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Financial Data and Key Metrics Changes - Consolidated gross profit for Q1 2024 grew by 7.1% from $19.0 million to $20.4 million [114] - Adjusted EBITDA for Q1 increased by 11.1% from $6.1 million to $6.8 million [114] - Adjusted diluted EPS for Q1 rose by 30.4% from $0.41 to $0.53 [114] - Revenue growth for 2024 is estimated at about 12.8% when excluding the impact of COVID and a slow-paying client [13] Business Line Data and Key Metrics Changes - Healthcare gross profit decreased by 2.4%, but revenue grew by approximately 7.3% when excluding COVID impacts [28] - Life sciences data and solutions gross profit grew by 7.9% [28] - Engineering gross profit increased by 27.1% [28] - K-12 education business revenue for Q1 2024 was $31.9 million, reflecting a growth of 19.1% after removing COVID revenue from the previous year [13] Market Data and Key Metrics Changes - Energy services reported strong results with double-digit revenue and EBITDA increases [8] - The Aerospace and Defense Group experienced mixed results, with a low workload in the aftermarket segment but still achieved year-over-year EBITDA growth [10] Company Strategy and Development Direction - The company is focusing on expanding its client base in K-12 education and has onboarded five new school districts, with twelve more in negotiation [6][22] - There is a strategic emphasis on energy services, particularly in the zero carbon chemical manufacturing sector [9][24] - The introduction of a shared services team aims to streamline strategic focus and enhance collaboration across groups [107] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong momentum for the remainder of 2024, anticipating a reacceleration of growth in healthcare as headwinds diminish [8][105] - The company is optimistic about the robust school pipeline and expects significant revenue contributions starting in the 2024-2025 school year [115] - Management highlighted the importance of cash flow and working capital management, aiming to reduce days sales outstanding (DSO) to the low 70s [36][59] Other Important Information - The new Thermal Kinetics testing lab achieved 100% utilization in Q1 2024, with continued client interest expected [25] - The company is exploring bolt-on acquisitions that align with its growth strategy and technical capabilities [69] Q&A Session Summary Question: What is the outlook for cash flow in Q2 and Q3? - Management expects Q2 and Q3 cash flow to be significantly better than Q1, aiming for more than double the cash flow from operations [34] Question: What is the current DSO and target? - DSO for the quarter was 93, with a long-term goal to reduce it to the low 70s [36] Question: How is the school pipeline expected to impact revenue? - Management anticipates better visibility on contracts and revenue generation by the next earnings call in August [37] Question: What are the reasons for fluctuations in accounts receivable? - Fluctuations are attributed to administrative processes with clients, particularly in the school sector, which can delay payments [80][82] Question: What is the impact of new contracts on margins? - There may be initial margin headwinds due to administrative procedures, but overall margins are expected to remain stable [64]

[RCM Technologies, Inc. Announces First-Quarter Results](index=1&type=section&id=RCM%20Technologies%2C%20Inc.%20Announces%20First-Quarter%20Results) RCM Technologies reported strong first-quarter 2024 financial results with significant growth in revenue, gross profit, and adjusted EBITDA [First-Quarter Financial Highlights](index=1&type=section&id=1.1%20First-Quarter%20Financial%20Highlights) RCM Technologies reported strong financial performance for the first quarter ended March 30, 2024, with significant year-over-year increases in revenue, gross profit, GAAP net income, and non-GAAP adjusted EBITDA and EPS First-Quarter Financial Highlights | Metric | Q1 2024 (Thirteen Weeks Ended March 30, 2024) | Q1 2023 (Thirteen Weeks Ended April 1, 2023) | Change (%) | | :-------------------------------- | :------------------------------------------ | :----------------------------------------- | :--------- | | Revenue | $71.9 million | $67.1 million | +7.2% | | Gross Profit | $20.4 million | $19.0 million | +7.1% | | GAAP Net Income | $4.0 million | $3.8 million | +5.3% | | GAAP Diluted EPS | $0.48 | $0.41 | +17.1% | | Adjusted EBITDA (non-GAAP) | $6.8 million | $6.1 million | +11.5% | | Adjusted Net Income per Diluted Share (non-GAAP) | $0.53 | $0.41 | +29.3% | [Executive Commentary](index=1&type=section&id=1.2%20Executive%20Commentary) Executive Chairman Bradley Vizi highlighted the widening strategic focus and execution across all teams to propel future growth. CFO Kevin Miller noted significant increases in adjusted EBITDA and adjusted EPS, along with improved cash conversion, anticipating continued cash flow improvement - Executive Chairman Bradley Vizi emphasized the organization's broadening and deepening strategic focus, with all teams executing current initiatives and seeding new ones for future growth[4](index=4&type=chunk) - CFO Kevin Miller reported an **11.1% increase in adjusted EBITDA** and a **30.4% increase in adjusted EPS** for the first quarter. Cash conversion improved both sequentially and year-over-year, with expectations for continued improvement in cash flow from operations in the next two quarters[4](index=4&type=chunk) [Company Overview and Disclosures](index=2&type=section&id=Company%20Overview%20and%20Disclosures) This section provides an overview of RCM Technologies' business, conference call details, and forward-looking statement disclosures [About RCM Technologies](index=2&type=section&id=2.1%20About%20RCM%20Technologies) RCM Technologies is a business and technology solutions provider specializing in Health Care, Engineering, Aerospace & Defense, Process & Industrial, Life Sciences, and Data & Solutions, aiming to modernize industries through advanced technologies - RCM Technologies (NasdaqGM: RCMT) is a premier provider of business and technology solutions[7](index=7&type=chunk) - The