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RCM (RCMT)

Participants
Brad Vizi Executive Chairman & President
Kevin Miller CFO, Treasurer & Secretary
Bill Sutherland The Benchmark Company
Alex Rygiel B. Riley Securities
Call transcript
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Operator

Ladies and gentlemen, welcome to RCM Technologies Fourth Quarter Conference Call.

Brad Vizi

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

Kevin Miller

Good morning, everyone.

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

For on now releases and with periodic file and information we that turn please they our more XX-Q, the forward-looking time-to-time. we press to back it the risks, other are the issue from statements SEC, uncertainties Brad. reports see I’ll which XX-K, that and on as Forms factors And well to X-K our subject, as

Brad Vizi

Thanks, Kevin.

by been results had Our heavily XXXX impacted COVID-XX.

better while three as on the business multiple markets. However, segments, to in growth recovering RCM all strengthen believe we from fronts. are now a we We our higher steady progress on We have that repositioning the financial opportunity to company. in pandemic, of saw made emerge focused an XXXX

segments, of to I of a few highlight areas Before each discussing financial our performance. want

of consolidated following profitability, towards remaining in results. $XXX,XXX. future the Despite we of we As positive impacted while business was million. of EBITDA We we EBITDA positive our platform segments the to the made XXXX in to three seasonal decision by we a order SG&A, most were in to significant in in generated progress to QX In steadfast the of XXXX, all strategic made EBITDA, negative of with cosmetically QX comparing to QX in revenue made know, on despite XXXX, invest the of strategic increase March to $XXX,XXX; sequential $XXX,XXX; the headwinds return to inadequate significantly When you once reductions saw of of secure our QX, investing results. $X.X pandemic. steady QX continue XXXX, of EBITDA plan. EBITDA of In

strategic $XX.X XXXX In XX% revenue addition of $XX example decreased challenging our type is increases This normalize. the in cash a to XXXX profitability the We flow highly million pride share. our higher of the from as of ourselves we or to result per believe million core million discipline end maintaining X.X our shares ability XXXX. the growth company from million purchased Debt should to generated programs, of XXXX. good In going we at capital $XX.X most $X.XX markets end by in million forward in leverage $XX.X of operations a at environment, at on. we in

were of we As covenants not our of the on able management storm, excellent weather to a credit result we employees but behalf RCM, the of the were on financial line. able only to crisis renegotiate

XXXX, million with material. school The Let's XXXX, Since our most discuss of from in this portion total revenue. their March of In sales. clients, of sight. was revenue million QX segments. good no $XX.X healthcare in figure XX% XXXX school on a XXXX. a revenue in school our progress After shut of generated business of $X.X We $XX.X healthcare QX made reopening we our in QX our early our clients QX generating COVID doors million impact in in XXXX million we rebound XXXX, of in saw to remarkable $XX.X trough of restoring of saw but

normalized with our QX approaching peak, we are revenue far from While still are more levels days have escape for school the velocity reached we and that of best our by believe business, XXXX. ahead

us strategic excellent business an initiatives competitive further pandemic in several of strength devastation forward. markets will accelerated how afford going the healthcare the end our believe of example is that Our we

example, For effort a Overnight, telehealth from business school our quarter, strategic administered being remotely. our fourth nearly nascent of strategic went imperative. was half initiative during the to a

As turnkey offering best the position wherever fortifies ensuring for clients, school a to student our the service in our the standard highest provide ability to the leaders further is business, market. in

leadership position has gone Our unnoticed. not

pursuing currently potential are late several We in clients. stages of high

While not IT we trajectory experienced in pronounced, nearly our as segment. similar a

From we revenue ultimately XXXX related COVID we we believe XXXX with a While long-term in $X.X QX $X.X million, million segment. IT of saw XXXX generated to lead of XXXX trough, million impact negative our to $X.X revenue our the and XX% in will COVID increase. Like business QX respectively. QX healthcare, million, the decreases QX and rebounded $X.X sequential strength

our been three accelerate of planned initiatives engineering move The galvanized many has by XXXX. segments, you business is to we largely business core in further continue growth The through adversely several in Of practice. and life in the pandemic. driven IT impacted pandemic know, business be as As most growth confidence investment ways. our segment sciences affected our by our strategy the to continues in

