RCM TECHNOLOGIES, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Bradley Vizi noted Q3 growth led by Healthcare and Engineering. Healthcare's K through 12 client roster continued to grow with new partnerships yielding strong results, and OPWDD showed extraordinary potential. Life Sciences, Data & Solutions division had strong performance with robust client engagement, successful project completions, and a 99% retention rate. Engineering's Energy Services, Process & Industrial, and Aerospace and Defense sectors had various project wins and progress.
• Kevin Miller discussed consolidated gross profit growth, details of Healthcare's school and nonschool revenue, and expectations for Q4 adjusted EBITDA.

Segment Performance

• Healthcare: Q3 school revenue grew 16.3% from $17.3 million to $20.2 million. Nonschool revenue was $6.4 million vs $7.6 million, but excluding a large long-term care group where services were reduced, it was flat at $5.6 million. Healthcare gross profit grew by 11.1%. Expected healthy sequential growth in nonschool revenue for Q4 2024. School revenue for the 2024 - 2025 school year ending June 2025 is optimistic to grow around 20%.
• Engineering: - Energy Services: On pace to exceed 2024 budgeted revenue and EBITDA. Awarded major projects in US, Europe, and Puerto Rico. - Process & Industrial: RCM Thermal Kinetics has delivered modular evaporation systems, and has various projects in progress including for SAF facilities and lithium facilities. - Aerospace and Defense: Engineering business is thriving with increased headcount in new clients and new multiyear contracts awarded.
• Life Sciences, Data & Solutions: Q3 performance was strong with robust client engagement, successful project completions. Had a 99% retention rate among existing clients. Gross profit decreased by 13.1%.

Guidance

• Confident in trajectory toward a record 2025, reinforcing position as a leader in healthcare and education staffing solutions. Expect attractive consolidated adjusted EBITDA growth in Q4 2024 compared to fiscal 2023. School revenue for the 2024 - 2025 school year is expected to grow around 20%.

Risks

• The information in forward-looking statements is based on beliefs, estimates, assumptions, etc., which may materially change in the future. Many of these are subject to rapid change. Risks related to uncertainties in business performance, market dynamics, and other factors as detailed in periodic reports.

Question and Answer

• Q: William Sutherland asked about healthcare school revenue growth, nonschool revenue in Q4, and cash flow.

A: Kevin Miller stated school revenue grew 16.3%, expected nonschool revenue to have healthy sequential growth in Q4, and expected good cash flow in Q4 and Q1 with some factors affecting Q3 but expecting improvement in Q4.

• Q: Alex Rygiel asked about 2025 EBITDA growth, stock buybacks, and election impact.

A: Bradley Vizi mentioned expectation of at least low double-digit earnings growth in 2025, stock buybacks are on the table with a disciplined approach, and positive outlook on election's impact on infrastructure, defense, etc.

• Q: Frank Kelly asked about other expense net.

A: Kevin Miller explained that other expense net was mostly interest expense ($490,000) and loss on foreign currency transactions ($127,000).