company operates at the intersection of resources, critical infrastructure, and modernization of industries through advanced technologies[7](index=7&type=chunk) - RCM provides services in Health Care, Engineering, Aerospace & Defense, Process & Industrial, Life Sciences, and Data & Solutions[7](index=7&type=chunk) [Conference Call Information](index=2&type=section&id=2.2%20Conference%20Call%20Information) RCM Technologies will host a conference call on Thursday, May 9, 2024, at 11:30 a.m. Eastern Time to discuss the first-quarter results - A conference call to discuss the results will be held on Thursday, May 9, 2024, at 11:30 a.m. Eastern Time[6](index=6&type=chunk) - The dial-in number for the conference call is (800) 285-6670[6](index=6&type=chunk) [Forward-Looking Statements](index=2&type=section&id=2.3%20Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, highlighting that actual results may differ materially due to various risks and uncertainties, and the company disclaims any obligation to update these statements - Statements in the release that are not purely historical are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995[8](index=8&type=chunk) - These statements are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied[8](index=8&type=chunk) - The Company assumes no obligation to update any forward-looking statements, except as required by law[8](index=8&type=chunk) [Detailed Financial Results](index=3&type=section&id=Detailed%20Financial%20Results) This section presents RCM Technologies' GAAP and non-GAAP financial statements, including statements of operations, balance sheets, and cash flows [Condensed Consolidated Statements of Operations (GAAP)](index=3&type=section&id=3.1%20Condensed%20Consolidated%20Statements%20of%20Operations%20%28GAAP%29) The condensed consolidated statements of operations present the company's GAAP financial performance for the thirteen weeks ended March 30, 2024, and April 1, 2023, showing increases across key profitability metrics Condensed Consolidated Statements of Operations (GAAP) | Metric (In Thousands, Except Per Share Amounts) | Thirteen Weeks Ended March 30, 2024 | Thirteen Weeks Ended April 1, 2023 | | :---------------------------------------------- | :---------------------------------- | :--------------------------------- | | Revenue | $71,939 | $67,124 | | Cost of services | 51,572 | 48,100 | | Gross profit | 20,367 | 19,024 | | Selling, general and administrative | 14,199 | 13,396 | | Depreciation and amortization of property and equipment | 287 | 271 | | Amortization of acquired intangible assets | 45 | 45 | | Gain on sale of assets | - | (395) | | Operating income | 5,836 | 5,707 | | Other expense, net | 426 | 407 | | Income before income taxes | 5,410 | 5,300 | | Income tax expense | 1,458 | 1,463 | | Net income | $3,952 | $3,837 | | Diluted net earnings per share data | $0.48 | $0.41 | | Diluted weighted average shares outstanding | 8,170,839 | 9,401,867 | [Supplemental Operating Results (Non-GAAP)](index=4&type=section&id=3.2%20Supplemental%20Operating%20Results%20%28Non-GAAP%29) This section provides a reconciliation of GAAP financial measures to non-GAAP measures, including Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted diluted net earnings per share, which management believes offer useful insights into ongoing operational performance - Non-GAAP measures like Adjusted operating income, EBITDA, and Adjusted EBITDA are presented to provide investors with useful information for gauging operational results and enhancing understanding of financial performance[13](index=13&type=chunk) - These non-GAAP measures should not be considered alternatives to net income or as substitutes for GAAP results, but rather read in conjunction with consolidated financial statements[13](index=13&type=chunk) [Adjusted Operating Income, EBITDA, and Adjusted EBITDA Reconciliation](index=4&type=section&id=3.2.1%20Adjusted%20Operating%20Income%2C%20EBITDA%2C%20and%20Adjusted%20EBITDA%20Reconciliation) This sub-section details the adjustments made to GAAP operating income and net income to derive non-GAAP Adjusted operating income, EBITDA, and Adjusted EBITDA, including equity compensation and gain/loss on asset sales Adjusted Operating Income, EBITDA, and Adjusted EBITDA Reconciliation | Metric (In Thousands) | Thirteen Weeks Ended March 30, 2024 | Thirteen Weeks Ended April 1, 2023 | | :------------------------------------ | :---------------------------------- | :--------------------------------- | | GAAP operating income | $5,836 | $5,707 | | Adjustments: | | | | Gain on sale of assets | - | (395) | | Equity compensation | 635 | 496 | | **Adjusted operating income (non-GAAP)** | **$6,471** | **$5,808** | | GAAP net income | $3,952 | $3,837 | | Income tax expense | 1,458 | 1,463 | | Interest expense, net | 478 | 360 | | Depreciation of property and equipment | 287 | 271 | | Amortization of acquired intangible assets | 45 | 45 | | **EBITDA (non-GAAP)** | **$6,220** | **$5,976** | | Adjustments: | | | | Gain on sale of assets | - | (395) | | (Gain) loss on foreign currency transactions | (52) | 47 | | Equity compensation | 635 | 496 | | **Adjusted EBITDA (non-GAAP)** | **$6,803** | **$6,124** | [Adjusted Net Income and EPS Reconciliation](index=5&type=section&id=3.2.2%20Adjusted%20Net%20Income%20and%20EPS%20Reconciliation) This sub-section provides the reconciliation from GAAP net income and diluted EPS to their non-GAAP adjusted counterparts, accounting for items such as gain/loss on asset sales, foreign currency transactions, equity compensation, and tax impact from a normalized rate Adjusted Net Income and EPS Reconciliation | Metric | Thirteen Weeks Ended March 30, 2024 | Thirteen Weeks Ended April 1, 2023 | | :------------------------------------------ | :---------------------------------- | :--------------------------------- | | GAAP net income | $3,952 | $3,837 | | Adjustments: | | | | Gain on sale of assets | - | (395) | | (Gain) loss on foreign currency transactions | (52) | 47 | | Equity compensation | 635 | 496 | | Tax impact from normalized rate | (174) | (136) | | **Adjusted net income (non-GAAP)** | **$4,361** | **$3,849** | | GAAP diluted net earnings per share | $0.48 | $0.41 | | Adjustments: | | | | Gain on sale of assets | - | (0.04) | | (Gain) loss on foreign currency transactions | 0.00 | 0.00 | | Equity compensation | 0.08 | 0.05 | | Tax impact from normalized rate | (0.03) | (0.01) | | **Adjusted diluted net earnings per share (non-GAAP)** | **$0.53** | **$0.41** | [Summary of Selected Income Statement Data by Segment](index=6&type=section&id=3.3%20Summary%20of%20Selected%20Income%20Statement%20Data%20by%20Segment) This section provides a detailed breakdown of revenue, cost of services, gross profit, and gross profit margin across RCM Technologies' key segments: Specialty Health Care, Engineering, and Life Sciences and IT, for the first quarters of 2024 and 2023 Summary of Selected Income Statement Data by Segment | Segment | Q1 2024 Revenue (Thousands) | Q1 2023 Revenue (Thousands) | Q1 2024 Gross Profit (Thousands) | Q1 2023 Gross Profit (Thousands) | Q1 2024 Gross Profit Margin | Q1 2023 Gross Profit Margin | | :-------------------- | :-------------------------- | :-------------------------- | :------------------------------- | :------------------------------- | :-------------------------- | :-------------------------- | | Specialty Health Care | $38,182 | $39,130 | $11,074 | $11,672 | 29.0% | 29.8% | | Engineering | $23,505 | $18,490 | $5,502 | $4,046 | 23.4% | 21.9% | | Life Sciences and IT | $10,252 | $9,504 | $3,791 | $3,306 | 37.0% | 34.8% | | Consolidated | $71,939 | $67,124 | $20,367 | $19,024 | 28.3% | 28.3% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=3.4%20Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of RCM Technologies' financial position as of March 30, 2024, compared to December 30, 2023, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets | Account (In Thousands) | March 30, 2024 (Unaudited) | December 30, 2023 | | :------------------------------------ | :------------------------- | :---------------- | | **Assets:** | | | | Cash and cash equivalents | $2,099 | $6,284 | | Accounts receivable, net | 73,486 | 70,690 | | Total current assets | 89,822 | 90,502 | | Goodwill | 22,147 | 22,147 | | Total assets | $120,483 | $120,484 | | **Liabilities:** | | | | Accounts payable and accrued expenses | $13,596 | $12,454 | | Transit accounts payable | 31,715 | 31,102 | | Total current liabilities | 62,808 | 58,196 | | Borrowings under line of credit | 22,159 | 30,804 | | Total liabilities | 91,086 | 94,694 | | **Stockholders' Equity:** | | | | Total stockholders' equity | 29,397 | 25,790 | | Total liabilities and stockholders' equity | $120,483 | $120,484 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=3.5%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows illustrate the cash generated from or used in operating, investing, and financing activities for the thirteen weeks ended March 30, 2024, and April 1, 2023, showing a net decrease in cash and cash equivalents in the current quarter Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (In Thousands) | Thirteen Weeks Ended March 30, 2024 | Thirteen Weeks Ended April 1, 2023 | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | Net cash provided by (used in) operating activities | $6,426 | ($832) | | Net cash used in investing activities | ($669) | ($332) | | Net cash (used in) provided by financing activities | ($9,714) | $2,416 | | Effect of exchange rate changes on cash and cash equivalents | ($228) | $234 | | (Decrease) increase in cash and cash equivalents | ($4,185) | $1,486 |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-10245 RCM TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in its Charter) Nevada 95-1480559 (State or Other Jurisd ...

[RCM Technologies, Inc. Announces Fourth Quarter and Fiscal Year 2023 Results](index=1&type=section&id=RCM%20Technologies%2C%20Inc.%20Announces%20Fourth%20Quarter%20and%20Fiscal%20Year%202023%20Results) [Fourth Quarter 2023 Performance](index=1&type=section&id=Fourth%20Quarter%202023%20Performance) RCM Technologies reported increased Q4 2023 revenue, net income, and adjusted EBITDA, reflecting improved profitability Q4 2023 Financial Highlights (vs. Q4 2022) | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $71.0M | $70.2M | +1.1% | | Gross Profit | $21.6M | $20.5M | +5.7% | | GAAP Operating Income | $7.9M | $6.8M | +16.2% | | GAAP Net Income | $5.3M | $4.8M | +10.4% | | GAAP Diluted EPS | $0.65 | $0.48 | +35.4% | | Adjusted EBITDA (Non-GAAP) | $8.9M | $7.5M | +18.7% | | Adjusted Diluted EPS (Non-GAAP) | $0.71 | $0.52 | +36.5% | [Fiscal Year 2023 Performance](index=1&type=section&id=Fiscal%20Year%202023%20Performance) Fiscal Year 2023 revenue and GAAP net income declined, though adjusted diluted EPS slightly increased Fiscal Year 2023 Financial Highlights (vs. FY 2022) | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $263.2M | $284.7M | -7.5% | | Gross Profit | $76.7M | $82.9M | -7.5% | | GAAP Operating Income | $23.7M | $28.8M | -17.7% | | GAAP Net Income | $16.8M | $20.9M | -19.4% | | GAAP Diluted EPS | $1.96 | $2.00 | -2.0% | | Adjusted EBITDA (Non-GAAP) | $26.6M | $31.1M | -14.5% | | Adjusted Diluted EPS (Non-GAAP) | $2.11 | $2.08 | +1.4% | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized strong Q4 2023 performance and confidence in achieving fiscal 2024 cash flow from operations goals - Executive Chairman Bradley Vizi highlighted a strong Q4 with an **18.5% growth in adjusted EBITDA**, driven by all business segments[6](index=6&type=chunk) - CFO Kevin Miller stated confidence in achieving the goal of **$20 million in cash flow from operations** for fiscal 2024[6](index=6&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements detail full-year 2023 revenue and net income declines, while Q4 showed a slight revenue increase and improved net income Full Year Income Statement Highlights (in thousands) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Revenue | $263,237 | $284,680 | | Gross Profit | $76,696 | $82,927 | | Operating Income | $23,692 | $28,798 | | Net Income | $16,831 | $20,889 | | Diluted EPS | $1.96 | $2.00 | Fourth Quarter Income