RCMT - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, welcome to the RCM Technologies First Quarter Earnings Update. I will now turn the program over to RCM Management.

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.

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

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

Bradley Vizi

Thanks, everyone. morning, Kevin. Good

As moved call, discussed concluded acceleration with a first January, the slow as through as quarter. expected quarter an in start in prior seasonally we the our

on strategic a the Our core. teams and deepening with breadth health of division initiatives Health have of growth of into on platform, shared as the helping focus platform the progress starting future. Further us of initiative, I digital its started team our continued organization, one-of-a-kind work month, mandate well distinguish of seeding each into our on galvanizing Care to I get initiatives executing be improved with new groups propel launch the highlighting ado, and while the teams, The will throughout strength the current mission-critical emphasis we and much the RCM the updates a will further is of of is both each widening believe XXXX communication with streamline help groups, introduced whose strength marketplace. Without in care. about our a what enhanced to collaboration the to the and services our we focus platform. Throughout all

facility care primarily the to consisting client, double-digit year-over-year. be reduce. Health decision long-term of solid business Care a slow-paying consider nonstrategic, to growth demonstrated we we Excluding made line top

this a the QX, This lapping hard for team. growth finish testament anticipate Health in of headwind in bulk we a dedication we and is the of the As to progress of work the second Care. half re-acceleration

one to Our XX key focus areas business, K of education our through strengthen. continues

that confident are are potential in school late revenue about districts each the anticipated on-boarded stages stages Also new contribution negotiation, XXXX-XXXX in the XX XX sales already the toward We districts more in X promising of new the $XXX,XXX. cycle note, of show excess of there school generate year. of to of and final the

efforts expansion base nationwide Our to grow substantial our continues client yield to results.

staffing We position in capture our XX through advantage. and leadership are strengthen to opportunities K our leveraging new

strategy, As Life our growth are and Solutions. confident to we continue value we Data to shareholders. Transitioning execute ability sustained to in and deliver to our our Sciences

demonstrated continued against client quarter to managed executing and First progress in service solutions our engagements. results strategy solution pursue project

Our renewal business doubled year-over-year.

Rico increased have seen our services Puerto for to continues We quarter-over-quarter. grow Life HCM and solutions, and our Sciences, in pipeline demand

and post have services expand support. direct the glove implementation with of our customers HCM Our introduction to white us in challenged

team. We and data a our ERP have dedicated expanded solutions built management team

have management practices. that services broadened series We practice a introducing enhance all team of our our robust of organizational will program by change solution

the revenue our say with closed within technical is us, for of widely on continues an be investment development double-digit we momentum marketplace. conducive it focused As industry. remainder toward are highly in the strong forecasted continue growth, marquee Services success followed business. of differently, several we To success to the the technical delivering area and the XXXX, leveraging given and the in Energy projects we quarter look results, increases. Client first EBITDA see momentum of to XXXX strong of to

and the for Europe, Northeast Energy and have to of industrial in Kinetics a transmission QX capitalize has QX, market group, the X invested do feels changes our their also to area X sector. The process to modernization organizational business material team Puerto and well in of net try development new in focus multiple future. Kinetics RCM expansion and continued Also Services electrical reduce of Rico RCM in building chemical execution the note, federal the line Services believe Kinetics Midwestern related economic in for grid. by demand. We EPC ethanol partnerships States, Energy Thermal production client The During and transition the state that is provide on plants contribution strengthened footprint efforts XXXX is that increasing to plant to and contracts a business set are office so. Within into United the as won for manufacturing incentivized carbon strategic studies. engineering optimization governments the Thermal and equipment carbon to this Thermal and foundation

continuation interest as was during Client to at and QX In remains February. design. The in sustainable XXXX. through a and and lull plant in through Kinetics XXX% the our Group facility SIF Defense utilization in Aerospace on The leader QX continue January in emergence process focused the of related aftermarket received the addition, chemical mixed a had XXXX. QX. XXXX utilization The a an workload its production order to and large market due segment team results Thermal new responsible engineering in continues, we was anticipate in will lab of testing lab also

EBITDA with engineering of in and manufacturers process, There and X components mobility RFQs for client new services new Defense division in X However, still air XXXX. RFIs, including business clients lift vertical piece end grew and and most aerospace throughout and supplies QX of and X X is aftermarket engineering new MSAs are executing Aerospace division QX by the power the the driving, The and new the electronics inverters, with year-over-year. OEMs vehicles, X Tier in XXXX. land

continuing the has and to continue our software customer and in inquiries throughout to opportunities expertise, and model-based conversion resulted and throughout expertise and strategy expand organization digital Our drive systems partnership the base quarter.