First, commercial our government both primarily sectors. serving aerospace clients OEMs, and are

declines their dramatic commercial experienced in demand have from clients customers. Our

aerospace derived But end commercial that have XXXX. off market. is from We traditionally in with a about XX% start revenue of being said, fast to our the aerospace

increasing are significant we through move new to anticipate improvement a entering addition we We year sequential an In pipeline. several as XXXX. awards, with

budget significant our The American cuts North the utility clients. was second challenge major from

believe we but client-specific there has are been pressure throughout Some the industry.

a been diversion funds restoration. to there's considerable storm example, For of due

seen to non-payment cuts of bills. shrinking monthly revenue also from have utility budget due We

rate recovery and a regulators are increases. the due However, expect utility we contemplating state capitalize to many of utilities bills allowing past as future these

in move has been are industrial from XXXX. projects expect be binary to Due the projects we the the return in two quarters overhang better group million several EBITDA XXXX of XXXX, $X $XX million range. cautiously continued awards, normalized Pipeline sequentially realizing this second expect Potential of quarter fiscal After Our from in first to XXXX. fourth time, for half primarily robust. segment. summer reflect very $X the activity engineering compared concludes the fiscal is million see continued the our clients nature will strength. in bright our we spot progress believe EBITDA questions. we we'll just This the this processing materially we that build optimistic At of quarter open towards grow of XXXX. are of to we and remarks. our call these in greenlighted Despite our COVID, to as to fourth on prepared will After vacation, results of a under school

Operator

I [Operator we couple already in a have instructions]. queue. And see

go Bill, So, up open is Benchmark. now Bill of line Sutherland and Your I'll open. first our one,

Bill Sutherland

your just the in a to wanted -- deeper school trends business. dive I little the into bit

maybe clients key be degree the which, have -- talk about So helpful. to X the you to would that

Kevin Miller

Hawaii Well, would is are basically, right -- York but is. not New York running capacity pretty New full at much that say and Chicago I now,

So it's different different for lines.

is Because I there, we New I power business don't just to professionals power remote the power a think needs but it where school. have mean professionals. -- in most be most the generally work little we've York the in business of professional gotten hurt remotely. of bit administered

fourth be in know that year. York believe we We we of that they So Certainly, this be full that will come we will don't at really won't back until will. believe quarter capacity. all kids City Hopefully, sure, New schools. probably for see but the

a We're over they're nursing doing not were both far or for situation. in to If we as kind flip better at of it's doing therapy, kid As New QX very, much they're every not every because well, not therapy very day. doing for in RBTs capacity similar full Hawaii, we're nursing and York, we than are in matter well. just just -- QX. that school and is concerned But

Bill Sutherland

pipeline will longer And you that? Right. take school a bit it would new than look when for it of next this at the business, is -- Or year? the be

Kevin Miller

a It's both. little of bit

a some it little of can now, might XXXX, new until contracts decent be encouraged materialize And school which a be big won meaningfully schools from to few that approach we contracts X with landed any the level because we -- necessarily additive. but year. the it, we've contracts potential could outside schools on them which the fourth any schools, their a think of really we that any that right We're I before some those big full the expect into starting X -- revenue meaningful don't contracts So and don't of realize then which cagey schools mean revenue, with be XXXX doing to with to schools new half we're school school dozen is all certainly will we experience they doesn't revenue talk quarter. won know appear about. big but gains have we're the why hesitant of about with but with we've districts school always about them I bit

Bill Sutherland

was I healthcare. trending? on one the last business about the then is non-education And Okay. wondering how