Statement Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Revenue | $71,028 | $70,221 | | Gross Profit | $21,631 | $20,466 | | Operating Income | $7,906 | $6,809 | | Net Income | $5,255 | $4,837 | | Diluted EPS | $0.65 | $0.48 | [Segment Performance](index=6&type=section&id=Segment%20Performance) Full-year 2023 segment performance shows Life Sciences and IT as the sole growth driver, offsetting declines in Specialty Health Care Full Year 2023 Revenue by Segment (in thousands) | Segment | FY 2023 Revenue | FY 2022 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Specialty Health Care | $136,241 | $159,448 | -14.6% | | Engineering | $84,675 | $85,937 | -1.5% | | Life Sciences and IT | $42,321 | $39,295 | +7.7% | | **Consolidated** | **$263,237** | **$284,680** | **-7.5%** | Q4 2023 Revenue by Segment (in thousands) | Segment | Q4 2023 Revenue | Q4 2022 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Specialty Health Care | $36,688 | $35,810 | +2.5% | | Engineering | $22,719 | $24,211 | -6.2% | | Life Sciences and IT | $11,621 | $10,200 | +13.9% | | **Consolidated** | **$71,028** | **$70,221** | **+1.1%** | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of December 30, 2023, reflects increased assets and liabilities, with stockholders' equity declining due to stock repurchases Selected Balance Sheet Data (in thousands) | Account | Dec 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $6,284 | $339 | | Accounts receivable, net | $70,690 | $50,762 | | Total assets | $120,484 | $87,964 | | Borrowings under line of credit | $30,804 | $8,783 | | Total liabilities | $94,694 | $56,002 | | Stockholders' equity | $25,790 | $31,962 | - The value of treasury stock increased significantly from **$43.8 million** to **$69.6 million**, reflecting substantial common stock repurchases[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Fiscal year 2023 operating cash flow decreased due to higher accounts receivable, yet overall cash and cash equivalents increased Full Year Cash Flow Summary (in thousands) | Category | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,482 | $28,283 | | Net cash used in investing activities | ($2,536) | ($4,820) | | Net cash used in financing activities | ($3,852) | ($23,127) | | **Increase in cash and cash equivalents** | **$5,945** | **$104** | - The company executed significant stock buybacks, with common stock repurchases amounting to **$25.8 million** in fiscal year 2023, up from **$17.6 million** in 2022[24](index=24&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of GAAP to Non-GAAP Results](index=4&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Results) Non-GAAP metrics, adjusted for specific items, reveal varied trends in Adjusted EBITDA and Diluted EPS for FY23 and Q4 2023 Adjusted EBITDA Reconciliation (Non-GAAP, in thousands) | Period | GAAP Net Income | Adjusted EBITDA | | :--- | :--- | :--- | | Q4 2023 | $5,255 | $8,869 | | Q4 2022 | $4,837 | $7,485 | | FY 2023 | $16,831 | $26,603 | | FY 2022 | $20,889 | $31,114 | Adjusted Diluted EPS Reconciliation (Non-GAAP) | Period | GAAP Diluted EPS | Adjusted Diluted EPS | | :--- | :--- | :--- | | Q4 2023 | $0.65 | $0.71 | | Q4 2022 | $0.48 | $0.52 | | FY 2023 | $1.96 | $2.11 | | FY 2022 | $2.00 | $2.08 | - Key adjustments to reconcile GAAP to non-GAAP figures include equity compensation, gain/loss on foreign currency transactions, and gain on sale of assets[16](index=16&type=chunk)[18](index=18&type=chunk)

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited interim financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Current Assets | $72,974 | $59,017 | +$13,957 | | Total Assets | $101,214 | $87,964 | +$13,250 | | Total Current Liabilities | $67,307 | $40,424 | +$26,883 | | Total Liabilities | $79,835 | $56,002 | +$23,833 | | Total Stockholders' Equity | $21,379 | $31,962 | -$10,583 | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Statements of Operations (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Revenue | $58,049 | $58,152 | -$103 | -0.18% | | Gross Profit | $17,281 | $17,358 | -$77 | -0.44% | | Operating Income | $4,331 | $4,760 | -$429 | -9.01% | | Net Income | $3,756 | $3,518 | +$238 | +6.77% | | Basic Net EPS | $0.47 | $0.35 | +$0.12 | +34.29% | | Diluted Net EPS | $0.46 | $0.33 | +$0.13 | +39.39% | Statements of Operations (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Revenue | $192,209 | $214,459 | -$22,250 | -10.37% | | Gross Profit | $55,065 | $62,461 | -$7,396 | -11.84% | | Operating Income | $15,786 | $21,989 | -$6,203 | -28.21% | | Net Income | $11,576 | $16,052 | -$4,476 | -27.88% | | Basic Net EPS | $1.37 | $1.58 | -$0.21 | -13.29% | | Diluted Net EPS | $1.33 | $1.52 | -$0.19 | -12.50% | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive Income (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Net Income | $11,576 | $16,052 | -$4,476 | -27.88% | | Other comprehensive income | $5 | -$442 | +$447 | N/A | | Comprehensive Income | $11,581 | $15,610 | -$4,029 | -25.81% | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' Equity Changes (December 31, 2022 to September 30, 2023) | Metric | Dec 31, 2022 (in thousands) | Sep 30, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $31,962 | $21,379 | -$10,583 | | Treasury Stock (Amount) | -$43,820 | -$68,269 | -$24,449 | | Treasury Stock (Shares) | 8,002,649 | 9,760,809 | +1,758,160 | - Key activities impacting equity for the thirty-nine weeks ended September 30, 2023, include **$24.4 million** used for treasury stock purchases, **$11.6 million** from net income, **$0.7 million** from employee stock purchase plan issuances, and **$1.5 million** from equity compensation expense[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | | Net cash provided by operating activities | $27,548 | $20,741 | +$6,807 | | Net cash used in investing activities | -$480 | -$453 | -$27 | | Net cash used in financing activities | -$26,558 | -$19,468 | -$7,090 | | Increase in cash and cash equivalents | $315 | $526 | -$211 | | Cash and cash equivalents at end of period | $654 | $761 | -$107 | - For the thirty-nine weeks ended September 30, 2023, net cash provided by operating activities was **$27.5 million**, significantly influenced by a **$22.4 million** cash inflow from the net of transit accounts payable and receivable, while **$24.4 million** was used for common stock repurchases in financing activities[20](index=20&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) - The interim financial statements are unaudited and prepared in accordance with SEC rules for Form 10-Q, condensing or omitting certain GAAP disclosures[21](index=21&type=chunk) - The Company follows a 52/53 week fiscal reporting calendar, with fiscal 2023 and 2022 being 52-week years[23](index=23&type=chunk) [Note 2. Use of Estimates and Uncertainties](index=10&type=section&id=2.