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RCMT RCM

Participants
Brad Vizi Executive Chairman
Kevin Miller Chief Financial Officer
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 Third 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 call 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

Thanks, Kevin.

Our impacted to results continue be by COVID-XX.

responded crisis from will utilization we heavily have well, and surgically In we May, Focus margin. However, and a a company. non-critical we the plan, where cut on gross outlined would that emerge better expenses. believe SG&A we

the maximize While at working from operations. to flow cash same time we're

We pleased with on results continue to fronts. be all three the

treasury incurred to an payable retiring million. the second allowed purchase our $XX.X debt from I or attractive our second XXXX third $X generated in the third areas we few the financial net flow us in of flow note has discussing reduce highlight million Since at We year a million million to combined. payable In flow $XX.X the end quarters want We third The Before price. in $XX.X XXXX. from for note generated of robust the operations the X.X is cash million cash in performance. cash quarter $X.X operations to quarter, operations from shares the XXXX, during million by to of XX% million and segments, quarter. the $XX.X of after

with cash Bank environment. credit strong financial a and renegotiate us challenging during our to allowed line covenants Citizens flow Our economic our

we and RCM segment. move have to debt on covenants the with forward. are impact revised most staffing the as continues pleased the care flexibility significant afford reduction We COVID health our

healthcare from school systems. historically know, company's much clients, in instruction of March. you nationwide, has person the of our school derived in As segment close Many systems most for including school its revenue

with reopened virtual the and classes. partially of have combination in-person Some

remained While under has in plans unions fully what when have employee entirely schools remain or virtual. some information pressure Many reopen changes. with rapid on by any are company eliminate they limited in-person The our announced manner learning. subject to update, and previous classes. for Consistent in-person reduce will to

improvement. clients full steady not three recovery in-person major a classes. our shown has do We business anticipate school until school Our fully resume

a but of quarter less what our fourth of Revenue a $XX estimate Hawaii context. three York the XXXX compared As It's you of under a in $XX.X many clients year-to-date school be for than Chicago. safe is assume XXXX. XXXX. will New million XXXX to and some of delivered million clients half was revenue the numbers I school entirely precision, $XX.X quarter hybrid you was quarter Chicago million New it's fourth million. in with XXXX was virtual. know, was $X.X million York are: Hawaii clients school in third XXXX. City, are for XXXX degree in the and with to school while Revenue school in will difficult share on our operating of largest of from very basis $XX model, to Revenue comparable compared in from to from high Both

predictably assignments of Visibility and both less be to Care, proposals. inquiries COVID Health on seen segments. segments due COVID reduction new impact the flowing IT our to Engineering a have But challenging. demonstrated material and compared current group continues seen As has in to business

the third XXXX in a saw sequential quarter compared XXXX. segment the second to Our Engineering quarter in of $X of million increase of revenue

Our in offset decrease by aerospace and energy processing a revenue. our groups, partially sequential industrial growth commercial services primarily is from

XXXX. for the revenue the of with expect materially of fourth We quarter in XXXX to quarter third be line

recently transmission We and both won in our industrial processing meaningful groups. and our several distribution projects have

in have We seen and for backlog group. Power also Systems pipeline Canadian a nice uptick our

revenue on We are groups XXXX. groups for XXXX. three drive these optimistic about we consolidated backlog three will believe Based and pipeline, current these in engineering growth

following our in group relatively SG&A believe of the which expense we sequential and The quarter XXXX, we was reasonably of company, the well. continued COVID. decline Our Across our weakness our optimizing group of $XX.X quarter in our quarter performed driven fourth progress rest second dollars. trajectory. The SG&A quarter XXXX, revenue of million. Sequentially, the third to the $X for the is million, continue million, of third for first the make performed quarter. The the impact million, has in IT HCM by XXXX, primarily of IT and well group, demonstrated XXXX, $X.X $XX.X

our efforts plans. reduce long-term without to SG&A gone have to growth our We great impacting

While investments surgically reducing we have development. SG&A also certain specific business made expenditures, in

We both. will do to continue

rise revenue our operating dramatically While climbs, as grow we leverage expense believe that a our SG&A to again improved top-line. our we as have we expect we

We ability normal better as are very our margins about more revenue our levels. to returns drive EBITDA excited to

results obvious to fourth sequential sequentially third headwinds, of of XXXX. the believe improved anticipate we the into we quarter we Despite that Finally, XXXX compared performance XXXX. as better we head will in deliver quarter

not of our a improvement, few While school the magnitude we our do lens last the from reiterate to want thoughts estimate especially have do to for call. clear potential we clients, a

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

utilization on gross margin. maximizing We remain and will focused

quarter, debt for revenue we the will and in fourth our accounts increases As net see receivable increase.

in some pandemic. we challenges DSOs. However, a AR can as that growth summary, through face we believe to continue result improving In natural offset we of significant of

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

Operator

Our Andrew first from Gordon. will come question

Unidentified Analyst

on think goal I on Congrats this contract you've you last meaningful is been the environment. of mentioned biggest My called what question quarters. this wins. calls several around kind navigating And difficult for new for the, has

about So the it's color don't us that? have much that encouraging magnitude. been that, contract I define The know word we tell what ever relative far how don't on been finalized. given suggests But you meaningful, very if know they wins? does that do so hear to you so we've What these can meaningful it's