our client interest. quality within continues grow solving issues is which our interest basis, to new service attracting client expertise revolves clients' engagement This new Our with base. also and supply throughout offering, and production around

with to these continue in clients will reach expand prioritize these XXXX. We engagements and our

our welcome project Our to instituting program entire excited management the team additions in changes with aftermarket engineering and engaged. sectors and and are

from results program to seen have stemming the will discuss management quantifiable office detail. the call more We team's to the results the financial Kevin from already exceptional QX efforts. I XXXX return in

Kevin Miller

Thank you, Brad.

for the EPS -- of as quarter to first first XX.X% million. grew $X.XX. $X.X Adjusted $X.X our consolidated XX.X% to EBITDA grew X.X% of consolidated XXXX million by XXXX for million $X.XX results, the to grew profit to $XX.X Regarding from quarter the first from for compared XXXX $XX.X quarter the gross quarter for by Adjusted diluted million. from

grew performance segment profit by of Life & down for XXXX, Solutions, gross gross XX.X%. gross Engineering quarter first by As profit Sciences, grew was X.X%. X.X%. Health Data in the profit Care

XXXX. quarter long-time XXXX, revenue the care long-term of first grew grew in XXXX X.X%. If quarter and by comparable from the the the of quarter of deliberate COVID large estimate the of after in we remove impact School by grew we we from revenue services by to first about a XX.X% reduction revenue and first COVID for slow-paying facility, about if removing However, the COVID estimate that million XXXX XXXX $XX.X we of that remove XX.X%. impact

XXXX, As we to EBITDA adjusted that fiscal low a fiscal least the will double-digit growth see continue consolidated compared at of similar when XXXX. compared for remainder anticipate to quarterly fiscal as to EBITDA we with to XXXX, cadence

for our year. This is We also concludes in questions. pipeline school that fourth XXXX-XXXX will the school call such there believe the to with this quarter we At significant prepared starting upside time, robust the a open remarks.

Operator

Instructions] [Operator

first off, like And have we looks Bill Sutherland. it

William Sutherland

in Nice districts -- got they are quarter 'XX, year, you've The right, got X lined of of Kevin? that on-boarded, and here. so Care side Health you've very impact terms some the business impressive will new the is 'XX up

Kevin Miller

it. be I didn't phone. didn't might hear [indiscernible] I my quite

Bradley Vizi

Yes, Bill, that go take ahead I'll one. and

have mute difficulty might having or on Kevin think I an been audio here.

have that a are the highly that executed We advanced. few quite on pipeline much we're confident very in X already and

execution the there. XX are amount should or that that figure believe get I roughly was the think same we so pending and

around XX in mark we a think -- aggregate, something have is I So that quite the bit potential. of think

William Sutherland

color mic, you just the think little in expanding part this while Life-Sci, is it? can you've services I more HCM -- the of services, got the expanding Brad, you on said a provide

Bradley Vizi

Yes.

our worked practices are when naturally, opportunities you in the as of right, happens, are business to that with one particular to build. And that successful with with that And clients front of the had to HCM, you're last aware. at and them and some in and our the Sciences ancillary opportunities, you've X the Life respect business you need, a So of them when on queue build strongest are bit or years here. couple quite been that in by we've HCM division embraced of success of with

much our energy along lines the leading putting very for in into well and doing that look for them, opportunities. clients, to them, terms it's that then identifying ultimately, incremental we strategic So of

from growth, robust. And very as to well market their again, growth. particular our as So them our to deliver in terms right, benefiting of ability is value that

William Sutherland

one. Engineering, in And just one other

do up a Or cadence you You Aerospace slow trying Aero get up? starting of you the picking for mentioned did X coming because year. this -- think? this Just mention sort clients out new to of a Is ramp, feel XQ.