Kevin Miller

an seen, We've And up, Well, and also demand a surprise this shouldn't anyone increasing we've well. it's sure. be trending really as is for our we've big exclusive and our been nursing for telemedicine nursing. what -- to

increased that's us people The nurses, pickup sword seeing for that nice So of nurses It's get because need for it's a has they double-edged us. and is that a It's right? them. flip side lot bit. quite But difficult So now, very to help. to right a are there. to good find for hard a we're looking

Bill Sutherland

pricing publicly staffing well of from companies it's seen commentary nurse thinking the about as that rates the I'm is, you pay the the and bill and rates? just was sure more I guys X have the held

Kevin Miller

Yes, travel really is go And seeing it's not much what big a of know, travel companies. as we've in we're business. a you challenge to been the we for sure. doing direct our But pickup

been able by And been a to the some nursing a been of lot companies. doing say -- of bit main to travel that testing. companies partnering work going not get meaningful lot been and supply it's do we margins enough of the doing our that's vaccination little excited able pickup not been nursing. a a to still that But direct. work. our because lot we're it And It's But with companies. has find has revenue. travel we've because them, been with find to with a the doing in We're we've on So it's travel able good had been And influenced the business about And COVID it. nurses. we're -- we've doing I'm been easy we're to that of COVID impact COVID we've not. and so testing, we've on

Bill Sutherland

Okay.

in come going On engineering, you back least Let was some I do pretty a -- a than million was is more mean, was just then and again. think you thinking run that one $XX queue decline probably business sequential just at I bit to -- to certainly, I'll hiccups? more ask -- there get quickly the the about rate?

Kevin Miller

we'll industrial realize but depend services, as exactly see sure we'll group. energy wouldn't see know yes. what it how uptick I wouldn't aerospace QX. we're -- I going but going in is, pickup pick not far it each that. to real to as now, see, revenues. tough a timing confident say a come QX an quickly, very that expectation And lot then our will to on the on up. And our of little optimistic We're We right well our quarter. sequential uptick I we we're my in we're is in we'll that -- not as necessarily an particularly of our mean, market will pipeline, see it's little back A compared just

Operator

from Alex, next will B. open. of Our Rygiel your Alex question Riley. is line come now

AlexRygiel

detail with as first of guidance, but us the a haven't relates expecting? is all over, little sequential But bit quarter you're little that provide the the a you I financial obviously, quarter? finalized more bit you it more improvement know, probably Could to numbers.

Kevin Miller

we the mean, than certainly, in I EBITDA first in fourth higher Yes. the expect quarter. quarter

sequential that, little But -- than but we'll QX. a some just guidance. as we have just we in like. going don't the know, you bit As you matter, a give to give look improvement too talk of good we'll much to guidance. lot from expect give Obviously, Modest idea quarter going a we maybe certainly, May. is -- precedence higher generally to pretty want modest QX a to to don't what we guidance But

AlexRygiel

as to capital ramp. working it then expecting And relates needs, obviously, to you're revenues

that as suspect I about you'll to talk relates have working So capital your liquidity increase. level? some needs it Can you

Kevin Miller

of is cause in fourth experienced will often we it if debt and where that where And Yes. sort happen our balance below we've quarterly quarter. it Certainly, at our sheet, from look consider debt to expect you ended our I rise the normalized as things we have levels. decrease or rise to what -- that

strong cash the flow, Obviously, in If statement the of would rise a in that needs, was but -- working we still range, So with debt for the more puts revenue our scatter pretty sort cash with to but uptick might even flow revenue. within in we're good first expecting big out, expect quarter, some the capital revenue even great. that right? really see considers the we -- that's that be year, our

in liquidity, we're have no issues of capacity. far as shape. good our -- As We're in borrowing terms we

Operator

Instructions] queue. it like. At Alright. this no Q&A, looks are further Alright, there [Operator our concludes questions time, in that

Brad Vizi

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

Operator

All and conclude gentlemen, officially right. your Ladies this does call.

disconnect lines, You your again. may thank now and you