%20Use%20of%20Estimates%20and%20Uncertainties) - Financial statement preparation requires management estimates for items such as allowance for doubtful accounts, litigation, medical claims, goodwill impairment, equity compensation, and tax rates[24](index=24&type=chunk)[25](index=25&type=chunk) - The Company is exposed to various factors including economic performance, competition, demand for services, litigation, and retention of key employees[27](index=27&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=3.%20Revenue%20Recognition) - Revenue is recognized when performance obligations are satisfied by transferring services to customers, reflecting the expected consideration[30](index=30&type=chunk) - The Company's revenue sources include consulting and project solution services (Engineering, Life Sciences, IT) and staffing/placement services (Healthcare), primarily on a time and materials basis[32](index=32&type=chunk)[34](index=34&type=chunk) Revenue Disaggregation (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment/Type | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $24,895 | $27,997 | -$3,102 | -11.08% | | Engineering | $22,452 | $20,922 | +$1,530 | +7.31% | | Life Sciences and Information Technology | $10,702 | $9,233 | +$1,469 | +15.91% | | **Total Revenue** | **$58,049** | **$58,152** | **-$103** | **-0.18%** | Revenue Disaggregation (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment/Type | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $99,553 | $123,638 | -$24,085 | -19.48% | | Engineering | $61,956 | $61,726 | +$230 | +0.37% | | Life Sciences and Information Technology | $30,700 | $29,095 | +$1,605 | +5.52% | | **Total Revenue** | **$192,209** | **$214,459** | **-$22,250** | **-10.37%** | - One customer in the Specialty Health Care segment accounted for **16.2% of consolidated revenue** for the thirty-nine weeks ended September 30, 2023[39](index=39&type=chunk) [Note 4. Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable](index=13&type=section&id=4.%20Accounts%20Receivable%2C%20Transit%20Accounts%20Receivable%20and%20Transit%20Accounts%20Payable) Accounts Receivable, Net (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Billed | $37,632 | $40,256 | -$2,624 | | Unbilled | $15,769 | $6,615 | +$9,154 | | Work-in-progress | $5,158 | $4,991 | +$167 | | Allowance for sales discounts and doubtful accounts | -$1,100 | -$1,100 | $0 | | **Accounts receivable, net** | **$57,459** | **$50,762** | **+$6,697** | - Transit accounts receivable was **$9.5 million** and transit accounts payable was **$38.4 million**, resulting in a net payable of **$28.9 million** as of September 30, 2023[42](index=42&type=chunk) [Note 5. Property and Equipment](index=13&type=section&id=5.%20Property%20and%20Equipment) Property and Equipment, Net (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Cost | $4,305 | $4,630 | -$325 | | Less: accumulated depreciation and amortization | $2,084 | $2,532 | -$448 | | **Property and equipment, net** | **$2,221** | **$2,098** | **+$123** | - Depreciation and amortization expense for property and equipment for the thirty-nine weeks ended September 30, 2023, was **$756 thousand**, up from **$729 thousand** in the prior-year period[45](index=45&type=chunk) [Note 6. Acquisitions and Divestitures](index=14&type=section&id=6.%20Acquisitions%20and%20Divestitures) - The Company has two acquisition agreements with potential future contingent consideration payments, totaling an estimated **$1.971 million** as of September 30, 2023[46](index=46&type=chunk)[173](index=173&type=chunk) - Contingent consideration paid during the thirty-nine weeks ended September 30, 2023, was **$0.3 million**, including **$0.1 million** of the Company's common stock[50](index=50&type=chunk) [Note 7. Goodwill](index=15&type=section&id=7.%20Goodwill) - Goodwill balance remained unchanged at **$22.147 million** as of September 30, 2023, and December 31, 2022[52](index=52&type=chunk) - **No indicators of goodwill impairment** were identified during the thirty-nine weeks ended September 30, 2023[51](index=51&type=chunk) [Note 8. Line of Credit](index=15&type=section&id=8.%20Line%20of%20Credit) - The Company entered into a Fourth Amended and Restated Loan Agreement on April 24, 2023, providing a **$45.0 million** revolving credit facility expiring on April 24, 2026[53](index=53&type=chunk)[54](index=54&type=chunk) - Borrowings under the line of credit were **$6.7 million** as of September 30, 2023, down from **$8.8 million** at December 31, 2022, with **$36.3 million** available for additional borrowings[58](index=58&type=chunk) - The effective weighted average interest rate for the thirty-nine weeks ended September 30, 2023, was **6.4%**, significantly up from **2.7%** in the prior-year period[56](index=56&type=chunk) - The Company was **in compliance with all covenants** contained in the Revolving Credit Facility as of September 30, 2023[57](index=57&type=chunk) [Note 9. Per Share Data](index=16&type=section&id=9.