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RCMT RCM

Participants
Bradley Vizi Executive Chairman
Kevin Miller Chief Financial Officer
Bill Sutherland The Benchmark Company
Frank Kelly Scopia Capital Management
Call transcript
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Operator

Good morning ladies and gentlemen, and welcome to the RCM Technologies Second Quarter Earnings Conference Call.

Your hosts today are Bradley Vizi and Kevin Miller.

Bradley Vizi

Good morning, everyone. This is Brad Vizi, Executive Chairman and RCM Technologies. Welcome to the RCM Technologies 2018 second 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 time. risks, we subject, that that are releases and and our the to the from forward-looking we factors XX-Q, well reports time with to on statements XX-K, as other as please issue periodic uncertainties, they X-K, filed

Bradley Vizi

Kevin. Thanks,

second our third $XX with pleased consecutive are with XXXX million. revenue quarter our We results. over of consolidated We posted quarter

highest million Our second quarter seen the years. $XX.X revenue was at quarterly XX we've of least in revenue

confident XXXX revenue $XXX million. fiscal are our will exceed We

fiscal over second same pleased million by XXXX $X.X respectively see and our million year-to-date I'll XXXX. growth division and each separately. are especially XX% EBITDA We and adjusted in to $X.X periods discuss quarter XX% of the

as a Our of quarter XXXX. million set Health to XX% Specialty Care with year. to Staffing a last the second Gross XX% new $XX.X as robust record quarterly compared Group revenue grew compared growing about profit

to in New York. and XXX paraprofessionals last with These about the with XX paraprofessionals City, years, City, Hawaii compared XXXX end Hawaii York of school an quite on and Board respectively. we paraprofessional improvement Education. the Department Education XXXX-XXXX Hawaii with New Our school when year and of was healthcare both had Hawaii as New by XXX growth we of in May York and City and assignment driven contracts largely in numbers our are At XXX June York XXXX the had The New

versus therapists timeframe. New of York tripled, growing York our $X.X Hawaii the City of the to about XXXX same second put million in from quarter million in second second To in Revenue the New with was about context, XX XXXX was over million second $X quarter quarter in in with of for million versus Our XXXX. that quarter of $X.X $X.X City about XXX the the XXXX. revenue

XXXX We revenue see fiscal year from Specialty division will will $XX our record and Health our a Care exceed million. believe in

revenue quarter division Engineering to Our consolidated of second grew as X% XXXX. the compared

operates revenue Our in Energy XX% million the Group, Serbia, growth the and which the quarter Canada XXXX. U.S., quarter posted XXXX, in now second Services second over of of of $XX.X

Serbian office contributed in about Our $XXX,XXX revenue.

PSR acquired Engineering for the of Serbia. Engineering in we Electrical reminder, Belgrade, XXXX, the Excellence quarter an in fourth of foundation laying Serbia a As in Center

are the commissioning, excited and and substations, leverage plants, North testing about our the services clients We Europe, high-voltage other for specialized engineering design America in and and for to prospects South in equipment XD in to XXXX very supervision the site was with PSR partners power associated Serbia performance electrical modeling, East. of operating growth Serbian and and Middle engineering engineering America throughout in established design opportunity and PSR RCM. and the enhance

grow believe original over XXX our from addition we our TMB In to performance in can to a capabilities enhancing time affords XX. this leverage that operating over to platform office RCM, We PSR throughout RCM numbers Europe. engineers

backlog the We continue year build. forward Energy from and as Services looking throughout to performance continued are pipeline to strong

expectation new law were half in the of versus second improved the within seasonal increase not concludes. Though Canadian generated of during with as Canadian a results. the in activity the our summer Ontario Power quarter plan our XXXX. revenue the which execution anticipate We Bruce the Systems Group, already Our XXXX and typical and of Power quarter with the million mainly serves OPG Power is during million operations Group, Bruce awards an $X.X year, Power second delivering in $X.X line in into remediation second put first project quarter effect both of and in

quarter Group of result the generated as $X revenue Aerospace in in quarter $X.X of the the down of in million delays QX. from project of Our million XXXX, second revenue XXXX, second of

aerospace in calls, too we small clients. previous mentioned of far As on reliant are number

months Our grow diversify we've base, to to two Services and the years. similar in primary past XX goal in what is over the our accomplished next client Energy

our last XXX in changes the Boyle already RCM augmented We he made has Mike has Though activity meaningfully to only are and joined encouraged effort. leadership days, Information Technology our Group. the by sales within significant

since continue need recovery, to innings are to return. this Island grew and This time XXXX. we in have our HR be sequential in as early erosion of patient XX%, gross Solutions were While first gross revenue two still we groups. The the compared and we growth we but about contributors long a very biggest respectively anything Solutions been X% to has to signs division. are to as and quarter by profit revenue profit and seeing seen Both already this of sequentially of Long

