sure don't the Okay. know just I I have that. comp in

Kevin Miller

XXXX, Yes. The school and comp $XX.XXX $XX.XXX QX quarter-to-quarter revenue the was nonschool in was million.

William Sutherland

I know of HIM, nonschool rate run that that's includes which been steady even... kind a now that or is So

Kevin Miller

a grow client Covid that because, we rate. had of bit we also big little revenue we steady there. And you can look that way definitely that they at bit that scaled I frankly, very quite at No, don't in back like a we the pay. just a a you to mean When QX as expect Yes. run we from there. 'XX, had look

So always back only we're use to clients. but the we out willing dollars that allocate so high in of DSO payment we good pays, scaled to number many can stretch on people that client

So -- things mentioned. interesting -- the one including bit to drive a is that but of schools pretty we higher, you which on we've outside got think we're that some that of ones can working that the HIM,

William Sutherland

Yes. debt again, repurchase guys that think the In deployment and capital Brad, reducing deployment, might with to are maybe versus at about, about are for just you -- look how are where you share you thinking how leverage? you

Bradley Vizi

to like Yes. framework a significantly we capacity to have We've up turn efficient perspective, powder have ample deployment from And our pretty from is consistent there which a capital flex do the framework a from perspective. but we'd of been financial ability dry to less a leverage, from what pretty are perspective, capital X EBITDA still with of we we structure. than certainly

terms net at or gives in looked cash to sometime different the and balance than months potentially lot so taking less be I In deleveraging of to opportunity over thoughtful a having and options. Again, of outstanding, the XX or X more sheet potentially shares. the really think us that million position shares next a taking

to be it million, But it with just happy X%, Absolutely. So a associated $X there's trade-off of. we around mindful we are to take would that somewhere there's

William Sutherland

one you M&A me at as as more on deployment picture. tack these Are opportunities you how let characterize on far would all the Actually, looking days? your activity --

Bradley Vizi

years, very can interested and that to and marketplace. we existing bolt-on unique is built are teams reality unique that leverage to And we capabilities over platform have that client relationships our is, value and I value looking. I Primarily grow and acquisitions capabilities add we significant Yes. We're we think of The always pretty think, the we our think we a think base the to. have, We're to can bolt-ons. we've in scalable. view the lot

of And culture that. a is So component key obviously, always looking selective. very

William Sutherland

Brad, do or on emphasis wait more opportunities? equally of you kind -- guys segments Or the at kind you them... as look as far of of are X X

Bradley Vizi

look we equally. them say I'd at

Operator

next William question Our from to with come Oak. Stone Duberstein going is

William Duberstein

the Thanks I for and one the me Great on really have nice performance. first on a to be housekeeping on share having call. but count. couple,

I said you shares under had you -- a think had million little outstanding. you like X.X

Brad, was being of if wondering put you And closer the included or X.X. forward the was your share I statement there? kind income awards discrepancy long-term what diluted the to count just On that incentive was, was

Kevin Miller

Yes, common those are the stock equivalents, Bill.

right? grants, So he's actually when share his are which $X those of are is under that when million. into So count, as you computed count, about have shares diluted today, was share outstanding outstanding the equity Brad giving the talking

William Sutherland

Perfect. it. Got

on Now to operational some stuff.

that loss know and segment margin of Aerospace improve top engineering, the lot, line the most year-over-year, was a expected through of bit a one probably of that is which kind you improved Just last the little gross metric. but the relevant I curious, year down that year. early had the contract kind you to

it you sort a then with just with between that's different takes and recovered of in just wondering you could then playing the the puts engineering I segment. if Engineering and aerospace if of Industrial, factor and the kind and TransnetBW, to the granularly consider more dig was if

Kevin Miller

Yes.

about And didn't the actually Brad of would on earlier still love going contract. that about big before it. spoke contract I'm little obviously to contract lose but revenue sure blow, the an you XX% one a reduced forward. these, this, in to on get of Brad We a we we terms We didn't lose but just have was big talk So a bit expectations speaks a we contract. on about call. correct But by had which

Bradley Vizi

on the in respect a think program to prospects anticipated lose program. Yes, that, we associated there's actually a that count point, further It granularity head a share I account. the lost end It in upside. was more margin clarify. With did didn't that to major had with some and for client awarded reduction just engineering, we wasn't

you into aerospace. And primarily And to the for that's when the from it and at look going going come year future.

improvement, migrate X richer to the to orientation services. of mix businesses I primarily room I been have staffing But you're other a think Aerospace, in think that going a for slowly certainly. it's see

respect of So margin with the is positive our profile net to outlook Engineering.