%20Per%20Share%20Data) Weighted Average Shares Outstanding (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change | YoY Change (%) | | :-------------------------------- | :----------- | :---------- | :------- | :------------- | | Basic weighted average shares outstanding | 7,919,752 | 10,154,505 | -2,234,753 | -22.01% | | Diluted weighted average shares outstanding | 8,196,330 | 10,522,158 | -2,325,828 | -22.10% | Weighted Average Shares Outstanding (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change | YoY Change (%) | | :-------------------------------- | :----------- | :---------- | :------- | :------------- | | Basic weighted average shares outstanding | 8,469,501 | 10,172,765 | -1,703,264 | -16.74% | | Diluted weighted average shares outstanding | 8,730,998 | 10,566,816 | -1,835,818 | -17.37% | - Total unissued shares of common stock reserved for various purposes decreased from **1,754,852** at December 31, 2022, to **1,389,820** at September 30, 2023[61](index=61&type=chunk) [Note 10. Share-Based Compensation](index=17&type=section&id=10.%20Share-Based%20Compensation) - Share-based compensation expense for the thirty-nine weeks ended September 30, 2023, was **$1,450 thousand**, up from **$1,130 thousand** in the prior-year period[64](index=64&type=chunk) - As of September 30, 2023, total unrecognized compensation cost was **$3.4 million**, primarily related to time-based awards (**$3.2 million**) expected to be recognized through fiscal 2027[65](index=65&type=chunk) - Under the Employee Stock Purchase Plan, **297,730 shares** were available for issuance as of September 30, 2023[69](index=69&type=chunk) - Under the 2014 Omnibus Equity Compensation Plan, **383,961 time-based shares** and **100,000 performance-based restricted stock awards** were outstanding, with **608,129 shares** available for future awards as of September 30, 2023[73](index=73&type=chunk) [Note 11. Treasury Stock Transactions](index=20&type=section&id=11.%20Treasury%20Stock%20Transactions) - The Board authorized a new **$25.0 million share repurchase program** on April 25, 2023, succeeding a prior program[80](index=80&type=chunk) - During the thirty-nine weeks ended September 30, 2023, the Company repurchased **1,758,160 shares** at an average price of **$13.80 per share**, totaling **$24.4 million**[82](index=82&type=chunk) - As of September 30, 2023, **$14.3 million** remained available for future treasury stock purchases under the new program[82](index=82&type=chunk) [Note 12. New Accounting Standards and Updates](index=21&type=section&id=12.%20New%20Accounting%20Standards%20and%20Updates) - The Company adopted ASU 2016-13 (Credit Losses) in Q1 2023 with **no material impact**[84](index=84&type=chunk) - The Company is evaluating ASU No. 2020-04 (Reference Rate Reform) and ASU No. 2022-06 (Deferral of sunset date for Topic 848), which defers the LIBOR transition sunset date to December 31, 2024[85](index=85&type=chunk) [Note 13. Segment Information](index=21&type=section&id=13.%20Segment%20Information) Segment Revenue (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $24,895 | $27,997 | -$3,102 | -11.08% | | Engineering | $22,452 | $20,922 | +$1,530 | +7.31% | | Life Sciences and IT | $10,702 | $9,233 | +$1,469 | +15.91% | | **Total Revenue** | **$58,049** | **$58,152** | **-$103** | **-0.18%** | Segment Operating Income (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $1,392 | $2,949 | -$1,557 | -52.80% | | Engineering | $1,157 | $880 | +$277 | +31.48% | | Life Sciences and IT | $1,782 | $931 | +$851 | +91.41% | | **Total Operating Income** | **$4,331** | **$4,760** | **-$429** | **-9.01%** | Segment Revenue (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $99,553 | $123,638 | -$24,085 | -19.48% | | Engineering | $61,956 | $61,726 | +$230 | +0.37% | | Life Sciences and IT | $30,700 | $29,095 | +$1,605 | +5.52% | | **Total Revenue** | **$192,209** | **$214,459** | **-$22,250** | **-10.37%** | Segment Operating Income (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Segment | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Specialty Health Care | $9,438 | $15,341 | -$5,903 | -38.48% | | Engineering | $1,873 | $3,301 | -$1,428 | -43.26% | | Life Sciences and IT | $4,475 | $3,347 | +$1,128 | +33.70% | | **Total Operating Income** | **$15,786** | **$21,989** | **-$6,203** | **-28.21%** | Revenue by Geographic Area (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Geographic Area | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | United States | $179,800 | $205,162 | -$25,362 | -12.36% | | Canada | $5,060 | $3,555 | +$1,505 | +42.34% | | Puerto Rico | $4,745 | $3,760 | +$985 | +26.20% | | Europe | $2,604 | $1,982 | +$622 | +31.38% | | **Total** | **$192,209** | **$214,459** | **-$22,250** | **-10.37%** | [Note 14. Income Taxes](index=24&type=section&id=14.%20Income%20Taxes) - Income tax expense for the thirty-nine weeks ended September 30, 2023, was **$3.2 million**, down from **$6.0 million** in the prior-year period[91](index=91&type=chunk) - The consolidated effective income tax rate decreased to **21.9%** for the current period from **27.1%** in the comparable prior-year period, primarily due to a permanent tax difference from equity grants in the U.S[91](index=91&type=chunk) - Effective tax rates by jurisdiction for the thirty-nine weeks ended September 30, 2023, were approximately **21.5%** in the United States, **26.1%** in Canada, and **13.3%** in Europe[91](index=91&type=chunk) [Note 15. Contingencies](index=24&type=section&id=15.%20Contingencies) - The Company is a defendant in various legal actions and is exposed to asserted claims, accruing **$2.8 million** for these as of September 30, 2023[93](index=93&type=chunk)[95](index=95&type=chunk) - A specific claim from April 2022 regarding a partially designed system has a potential liability limited to **$3.3 million**, with **$0.5 million** reserved and potential insurance coverage up to **$5.0 million** (subject to deductible)[96](index=96&type=chunk) [Note 16. Leases](index=25&type=section&id=16.