Brad Vizi Executive Chairman
Kevin Miller CFO
Bill Sutherland The Benchmark Company LLC
Call transcript
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Brad Vizi

Good morning, everyone. This is Brad Vizi, Executive Chairman of RCM Technologies. Welcome to the RCM Technologies 2020 Second Quarter Earnings Call. I'm joined today by Kevin Miller, our Chief Financial Officer. Kevin will begin with a legal disclaimer, and then I will summarize the operating results for each of our business units before opening it up for questions. Kevin?

Kevin Miller

everyone. morning, Good

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

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

Brad Vizi

We result revenue primarily Thanks, second quarter broad lost of the Kevin. many by significant RCM Like in the companies, closings. was school materially COVID-XX. impacted

However plan COVID and SG&A in a while against the cut would time, we that last same gross at performed Broadly surgically cash we plan speaking that believe spoke well maximize on utilization we operations. outlined focus heavily to from we we May. when our flow margin, we where expenses; working outlined non-critical

We all three results the are fronts. with pleased on

I cash our the We're cash forward. sheet. about our by going XX% want debt pleased a to this from discussing affords of net Robust to operations highlight in our flow reduce from allowed million $XX.X operations cash flow million. segments, us Before from debt $XX.X generated $XX.X areas quarter. flow few balance and in statement to We million the second RCM flexibility reduction

the award the reflect $X.X first Our arbitration second quarter not does quarter. cash from flow million

executing on proceeds before reduce quarter will also further. million RCM in we September off million. purchased and by attractive the note a use second of We expect that note coupon payable XXX% pay $X.X to award the that that We're an price for able starts the to optimistic shares be purchase X.X to those at this X. collect quarter

has significant Finally, a financial on most Healthcare had our line on credit environment. covenants flexible negotiated our of impact during segment. we COVID challenging economic Staffing

initial And on we As revenue be expectations, thought pandemic. revenue thought due the two, to compared lower. were fronts. somewhat school would we two be our to would our One, we higher non-school surprised

exists revenue thought Our $X.X versus a to demand million for would doctors patients, in about non-school $X business. We XXXX treat and that COVID XXXX. QX to due in initially non-school meaningful our $X.X a in in and was million see in XXXX QX million revenue QX increase hedge nurses natural increased

did industry. as additional saw states, to multiple as services demand several related COVID-related COVID several COVID-related and regional impacted offset. for at alternative materialize sites testing opportunities, Though care that such headwinds sites from regional the did from expected, services While we we the Most were plummet. gains benefit not importantly, need

anticipated we nice see also increase HIM since in a We that will our technicians mostly HIM. work-from-home,

disruption. or the However, many revenue. clients our $XX XX% have influenced end clients school of Healthcare of about generate projects to fiscal In COVID XXXX, due million delayed our Staffing HIM

was pre-pandemic made plans not clear QX that uncertainty were have schools in have surprised QX revenue modest with we closures year. the fall. from mid-March around school million widespread revenue on QX most significant as The it our platforms We generated aware, that as However, Telehealth have rapid by change. to significant Until remains predict rapid for school will were of schools. the revenue. effort. part silver be negative believe XXXX nascent is generate both very significant. worse you're leverage materially the market impact XXXX This short announced to clients normalcy their degree schools XXXX. QX in of Telehealth we're some in around are a schools, in pleasantly school services in those $X.X our share to from Telehealth pertains school challenging this it results leadership business expected become by plans said it position And our lining compares will that announced business There to plans. XXXX a $XX.X We that to formally million to of Those situated in our Furthermore, school our subject more leading ideally the to to ascent achieves revenue. market. we and believe accumulate the the long-term. country of providing Many One offering

opportunity. become very the only post-COVID are believe for integral in are system. will about education these of schools the We services we undefined part but excited an We early innings to Telehealth services the

As COVID group have and inquiries has healthcare, in seen of assignments Though IT predictably less a COVID, compared segments neither on and as proposals. reduction material engineering a segments. improving. demonstrated slowing both but a result to of is going current business challenging impact forward new seen Visibility

sequential see the half second of our to in XXXX half on growth compared as Our pipeline. based backlog current and first Engineering expect the to segment

We Historically, XXXX. into weakness represented groups roughly have our side time, our second recently groups. and of aerospace projects XXXX commercial of our commercial area half most saw we're of and on Aerospace The significant we in XX% industrial this and business is the the transmission processing the our revenue. group. about has both optimistic distribution meaningful several won At in these two

go-forward we deliver been previous to discussed gross working a on have superior As diligently reconfigure to calls, basis. company margin on the

strategic this as several Our progress gross sizable of demonstrate today objective, result toward a initiatives. margins

several and partners. initiatives we two on utilization, includes that superior way increased plan project margin, the improvements able we in XXX Specifically basis year-to-date depth improvement. These out work ago, points. the On same function and focus to improvement and our management, a of strategic over of of a XXX changes structural XXXX achieve were our period laid of was were QX increased which project progress years points when basis leverage illustrate Serbian basis, XXXX, margin the gross the the to engineering gross manage QX comparing versus we

effort we towards instances, extension of progress many each made in into closer evident made into Not believe was but the this client's to of throughout the client, RCM objective, in division a the evolve front to significant have only partner. more made move our value-added operation. and an we Finally, the We continuity relative on business. has a this progress evolved of critical have