Kevin Miller

about as clients us just you to. that for want The talk of generally, could I a discuss biggest contract a lot little don't our specific reason I Sure. wins. that. bit don't we generally mean know, is

approves us have about specific announce specific if win we we the too something careful really about we're we to pretty many the like client that's unique a to and something and wins be little the want world something and we that So sometimes bit feel know we about and we've But announce or we and client individual when contracts. allows discussing will projects, contracts. material it, won it, to consider interesting which announcing careful pretty

Unidentified Analyst

asking threshold. Right. I I'm you define the to materiality guess

Kevin Miller

pretty this our you is than you. a where concrete improved I this year. are a it we that, pipeline. that year. projects quite hitting higher Several don't Where that time was I nice year. have in sized think is feel just tell good I'd think backlog that excited have of not for we're it would last have much that Well, we large some I our like over we next pretty say answer probability Sure. is

XX that's group and X, it talking So contracts because X, Engineering and we about talking were our the that about take projects typically it. the client when we're to closing get we where sometimes to months backlog, talk have from big actually time about we start can

all year. And believe we're nice run pretty careful. that on at start $XX much we a the pretty you these So have how next is that into I'm is we What is I tell basis give assuming pipeline of getting, now, see time. few Go sometime I and We're think discuss you That's can to of prepared all where in million high on year. our we'll ahead. we contracts to really a have right hit a current this rate can't I we sort heading exactly early a probability a some next be quarter, quarterly that think a of about that. pretty projects run could next And better year. much rate

Unidentified Analyst

have Okay. on I'm track. pipeline investor obligations your trying the are confidentiality And to that there as I ago in to then when was mean, I of calcine base, that know I ongoing beginning we I wins understand don't your that's that be to, to also of But in that in continuing commented them. as couple by recall, what my, track pipeline, was you your for 'XX. at refer or a it's of was things believe you I And quarters plant all you record chloride I believe Michigan. public when, And that have.

So saying the we that does controlling whatever benefit I I or a include large that benefit that is portrayed in into run to the continue could believe, your million project aspects that because rate from guess as $XX you're of design included was, from something quarterly next Does year. a expect you're that as participation well. process?

Kevin Miller

in. is going a business still pretty kind is assuming, That it's which be we think closed, project. the to now, Right it Yes. we're large hasn't of

that of for That take get a backlog, if now. if our they in like booked projects when $X project projects signed is be comes that's opposed to good million a maybe XX% where do of they we or in sure next boost say, going win up. of in longer about than our rate were these lot amount it a I year. a would sometimes that portion that or as that, revenue certain stopped believe sometimes is even rate, XX% is forecast run at to portion is talk going we we've are it. weighted next contract close. of about right When that we've project And $XX comprised million a run because finish think. probability. to We XXX% that of next so, for that above our delayed Sometimes get which year year a is It's should theory, But a recognized

the but We the has a So a project we've closed. of it year on between a hopefully been believe closing and That's or now next of years. in of working end we'll early good couple that year, has see. chance not project for very

Operator

[Operator Instructions] Bill come from question will next Sutherland. Our

Unidentified Analyst

front, virtual? how talk performing three terms care in whether the Can you're On health of the just hybrid couple or all you under main of it's customers a things. about each, in the

Kevin Miller

Sure.

that's following under option a or be is format, guideline, sort of may Even though of parents schools. are in other it's XXX% And may both New if may when models York the to able not formats, three and or announced that. announced hybrid these kids there schools school of schools week, be have different go the days then sort are thing two now. that general And individual the their virtual. having kids Hawaii their but right go to even some

end announcements that's that's speculation. that now to is made fully in to year, going and hybrid So kids but we're the are between own that in two our that if So a right? just to model, to And our of those virtual, virtual. like impacts They've they'd having addition our happen pretty but right go November, are hybrid. sometime some hybrid now revenue skeptical XXX% Chicago the

Unidentified Analyst

in guys you all? revenues that this that what telehealth for what you are quarter able million. by as accomplished far situation, were Like do $X.X I the see the was mean, to of portion just as for I And

Kevin Miller

of a future, percentage we're on telehealth telehealth. small potentially we've could ton that refining that, sell offering. very to new dedicated of in before. salesperson that. And had never We're for recently a not we and We Bill. that, working big pretty in salesperson doing the offering hired be fact, A a that And us think a

think going So that's to when we we now. to that like days are going of focused we space be on lot back to a it's a space it's But even an area that five legs think in a because is good for think growth in future week. But session we're schools clearly have be, it's

Unidentified Analyst

some to to contracts --. convert, current Do we just your degree,

Kevin Miller

total recall is roughly. of business it is. our Yes, XX% probably But that therapy about school

to If of smallest So entire then nursing in it's And and the same it's the that and we is still power meaningful. work, same, we we're the I power/RBTs, if it. three. therapy in one. love bucket, smallest really at the that professionals RBTs really, compare But put good and and the

Unidentified Analyst

the lost I think call? I you, Are

Kevin Miller

No, you're though? still on

Unidentified Analyst

Kevin? Are you talking,

Kevin Miller

me? Can am. I hear you

Unidentified Analyst

it. hear can't I Well, right. All

Operator

Okay.

We more questions the have no in queue.

Kevin Miller

No more questions?

Brad Vizi

RCM's We Okay. next Thank in forward you update quarter our call. to right. third for XXXX. All attending conference look

Operator

call. your concludes This

You may now disconnect.