%20Leases) Lease Liabilities Maturities (After September 30, 2023) | Fiscal Year | Operating Leases (in thousands) | Finance Leases (in thousands) | | :---------- | :------------------------------ | :---------------------------- | | 2023 (After Sep 30) | $357 | $117 | | 2024 | $754 | $233 | | 2025 | $493 | $0 | | 2026 | $409 | $0 | | 2027 | $302 | $0 | | Thereafter | $1,455 | $0 | | **Total Lease Payments** | **$3,770** | **$350** | - Weighted average remaining lease term for operating leases is **8.23 years** and for finance leases is **0.75 years** as of September 30, 2023[102](index=102&type=chunk) - Weighted average discount rate for operating leases is **3.15%** and for finance leases is **0.87%** as of September 30, 2023[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, operational results, liquidity, and capital resources for the period [Overview](index=29&type=section&id=Overview) - RCM operates in a cyclical market sensitive to economic changes, leading to potential volatility in financial performance[105](index=105&type=chunk) - The Company aims to be a single-source premier provider of business and technology solutions with a strong vertical focus and integrated services[106](index=106&type=chunk) - There is increasing demand for outsourcing due to the complexity of advanced life sciences, information technology, and engineering solutions[108](index=108&type=chunk) - The Company generally endeavors to expand its sales of higher-margin solutions and project management services[109](index=109&type=chunk) [Critical Accounting Policies and Use of Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) - Financial statements require significant management judgments and estimates for items such as accounts receivable, goodwill, long-lived intangible assets, stock options, restricted stock awards, insurance liabilities, income taxes, and accrued bonuses[112](index=112&type=chunk) [Recently Issued Accounting Pronouncements](index=30&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - Refers to Note 12 for discussion of new accounting standards and updates, including ASU 2016-13 (Credit Losses) and ASU 2020-04 (Reference Rate Reform)[114](index=114&type=chunk) [Forward-looking Information](index=31&type=section&id=Forward-looking%20Information) - Growth prospects are influenced by broad economic trends, customer capital spending, and global events such as the COVID-19 pandemic[115](index=115&type=chunk) - Changes in government regulations could impact earnings through new employment service restrictions, benefits, licensing, or tax requirements[116](index=116&type=chunk) - The consulting and employment services market is highly competitive, with significant price competition expected to continue[117](index=117&type=chunk) [Thirteen Weeks Ended September 30, 2023 Compared to Thirteen Weeks Ended October 1, 2022](index=32&type=section&id=Thirteen%20Weeks%20Ended%20September%2030%2C%202023%20Compared%20to%20Thirteen%20Weeks%20Ended%20October%201%2C%202022) Operating Results (Thirteen Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Revenue | $58,049 | $58,152 | -$103 | -0.18% | | Gross Profit | $17,281 | $17,358 | -$77 | -0.44% | | Operating Income | $4,331 | $4,760 | -$429 | -9.01% | | Net Income | $3,756 | $3,518 | +$238 | +6.77% | - Revenue decreased slightly by **$0.1 million**, with Specialty Health Care down **$3.1 million**, offset by increases in Engineering (**$1.5 million**) and Life Sciences and IT (**$1.5 million**)[120](index=120&type=chunk) - Other expense, net increased by **$0.2 million** due to higher interest expense from increased borrowing, primarily for treasury stock purchases[123](index=123&type=chunk) - Income tax expense decreased to **$0.4 million** from **$1.3 million**, with the effective tax rate falling to **10.4%** from **26.9%**, mainly due to a permanent tax difference from equity grants[124](index=124&type=chunk) [Segment Discussion (Thirteen Weeks)](index=34&type=section&id=Segment%20Discussion%20(Thirteen%20Weeks)) [Specialty Health Care (Thirteen Weeks)](index=34&type=section&id=Specialty%20Health%20Care%20(Thirteen%20Weeks)) - Revenue decreased by **11.1% ($3.1 million)** to **$24.9 million**, primarily due to decreased demand from non-school clients as COVID-19 transitioned to an endemic[127](index=127&type=chunk) - Gross profit decreased by **17.0% ($1.5 million)** to **$7.5 million**, with gross profit margin declining to **30.0%** from **32.1%** due to a mix shift to lower-margin services[127](index=127&type=chunk) - Operating income decreased to **$1.4 million** from **$2.9 million**, driven by the decrease in gross profit[127](index=127&type=chunk) [Engineering (Thirteen Weeks)](index=35&type=section&id=Engineering%20(Thirteen%20Weeks)) - Revenue increased by **7.3% ($1.5 million)** to **$22.5 million**, driven by a **$3.1 million** increase in Energy Services, partially offset by decreases in Aerospace and Industrial Processing[130](index=130&type=chunk) - Gross profit decreased by **5.2% ($0.3 million)**, with gross profit margin falling to **25.0%** from **25.5%** due to lower utilization from increased staff in anticipation of higher revenue[130](index=130&type=chunk) - Operating income increased to **$1.2 million** from **$0.9 million**, due to increased gross profit and a decrease in SGA expense[130](index=130&type=chunk) [Life Sciences and Information Technology (Thirteen Weeks)](index=35&type=section&id=Life%20Sciences%20and%20Information%20Technology%20(Thirteen%20Weeks)) - Revenue increased by **15.9% ($1.5 million)** to **$10.7 million**[131](index=131&type=chunk) - Gross profit increased by **38.4% ($1.2 million)** to **$4.2 million**, with gross profit margin rising to **39.4%** from **33.0%**, attributed to managed service offerings and higher revenue from recruitment process outsourcing (RPO)[131](index=131&type=chunk) - Operating income increased to **$1.8 million** from **$0.9 million**, driven by higher gross profit, partially offset by increased SGA expenses due to the TalentHerder acquisition[131](index=131&type=chunk) [Thirty-Nine Weeks Ended September 30, 2023 Compared to Thirty-Nine Weeks Ended October 1, 2022](index=36&type=section&id=Thirty-Nine%20Weeks%20Ended%20September%2030%2C%202023%20Compared%20to%20Thirty-Nine%20Weeks%20Ended%20October%201%2C%202022) Operating Results (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | :------------- | | Revenue | $192,209 | $214,459 | -$22,250 | -10.37% | | Gross Profit | $55,065 | $62,461 | -$7,396 | -11.84% | | Operating Income | $15,786 | $21,989 | -$6,203 | -28.21% | | Net Income | $11,576 | $16,052 | -$4,476 | -27.88% | - Revenue decreased by **10.4% ($22.3 million)**, primarily due