Bradley Vizi

POs deliver margins, front, was of for want that portfolio one? strides Aerospace us started to the Engineering their I to clients me -- yes, that reward naturally. Kevin, to bit And this particularly larger do the front positioning more do want aftermarket, their done and and as bit trust, Aerospace they mix work the some a making alluded really yes, remarks. And cadence, optimizing good long group with the that again, are as of business terms basically for continue up, higher the as gain has picking we with you deliver term, well there in you new on to that solid crystallizing a is lull prepared small speak success, and quite them in quarter of returns work. as to to On take good the this on a

we look of the X, those you X second in first half the expectations year. So when combination the what higher than months at in much saw have we the of

William Sutherland

put And in on just quarter. you improvement. want And the here cash take a mention on Kevin, of to one kind mentioned you lap Is any that? there the me more. victory continued let

Kevin Miller

and disappointed in to much the with if Well, QX remains don't be whatever. we have. we Xx very than QX more be I'm and expect add QX. operations. up flow. from -- in QX or terms X, frankly, care QX don't you and better higher, I'll seen. a lot flow add to we cash But those of QX, But be QX cash if if quite better a How it than And going versus very QX up when significantly lot be you they to be I of disappointed comes should not When

William Sutherland

-- just timing. it's not It's not only

You're of also impacts. just cap some the making terms progress in working of

Kevin Miller

It's even that of everything. biggest down at seasonality, and it what going and is are seeing be income, balance -- and with level now, where obviously, QX we're the receivables from to and Based down I'm the starts on be managing end QX. we right of end It's progress getting a where today. some the sheet. having more Obviously, in expect than everything. considering our a they making capital the at in down the the of they terms working after to acceptable receivables good in right especially QX ended up It's is receivables, net them further one to

William Sutherland

first Yes. get? in remind where DSO about Remind what of off, was then want you quarter the -- kind and to the us us

Kevin Miller

just that too get be Long term, XXs, I'd then to then may next quarters. to in that. working the it XX we are get be keep little Obviously, X optimistic down. XX. we're to there it it and XX. always like get factors to to first to get it's But a the Well, XX to And influence need over it and that low going

on a little take high-margin profile. do clients have slower maybe we bit that Sometimes

you're And working companies. sometimes like big when with

William Sutherland

districts? school Like

Kevin Miller

sometimes, But of are you Well, jump schools through. just administrative a quickly. lot need to there are interesting. districts They pay groups

desk, a significant they see yes, once and on some the quarters higher, quarters. seen just pretty causes pay us well. and going really, we're the above quickly just get next thing all invoices. And where the somebody's And some fluctuations. because getting can excited shape approve up do bit pay to schools that X that once receivables be really we've great are little other incredibly pristine about But It's those over of administrative we're So is and the on schools traps POs that are they where they our our I school good bit we've a sort tied pay but little historically job then up through DSOs seen there. on quarters the clients better of to X out of largest in the to

Operator

Next Alex Rygiel. up, we have

Alexander Rygiel

to nice to potential and Brad quarter relates think Kevin, school when quarter this? the the going you're have do for A good here. fourth the it robust question pipeline you on as and visibility upside, quick

Kevin Miller

will We'll generate the have better terms of feel of probably certainly of time talk what next it terms visibility chute. early of August. the in it will contracts that out be of have in kind for right? place, going them we in revenue a have the better Well, to in some we they're And

in you sometimes we're you with way. But got them, when sometime to revenue it of sometimes to in schools have we like ever terms Brad so going how next for of day pretty going And as I pipeline kind that way ramp then September, and up won't of we've October And a year at -- clients pop of sitting and history for schools in clients from to in good generate remember, first or that well, X. all of frankly, in schools we of But I a this are until them bad obviously, feel the the surprise to year had a are we to in get because just have think right to many few are sometimes really new not going a we've much here 'XX, the going, the others get 'XX. in company. that significant least then can work schools will be on come good later them new a like and

exciting. So that's

Alexander Rygiel

with you new contract? of And and these maybe contracts sort Or if new sign if there's the a that there's days margin execute address receivables when headwind first schools, XX up in can headwind? on you notable any the of

Kevin Miller

Well, don't certainly I headwinds. like feel -- certainly any there's receivables

school approved, have school. invoices into administrative find of Sometimes, in burdens getting approved so at has to every -- time get like get we getting when a and the cadence approved are and a of POs client, you particular little terms it sometimes, getting -- procedures while that approved the IEPs sheets school new quirky and takes administrative a can down when

But they of beginning there's in really So schools everything that the take pay where typically always sometimes long pay. And only like they're slow paying we until a work a take the to -- no stuff through through. we time they're there's need. they sort time to really, going get one school to to need if time The you administrative as long pay. some

margin we're But what should don't you all for So that all. going get you now. right pretty you the profiles know the margin gross doesn't don't we that in to schools at me and similar in terms concern we in of the working until as sure But be we And it. And really that know have to have there get revenue, until there well. see and start that. just you working it start believe don't adding

headwinds now, as you few schools. seeing rolling. bit the Sometimes right far get impress need not concerned to in a might of not But people at margins margin to really lower lot them put contract are -- there little a and we're for the a we're as really