XXXX. the end experienced vacations, million business Specialty improvement about prepared remarks. continue expect XXXX revenue for summer from seasonality in while third to the of to the as sequential important second This closings. XXXX. the the XXXX. our fiscal a $X the XXXX time, concludes at perform the call in this will Microsoft questions. due about consolidated was quarter We and in of expect that we summer it school third that in we RCM segment quarter fiscal basis, noteworthy first Care includes to pertains of significant On holidays It divested is to Also see $XXX,XXX our Health however, during for At and open half second to a quarter note, again quarter Solutions

Operator

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

Bill Sutherland

can to healthcare the pertains to color As group? year, this as provide look ahead you coming you any school

Kevin Miller

as most now. investors Yes, mentioned until his mid-September, doesn't maybe I The QX, close and school have like Chicago. fully with New we same thing underway in York significant start our prepared in remarks, seasonality until of September Brad to system really get doesn’t which isn't mean, and our

earlier start Fortunately little bit mid early Hawaii -- August. to a they starts

So our to expecting we year. the have are are school some relative every different pretty year from big school by that XXXX-XXXX. year years to new school seasonality the placements but significantly be do of in as number and at QX, the not anything coming up expect to all last very far coming new we school increase as the in last we schools of Certainly going isn't But there we try school are year. as concerned anything we

Bill Sutherland

in healthcare your staffing you characterize emphasis? would right the How now other momentum

Kevin Miller

I strong. very think it's

is healthcare firm Our very well. group doing well, The segment only group. that doing isn't is our frankly, very

year-over-year down revenues are firm lot. a our So

the units seen particularly there, that are But in than have doing weakness well. serve. we So other think some our I markets that, we of staffing all

Bill Sutherland

others turned color and And possibly together bit in for initially maybe the comes have HR color proportion little just then, a more that as the are Long business rebound nice second on little seen this two about Island rebound And the you lines maybe What solution. guys Solution of think around a nicely. you quarter. revenue

Kevin Miller

profit short-term in our really focus to biggest we the the making smart are drive investments drive gross to Yes, Right frankly with in is are. margin in contribution business excited now where the on and long-term. we

sales life a now team processes. few our inherited and Mike -- We've right is some his management with really we're quite he management sales on And So also and sciences. our added just and Mike continuing executive in added people. work other solutions improving is focused to are sales HR that that shown. team We've

about have a IT lot a lot we think room group are the of grow. and of and we So excited to headwinds

Bill Sutherland

unusual There … utilization that -- margin I probably was behind Was the had nice suggest next it. that assume gross the this or some

Kevin Miller

expected, see did It’s came high expecting I little to had this But so was I than than I but better really it quarter. to some strong I improvement We wouldn’t bit a it a utilization. projects we frankly, I expected expect -- higher that there. expect of little every QX, a had in where couple be quarter.

quarter necessarily the chose a what that margins those I that mix margins staffing. we about is this depending to was to expect and the products have on and QX regular I the exciting QX in QX, on the think margins but So we produce had wouldn't basis in potential of

okay. and margin Our bit focus is I a on focused and we in focused dollars. on IT, at then driving drive gross on very extremely than gross up more we are we gross are dollars we give very that margins And important, to the have drive utilization, more to are contribution margin, margins if but that's little gross gross are mean margin and line profit more focused the

opportunity we going dilutive drive I’d So extra revenues, a staffing a at margins. different lot of not overall in that’s going that were to that the in after But we are margins we we necessarily say the of few and had come to are after, going QX. in blended to if business million staffing XX% obviously, some our

We sale. with are that okay

Bill Sutherland

coming going a mix side how other should And of forward? Health in issue? think about coin then is And down XX% Sure. that of Care, the we the that change, directionally, to

Kevin Miller

to give frankly, firm, color. the Yes, just factor mean, I biggest Bill, is you some

amount of firm. in we gross firm I have as but you mean, QX, huge we we don't margin. in revenue impact So pretty a XXXK a do had on the big know,

XXXX XXXK did and XXXK 'XX. QX of QX of we So in in

So we XXXK. down are

for QX accounts of chunk 'XX. that versus a year-over-year, the So QX pretty big 'XX

if you looking this at The that sort last out, you other strip XX.X% of year. and factor quarter big XX.X% versus are

XXX a in New to contract margins have of paraprofessional work what basis our the are margins. overall seen And growth. then it's we year-over-year those And in travel softness York margins been nursing the driving is some of Brad is growing a in City travel our margins that So lot And about come the about. the that’s difference. down. so big dilutive frankly in our chunk group And talked we've point as

XXX-basis-point those X.XX versus did then of XXXK about Bill, if in So are year-over-year, we look driving year-to-date you big sort about two XXXX. XXXX the firm And factors at for difference. year-to-date

versus basically contract year-to-date, that is have basis decline. same firm. points to we in which what call XX I gross year-over-year same you've actually year-to-date difference, factors out we the contributed strip about just It's the XXX-basis-point to and about margin, So got the the discussed spread