HCM, versus of Our or IT a The the cancelled performed do do the great sequential time, in second few filter replaced. a due suffered in business our this any primarily I for more QX of But XXX of with not invest environment. not recognize well us school improvement. margins. further the When gross the as moment especially excluding sustainable greatest XXXX, margin in comparing was from sales like gross revenue substantial valuable pandemic, improvement year-to-date we which of were healthcare inherent current want Like The outside in improvement. to risks take to for rest a we thoughts. highlight we quarter. in have would the we've IT to infrastructure, a growth profit basis clients. made group points our that a a relatively trajectory. XXXX, impact expectations significant On but engineering, way leave division to expect the improving increased the of QX projects revenue decline sequentially. IT to do in delayed, progress This to and delivered We affords IT, result you HCM-related leading when and At demonstrated not economic rest decline political basis, XXXX we our gross dollars

continue plan our we on will of that quarter. continue optimize structure. to second our the in COVID cost we to will execute specifically, SG&A We implemented efficiency early the swiftly More

While much further can second the reductions on costs. of if we our necessary, in accomplished we action cost desired take quarter,

utilization on maximizing focused and remain margin. will gross We

flow see expect third experienced cash to If a revenue lower quarter, healthy receivable QX accounts rise we debt from quarter. the in in We and we see levels. will steady in fourth uptick the

as Although summary, try a will of challenges In positive for policy, the guidance, result believe to to face a of remainder we XXXX. continue as EBITDA we pandemic. avoid the see that we providing we significant

this handle positioned than and entered. call these for exit we pandemic are At the questions. think the concludes we open we This However, remarks. time, challenges we our prepared to stronger will


on I Sorry about was that, mute.

Sutherland. from So your our question will line Bill, is Bill now open. first come

Bill Sutherland

on of your amount look? wanted their just what's you couple I ask and fair plans could a third districts, fourth from on the school to quarters Group Healthcare and mostly a things three the that and of impact So revenue your do have you update how how latest because


to a to there now, out they well, well three of week, would to allowed terms They're anything. the Right open going they that I've participate definitely period fully they may, New there for we to out not believe anything September out time. filtered are I for York there -- we basically State, for whether students parents in some haven't they're would on open school How they XX% week, really other York lot are -- kids normally table in-person of like that has New whatever feel to not whether from. heard going day City days, anything are of some going September that ideas. options has X. seen Sure, days two offered the formalized choose expected to and that's them is going every approximately what's week, not. anything the school surveyed says happen schools one work. been binding one, There go they there in open There's other that haven't out X they is believe, other that to online But or of

We after that XX% that Hawaii you Friday indicated weeks -- be And longer that first going Oahu, was could They've open -- was to which They open on is are also online. of be four about just normally XX. Island right week to hybrid, about Friday will subject our preference how around to the is Hawaii a in-person going compared won't first scheduled intelligence X model best therapy now to September know. impacted they're lot. we going a schools But That's plans go. previous revenue that and we us that going be exactly of to don't levels with at And obviously, to the our on hybrid Our go some the revenue at-risk is belief. of know. just York, the they're professional, hoping almost for represents in-person to all nursing August. impacted, if impact as think open we they're don't or is are kids. our level don't to obviously four Hawaii that their there's because believe, of but know. changing New which we weeks of biggest as just announced daily be a know. that it's component to what But to change And to month August that give our which that's

So considered our four to be that in some lot may at-risk they've during kids school indicated be at-risk. they're primarily are even going kids where of the weeks online,

just know. this point, online. we're be the at know, impacted we just just And -- we after don't we don't going first that how to So four being weeks by much

extra Chicago concerned, to purposes And our as types us has they're heard into they is our some day to where of schools and that initiatives that that the do brings be which of use have is one Almost revenue want in far open they're is going online different all online. initiatives quarter, nursing. As early school limited Chicago where indicated -- going from they're latest XXX% Telehealth be going they nurses the XXX% first has all the we've being being physically for that to for nurses. for November of

to So, is at our we materially revenue change. going impacted. be to believe this obviously, Chicago But subject everything's not time,

Bill Sutherland

nursing, great that York component But a to Chicago is Telehealth be --? a to of that's going Great, like rundown. City, or shifted New

Brad Vizi

and that nursing school, where nurses where certain just that even will our have they or Telehealth a facilities. kids, we be believe combination if -- they're in need believe centers they We using of in our not at then them

paraprofessionals. on from a hit. there's going biggest But some our between big and the paraprofessionals, and be We City believe of portion time to school there's is for lot that but of and get York to starts. So is you the we're our nursing lot we take Telehealth do going two needs to believe on sort a And believe revenue around. days, New of uncertainty to going just the coming utilizing them don't now offering three a the be

Bill Sutherland

All right.

the in Telehealth what hop I'll and me, as using from more one means understood Just Brad by I gaining a of share. queue. said

any So of can on what you there? to give us you're color kind intending do

Kevin Miller

take that Yes, I'll one.

that clear a the that -- of a to with and initiative. early we're it provider now was And it market. were to But options in to taking we which it service underlying of sorts way be happened, as So easy and regional had the leading or of premises all panoply And really just all case days ultimately at position and had offerings, presence we're When of another. already of it. Telehealth invest nurses the offering. to ultimate schools in this against to we leverage gain competitors et our terms share going still don't was is to to cetera. our decision really This have behind of the have to one made our quite wherewithal tend many therapists looking

for opportunity So but us focused certainly on. front and center an we're that is and


no in are further right. Thank Instructions]. [Operator there time All you. questions queue. At this

Brad Vizi

second next RCM's We November. quarter call. in for attending to Thank Okay. update forward conference our look you


time, now gentlemen, and at Ladies this disconnect. you may