Alexander Rygiel

recently broadly worth are or walked more away other sort contracts of from then contemplating nearing your are that business or And are of your that discussing? across sizable conclusion of segments, any kind there X all have

Kevin Miller

this much in just don't really sense client. It's just that by that capital payment, health a Medicaid, always allocation the decision it's short and make And it's really the bit. we facility as don't want terms to that, But client. because Brad, risk we little decided is in that at a we to that paying, service slow XXXX wait we it the just long decision backlog that's a is just XXXX but is talk because it. one never Brad don't as to then much don't a about pure about that the level write-off. want long-term term, the but across got contracts, not by care in down servicing I up far Brad to slow know XX-plus too and funded mentioned not add the hurts all of going divisions. a a major and that there just get capital pipeline it a sort had we them And large term. in mostly of right They're I care Well, them. we mean, paid big if -- to But of something is win we client them think contract I but... because you a We've year strong they're tied doesn't But want talk really to were and that

Bradley Vizi

going on to orientation that Yes. of we're right that of of basically of respect we're going to put headwinds with kind grow -- horizon potential don't to a really the we be fine to But project that Alex, it, through. we I we're think think there's on business. point projects, aware there's some ending, always our not to nothing the

we we think quarter. it the Kevin the we're headwind, end be largely in that Care, was mentioned, as Just this biggest going reaffirmed, Health and of at through to

Alexander Rygiel

acquisitions? cash any And I is end is but how sheet quarter, you the question you're talk in the positive. strong. going buybacks thinking really bought shares outlook back with about can about Balance to allocation flow versus capital you Clearly, your I'm prioritizing here. very believe don't

Bradley Vizi

Yes.

when is thousand we of in clear bought couple hundred shares you'll that, be Q the filed see here, the Alex, quarter. a on to Just and

Alexander Rygiel

QX? In

Bradley Vizi

sellers. of close over couple around period our that and were bolt-ons, when the we And next by or think we're to value time. of come -- carrying just we in opportunistic, and be as couple getting we're should intrigued certainly to pretty cash itself right a really it. profile, right here said, cash to at a the being can going meets is be delevered return Yes. to had are for that And And looking of that we move. That that going point we we the presents look, a significant of opportunity chemistry the much be little quarters, we're starts bit we're to with comfortable to the finding add very quick look,

set in platform. they capability ] with when respect the comes with sales else we growing right, So a force that segment everything of technical that profile put behind the of in to very a our [ market horsepower attractive power, recruiting terms can that and half

a we're So there's on one perhaps there, those. more August talk little to about in but of closer

Operator

[Operator Instructions]

Next up, we Andrews. have Ben

Unknown Analyst

went margin Two questions. Health like Care year-over-year, little bit. looks When look at gross a down I it the

that So the are you're accounts business? also calling they're slow high-margin paying, that

Kevin Miller

for around The pretty right margin, margin in noise sort of a normal pretty high compared run in increase. mind margin. But to impacting keep that had pretty but New downturn that and frankly, That you the then taxes I a there's They're historic year-over-year year will to mix was That's say would have the of in big some you're comparison. through No. in in is just last other had increase And the York. that that margins. QX the that was we took issue going we We QX our employment the in see. of than main margin, and nothing normal to shift the reason QX. biggest hit big

Unknown Analyst

of you indicative intertwined clients accounts split of the get that? then question together this control. out spins it many might out is together regarding it seems long But it get then a that then of And of you spins why with that Or well. that it client? type guys and is revenue now, receivable, Okay. Is for you years, of and control, the it have? And that then be time that indicative as on

Kevin Miller

Yes.

of administrative with in can't especially built for back it particularly I issues get there's be until to better we row, in. project we'll on run terms always can the last you're of paid couple the I the schools, with clients. X Because you in just side, going get time our and a those of a -- had Ben, way working lot And time, biggest of clients it, some right? we excluding is the clients, -- to had a then finished. DSOs of there's milestones project the a best do certain outstanding think quarters level. And where are There that noise lot from the we've into in explain in especially is terms to times, some

in So going some be to the there's fluctuations always terms AR. of

you've that while. the discipline to it's that and here out what looked as years over some have to terms honest. And were years -- areas years and we're for of the had and fluctuations -- over at think on I -- look that the to sort want of issues were AR of today, a look be diligent in that's I here if don't company going this right focused couple some word had see But we I I or we XX-year that we now, don't ago. X you should next think work in have if seen really need the you that that but focus the of the you not if we like we you're not some on systemic, And period, that of XXX% prior focused use there we've is that issues a been as X be, don't we think X do as just and really a on. of where kind to like

