RCM Technologies, Inc. (RCMT) Earnings

Management highlights

- Entering Q4 from a position of strength with record 2026 engineering backlog as of end of October and momentum in healthcare. Penetration of existing clients increasing, commercial discussions with future flagship clients crystallizing. - Healthcare: Entered 2025 - 2026 school year with momentum, new school partners expanding, existing clients broadening role. Share in markets increased despite increased competition. - Life Sciences Data and Solutions: Industry seeing shifts due to tariffs, drug pricing, process automation. Partnered with AI-driven company to streamline compliance, created dedicated life sciences engineering group. Made progress in AI and analytics for data and solutions. - Engineering: Energy Services delivered strong quarter in Q3, secured record backlog for 2026. Aerospace and Defense saw revenue, gross profit, EBITDA growth. Industrial Process part strong, part in strategy adjustment.

Guidance

- Expect Q4 to yield highest quarterly gross profit and highest adjusted EBITDA in fiscal 2025. - Anticipate benefits of record foreign recruitment pipeline in healthcare for 2026. - Engineering sectors like Energy Services have growth potential, aerospace and defense expected to continue growth, and industrial process looking to improve trajectory.

Segment performance

### Healthcare - Gross profit for Q3 2025 was $9.0 million, up 8.5% from Q3 2024. Gross margin was 30.0% compared to 31.2% in Q3 2024. School revenue for Q3 2025 was $24.4 million, up 20.7% year-over-year. Non-school revenue for Q3 2025 was $5.6 million, down 11.3% year-over-year. ### Engineering - Gross profit for Q3 2025 was $6.9 million, up 17.3% from Q3 2024, and it was the best engineering gross profit in quarter in history. Gross margin was 22.0% compared to 24.4% in Q3 2024. Energy Services backlog for 2026 is over $70 million, a significant increase from $21 million for 2025 at this time last year. ### IT, Life Sciences and Data Solutions - Gross profit for Q3 2025 was $3.5 million, down 4.2% from Q3 2024. Gross margin was 39.5% compared to 38.0% in Q3 2024.

Risks & headwinds

- Excess medical costs to the tune of approximately $1.8 million year-to-date, with Q3 hit particularly hard. - Medical claims difficult to budget accurately as they can be wiped out quickly due to inflationary pressures and rising hospital/insurance costs. - Industrial Process is the smallest unit, and its current trajectory needs to be different though it is stable.

Analyst Q&A

• Q: Curious about the candidates, the foreign candidates that are building in the healthcare group. What -- can you just kind of give us an order of magnitude and maybe timing on that on their impact?

  A: Well, we certainly can't predict the timing, Bill. It's all dependent on visa retrogression. There have -- according to some things that we've heard, we believe the dates are going to be moved sometime in the fourth quarter. Even if they move a couple of months, we probably have 50 to 60 nurses we can bring over if they move, let's say, 3 or 4 months.

• Q: I guess there's no way to predict excess medical costs. Do you feel like this is kind of a level that we should just pencil in for 4Q?

  A: Yes, probably because I don't expect anything radically different in Q4. We have taken some measures long term to try to reduce those costs a little bit, but that's probably not going to impact us too much until 2026, hopefully.

• Q: When you were going through the engineering groups, on Industrial Process, I wasn't clear kind of how that's doing and kind of how that's booking for next year?

  A: Part of Industrial Process continues to motor along pretty strong. We're hiring. Demand is robust. And the second unit, it's work in progress. Some changes are being made to strategy, personnel. And the good news is it's our smallest unit, right? There's potential upside there for sure. But whether it's a pretty good year or a very mediocre year, it's unlikely to move the needle.

• Q: I wanted to touch on Energy Services. It seems like it's growing the fastest, probably the largest growth opportunity. Everything we're reading is just pointing to increased utility growth, power -- independent power producer growth. There's behind-the-meter deals happening with data centers. Just wondering if you could touch on how you see the market evolving for you guys, if you're sticking with traditional utility partners, if you're seeing any new entries into the business or if you're exploring new partnerships?

  A: Our strategy in that business has been to really kind of focus and go all in on our strengths or we can establish a point of differentiation and a reputation with really the Tier 1 clients. In other words, the largest utilities in the country. And so there are certainly a broad list of vendors out there, right? In terms of that Tier 1 list, it's relatively narrow. Those go-to players that kind of get to the final line pretty quickly and are in contention for being the preferred choice.

• Q: You mentioned you're attracting sort of a new level of talent or you're liking what you're seeing in terms of pulling talent or talent coming to you, I guess, not pulling talent. Would that -- would these -- is that in this energy services area? And is it -- are these people in your points of differentiation? Or are they more of an opportunity to expand, I would say, maybe horizontally or with complementary services, if that makes sense?

  A: Yes, that's a good question. Like, look, I mean, one of the nice things about services is to the extent that you meet -- it could even be one person, but you come across a set of very talented folks that you can bolt on, right, to your platform, the opportunity to grow within adjacencies is it's pretty clear. So the answer to your question is it's really both.

• Q: On engineering, the gross margins were well within your stated range, but down lower year-over-year. Is that just a larger contribution of engineering where you have lower gross margin, but you make it up on the SG&A line? Or is there anything else in there?

  A: Like we discussed on previous calls, you're going to see a fair amount of variation to our gross margin in our engineering group. And it has to do with revenue mix and it has to do with how much of our activity is conducted by our subs in a given quarter, right? So we don't make the same profit margin -- the same gross profit margin on our subs that we do on our salaried employees.

• Q: On Specialty Healthcare, you're getting further penetration with your existing schools. You're acquiring new customers. Is that -- are there other areas you can replicate that business model? Or does it look like schools seem to be to fit your skill set here?

  A: The answer to that question is yes. There are other areas that we can replicate that model, and that's something we spend a lot of time thinking about. Obviously, our -- at our core, we're a school business, right? And we're really, really good at it. We think we're as good as any company, if not better. So we don't want to lose the focus that we have on schools because we're driving nice growth there.