Bill Sutherland

Headed cash first down looks It one days. quarter. like three are like for Last days better me, than further… quarter

Kevin Miller

of perform hiccups Yes, well bit just we stopped the in now QX had now client a can And Ney collections, that there lot but the they that fact actual biggest a accounts in for was have a we City York issues our -- in lot improvement, of Bill, they we mapped is because the thing terms our cash Education. some of of the Board all where had June. of the

have of we to gotten in would've We for. had least $X they payments. if close So that didn’t we million stop gotten that might making at paid half stuff

we And year, so X.X far New have million this from York collected City.

well. very as a QX cash good in expect we So quarter

should better So be. than hopefully QX, it

Operator

[Operator ahead. Instructions] Please will be Anthony [ph]. Samling Our from next coming go question

Unidentified Analyst

to relation this no have My running other makes question model still Or of that sense? is does three sense? Brad. that that you most one think particular makes you to concentrate on business each Do should different the businesses

Bradley Vizi

public nice to have isolation, particularly play, a as in think a it's always pure I company.

this I’ll think I have at together. that performed these nicely However, three businesses say scale,

as well primary as the between is model. delivery think really synergy I similar services them shared

respect should fundamentals the extent respect to them have commenting going the of But up underlying business. thoughts with further to there. ultimately certainly with you to our So address stop that I kind forward, probably into strategy

Operator

from Kelly. [Operator Instructions] We a in ahead. go coming Frank Please have question

Frank Kelly

overkill, and I it relation Brad morning wanted a in Good base took capacity. redundant. that for gentlemen, be joined welcome was but was financial a transactional the through late, new margins. specifically? advisory $X.X touch might so million What The into fees, what the little a -- and that dent I call That to? in aboard to maybe nice

Bradley Vizi

for $X.X million in wasn’t Frank. total It that

up made $X.X language You've were that that the probably million. several read there components

whole or If thing you … read the

Frank Kelly

Okay.

in to? relation in So what the advisory was transactional that particular financial fees,

Bradley Vizi

Well, in it's interested not something commenting on. I’m

are So we so IT we fees million. financial in this for at had closing. point fees, is going transactional President and $X.X we group, have $X.X search legal And of fees that fees disclosed with advisory on R&D million this the in associated loss those total I've associated unfortunately our made-up what total all with interested

Frank Kelly

a in If for significant we X.X downturn year-over-year, to relation the cover weeks gross XX we roughly Why had to? Engineering, we that gross XXXK. skip was looks points margin it over what lost Did in in there? you profit, like the

Bradley Vizi

What to Frank. I’m sorry, specifically of which I beginning were question. you the group? in referring numbers your missed

Frank Kelly

year-over-year. Engineering, XX weeks XX weeks

Bradley Vizi

of nothing going we project there Engineering, year, that sure. the there fact did in some the is specific fixed other Yes, price very really on quarter good last margins. second than have

of had we where XXXX we utilization shape in had and And estimating. in So excellent a good projects XXXX. in terms in of QX we of couple were

end As come not you completion in projecting know, of cost the the through going the estimating get are job, you're to of when you're we may as sometimes exactly and percentage you as the project.

is it always would quarter what have You overestimated which of like happened you year. second last in for be the the to cost,

the quarter that is it, I specific this If would you of flip that an on other fact for not like see as than But good quarter good not as the year, and it, is see to particularly there Canada. 'XX second definitely can to over but to do utilization in we to point better. like gross was anything I’d this than going QX issue the in I think I'd margin overall, as lower

Frank Kelly

So year? you of that for the balance the of margin anticipate in year rise gross to any some

Bradley Vizi

be a crystal balance some upside of into will depending for my gross our basis, QX. of do some gross to ball it go, there this year best in certainly think that forward to up. similar There similar But margins guess is go looking the I’m for get as is that the I is the Frank, at projects opportunities a Engineering margins QX. on longer us in how term, on the engineering to think but are looking here, margin I likely look to lot

Frank Kelly

like bringing down. a good cash work. and are great looks from job DSOs we lastly, And and on those collections the collections I what July of having the It August read. Good cash

Bradley Vizi

school getting a little end fall fall the quarter. have in cleared real collection bit the of Frank. a QX the that The revenues should QX, wind-up because because we of they cash in Yes, quarter strong DSOs way towards

a wind you taking of revenues So the are up revenue uncollected, the having number your months. three for bulk yet, you full

DSOs is and we our through cash real what have earlier, -- we and in great look million nice I $X.X already QX sometimes So is already nice have from but we've typically don't flow August. about it's as New QX, York, collected headway mentioned really

in the have real good should a cash we So quarter QX.

Operator

queue see gentlemen, in do Okay, any I callers Instructions] [Operator not more for questions.

Bradley Vizi

Have a Thank you day very much. everyone. nice

Operator

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

this time. day. at have And great disconnect may you. Thank all You a