Unknown Analyst

we'll Okay. DSO. forward ongoing that kind Hopefully, going hear. to good an Well, of see that's lower

Kevin Miller

we or going XXX lot these be us so The thing obviously, to XX to if days very, XX, get or of absolutely on, a a also business. We're will those good take margin the worth need get add a will client we to we behind know right? from client very sure how and that squeeze, I that have is we focused DSOs to the companies, if the down. to make And that would make worthwhile. going only is the big about make we we is there's going XXX we're Yes. sure that allocation select equity. flow, X to of on sure companies that We're also have client, Like that that careful high that, it's juice them is pretty that cash companies. And capital we're return

So we spent this, we very a a thinking very, it lot at of time spent about carefully. looking time of and lot

Unknown Analyst

And clearly because like trying happened to Right. asking that's is customer this I'm understand it I'm more. know just why it your looks I and -- before, base it's

Bradley Vizi

that at pair also context we days, Kevin DSOs returns on look to fine So said a feel going when and again, I'd in But right? credit, to we XX just client in they overall good again capital, a absolutely has on point what right? great. to is put Yes. is the and of if pay want it's a gross -- pay margin, XX%

project our thing of set we activity right? of that normalize. base, also start that especially scaling so a pretty a mix is mean, at be as try client holistic look business, but it I scale And the you like services diverse ours, we platform, to way any naturally, kind in here we're a to has one subtle

them administrative about say, client when ends all they you one maybe place can right, and might that talk school a you side. miss up sudden, rhythm, one even on flare-ups a flare you up their in have some some we when administrative right, intensive. issues, on the have furthermore, say, we be client. And a cutoff. And So that actually can have get gyrations and But a then I pretty, pretty very, of is front, on-boarding just fundamental, and great turnover very would of that or couple from intellectually

own the right? up person bit -- picking a down a that of comes system, learning of So in terms their in, little side So little a again, that things that next bit. on could side there's curve their right, on slow right,

a a just in client, some steady time whole, we the have this opportunity. So a you there's points in with sticky of being just opportunity, become right, partner, they're us where vendor, right, that a a a you're you that things a is to as great and a state instead to resolve right? with natural or help term pinch as long them more that view right, But And terms to getting little point client, ultimately of point respect any now a bit an happen. And challenge, the just right, pinch partnership.

Unknown Analyst

I falling this analysts off. it up being by And out quarter the thought gain in Street when from masked mean, and was than impressed. I look running went earnings up like really definitely it your was the you quarter, more Health stuff going to I sale, go more If thought. at clearly, back the did EBIT year, with you the I on Care $XXX,XXX or last than not engine

nice even on. should can margin? aerospace look in how these year-over-year like at out I margin we possibly coming schools clients over and So of when growth same better? or QX see relatively did we looking Should that maintain a the few Or you quarters, type are

Kevin Miller

improve, sequential to expect a margin a on Well, I'm on it up through mean basis bring we margins employees, as should you of through we catapult but that that when basis, unemployment of the sit going alone points. I in see I not start XXX% move Ben, will XX see sequential from to basis. quarters. running going the we're here a expenses tell QX, to our gross and for lot improvement we

We margins last really year. So had we go we good see should as improvement through. some

also I stress is and growing But the I gross important -- dollars we would year-over-year. to on focused how return really don't focus on profit those So something I -- we're know incredibly Brad margin dollars. and for while gross we're compare profit going on, gross and getting that

that. if to a to makes today, for a going we'll some lot sequential lot improvements have or sort at margin -- margin, direct large expect do of we the a as do of the it sense businesses. gross X look XX% margin a in I But business not XX% a of So that's see to do of deal for all SG&A,

Unknown Analyst

you've Well, the work valuation-wise. well realizes trading a don't growth the guess, and of excellent. can you've you into know, clearly I a stock get kind is Hopefully, now the [indiscernible], you back turned market I on and double market it, growth multiple RCM company can multiple get buying or that done, at a below world again. a And

see. let's So

it. So thank I for you appreciate everything.

Operator

this at time, gentlemen, Instructions] right, All queue. [Operator are there questions in no further

no questions this At in seeing time, I'm queue. right. further All

Bradley Vizi

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

Operator

call. ladies And your with gentlemen, this that, does and conclude

You may for us and disconnect your thank today. joining now you lines, again

RCM (RCMT) 9 May 242024 Q1 Earnings call transcript