William Sutherland

was just Sciences quickly. And one the know to segment star I more Great. time Great. than then IT more clearly plus. Life rather sort project-based of The of XXXX. been transitioning you've solutions

I both if organic and acquisition the talent of you how much much how if just QX in then or might was last talent wondering, the of if also were hurdle is And be year. great this had and performance hurter contributing? year,

Bradley Vizi

Bill. We've up drivers couple is we're our last primary And the of Life continue And to building years, Yes. well all question, respect both is nearly HCM. are in investments Sciences as with those that of paying and to Good as so. organic. business the team that going the And do heavily off, invested and really to capabilities. X

growth a there. growth, really for is have thing with the clients And only that adding. of we not both our I'd there's So highlight can inorganic I within. going clients think strategic capability we're grow But strategy, lot incremental to that looking our not core back you'd core to that respect other

client base take client an extension incremental within other advantage and to us client, their share of very provide strong client growth. be important right, words, making that frankly, advantage a value deliver in to that as well offering more services to and take to as more So to own the has the as able

contribution is was bites we -- of in to had de X the a market the herder soften that respect minimis. bit. accordingly. regard. With of did profit really, talent when the kind the structured that apple And that have previous the we So -- contribution deal in the our And would had line that quite we we've anticipated with acquisition, we contribution, discussion technology

green stream, and actually respect the could shoots we're that So and contribute with decent seeing the business contribution core XXXX. to profit in

I But dispersed, XXXX, de was say I'd was different would that the segments. say, with that minimis. respect provided, the it it synergy to throughout

benefits of in that acquisition, beachhead never One the core having was of a any technology. it around thesis

You're that of benefit to in potential the of seeing Silicon grow each funnel Valley. from think, you're to segments, we that technologies process some continue and was that in into the And see really more forward. extent their to going It the they some the had. pushing capital that hard you'll

Operator

looks Instructions] next Frank going is from to like question come our [Operator It Kelly.

Frank Kelly

good Good as said, amazing. all have that [ of XX with and quarter, year. especially GM ] north Bill's And a life just growing is sciences absolutely

will Just and to to the top on that be add line set.

we look but that AR stock at no always what today, we peeve, the value think nemesis I It's doubt there. that's of reading been there's if they're beat up. pet my our out

that Kevin, Hopefully, we've Really, mentioned we in from saw some effort -- got free to on by was with put being there a million $XX operations focus in that there cash projected that. 'XX. flow

of best, I deleveraging, well? about a that that on expanding something outstanding. Is as as lot in hopefully, on Cash number but with of that. Can do -- deployment, about that. we wasn't is we've talked got capital one we the a quarter, shareholder But $X.XX was the shareholder table which the form of to out, folks return. that thing talked like Brad a that shares think dividend, is return risk, there's nice, conservative at a can but that's buyback, pointed just which nice

Bradley Vizi

table. Probably be off it's get finally year, But to haven't -- when outstanding, dividend, the shares it's that we -- do do again, likely we Frank. when taken not we bigger. with this fewer And it

otherwise than So be. would

on that So patience front. I your appreciate

Frank Kelly

Great. Great.

at first as we Is we're way -- end flavor a have have we're headed QX? what can what that we well, of practically the we Just the Q and to some one for expect -- look. maybe there where now

Kevin Miller

Frank, quarter hoping growth quarter. and Yes. we're each showing prior planning on the some over

where comes we we'll the in. we are So But today. how like see quarter

Frank Kelly

of on know call Great. down like a segments the as far even guess to I -- percentages Great. drilling quite things some I we anticipated specific on that. ago, But percentages and each on or Because X okay. some as -- were

guess a QX So have what is that going QX we're saying good a hearing. I to or comfortable we're

Bradley Vizi

Yes.

I XXXX, quarter. mean, if think Frank, right? us. you Naturally, normally that's look at our as of as think is indicative in for break just QX I generally pretty have far summer the QX, strongest for year you cadence typical I schools speaking,

bit And the get work off second start the sometimes to year. the of January, reset a in quarter payroll but snow naturally, a of couple year through than acceleration see you or will in half until schools expected, weeks as couple lighter have things taper and start will And project June. a of we days, you or open little the the of ultimately schools taxes, like program a a an to delayed through

different So that we from don't see anything cadence.

Operator

like there any in doesn't seem more questions queue. It are

it any So for I'll turn closing remarks. back over

Bradley Vizi

quarter conference forward look Thank you for call. to attending fourth May. We RCM's in update our next

Operator

This your concludes call.

may You disconnect. now

RCM (RCMT) 14 Mar 242023 Q4 Earnings call transcript