to a **$24.1 million** decrease in Specialty Health Care, partially offset by increases in Engineering (**$0.2 million**) and Life Sciences and IT (**$1.6 million**)[133](index=133&type=chunk) - Other expense, net increased by **$1.0 million**, mainly due to higher interest expense from increased borrowing to fund treasury stock purchases[137](index=137&type=chunk) - Income tax expense decreased to **$3.2 million** from **$6.0 million**, with the effective tax rate at **21.9%** (vs. 21.5% prior year), primarily due to a permanent tax difference from equity grants[138](index=138&type=chunk) - The Company recorded a **$0.4 million** discrete gain on the sale of its Canada Power Systems assets due to the final collection of escrow funds[136](index=136&type=chunk) [Segment Discussion (Thirty-Nine Weeks)](index=38&type=section&id=Segment%20Discussion%20(Thirty-Nine%20Weeks)) [Specialty Health Care (Thirty-Nine Weeks)](index=38&type=section&id=Specialty%20Health%20Care%20(Thirty-Nine%20Weeks)) - Revenue decreased by **19.5% ($24.1 million)** to **$99.6 million**, driven by decreased demand from both school and non-school clients as COVID-19 transitioned to an endemic[141](index=141&type=chunk) - Gross profit decreased by **21.5% ($7.9 million)** to **$28.9 million**, with gross profit margin declining to **29.1%** from **29.8%** due to a mix shift to lower-margin services[141](index=141&type=chunk) - Operating income decreased to **$9.4 million** from **$15.3 million**, primarily due to the decrease in gross profit, partially offset by a **$2.0 million** decrease in SGA expenses[141](index=141&type=chunk) [Engineering (Thirty-Nine Weeks)](index=39&type=section&id=Engineering%20(Thirty-Nine%20Weeks)) - Revenue increased slightly by **$0.2 million** to **$61.9 million**, with a **$5.7 million** increase in Energy Services offsetting decreases in Aerospace (**$3.0 million**) and Industrial Processing (**$2.5 million**)[144](index=144&type=chunk) - Gross profit decreased by **9.9% ($1.6 million)**, with gross profit margin falling to **23.4%** from **26.0%** due to lower utilization from increased staff and fixed salaried costs over lower revenue[144](index=144&type=chunk) - Operating income decreased to **$1.9 million** from **$3.3 million**, primarily due to the decrease in gross profit[144](index=144&type=chunk) [Life Sciences and Information Technology (Thirty-Nine Weeks)](index=39&type=section&id=Life%20Sciences%20and%20Information%20Technology%20(Thirty-Nine%20Weeks)) - Revenue increased by **5.5% ($1.6 million)** to **$30.7 million**[145](index=145&type=chunk) - Gross profit increased by **22.5% ($2.1 million)** to **$11.7 million**, with gross profit margin rising to **38.0%** from **32.7%**, attributed to managed service offerings[145](index=145&type=chunk) - Operating income increased to **$4.5 million** from **$3.3 million**, driven by higher gross profit, partially offset by increased SGA expenses due to the TalentHerder acquisition and higher corporate SGA allocation[145](index=145&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (Thirty-Nine Weeks Ended Sep 30, 2023 vs. Oct 1, 2022) | Metric | Sep 30, 2023 (in thousands) | Oct 1, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :------------------------- | :-------------------- | | Operating activities | $27,548 | $20,741 | +$6,807 | | Investing activities | -$480 | -$576 | +$96 | | Financing activities | -$26,558 | -$19,468 | -$7,090 | - The Company believes it can satisfy its liquidity needs for at least the next 12 months through cash provided by operations and its revolving line of credit[162](index=162&type=chunk) - Current assets of **$73.0 million** exceeded current liabilities of **$67.3 million** by **$5.7 million** as of September 30, 2023[163](index=163&type=chunk) [Operating Activities](index=40&type=section&id=Operating%20Activities) - Cash provided by operating activities increased to **$27.5 million** from **$20.7 million** in the prior-year period[148](index=148&type=chunk) - Net income for the thirty-nine weeks ended September 30, 2023, was **$11.6 million**, down from **$16.1 million** in the prior-year period[149](index=149&type=chunk) - The net of transit accounts payable and transit accounts receivable provided **$22.4 million** of cash, significantly up from using **$1.0 million** in the prior-year period, due to several large, multiyear EPC projects starting in Q2[150](index=150&type=chunk) - Accounts receivable used **$6.7 million** of cash, compared to **$1.6 million** in the prior-year period, attributed to normal fluctuations relative to revenue[149](index=149&type=chunk) [Investing Activities](index=41&type=section&id=Investing%20Activities) - Net cash used in investing activities was **$0.48 million** for the thirty-nine weeks ended September 30, 2023, compared to **$0.453 million** in the prior-year period[20](index=20&type=chunk) - Property and equipment acquisitions used **$0.9 million**, up from **$0.7 million** in the prior-year period[155](index=155&type=chunk) [Financing Activities](index=41&type=section&id=Financing%20Activities) - Net cash used in financing activities increased to **$26.6 million** from **$19.5 million** in the prior-year period[156](index=156&type=chunk) - The Company used **$24.4 million** for common stock repurchases, significantly higher than **$6.4 million** in the prior-year period[156](index=156&type=chunk) - Net payments under the line of credit were **$2.1 million**, a decrease from **$13.0 million** in the prior-year period[156](index=156&type=chunk) - The effective weighted average interest rate on the revolving credit facility increased to **6.4%** from **2.7%** in the prior-year period[158](index=158&type=chunk) - The Company has an 'at the market' (ATM) issuance program for up to **$25.0 million** but has not sold any shares under it to date[161](index=161&type=chunk) [Current Liquidity and Revolving Credit Facility](index=42&type=section&id=Current%20Liquidity%20and%20Revolving%20Credit%20Facility) - The Company's liquidity is primarily met through cash from operations and its **$45.0 million** revolving line of credit[162](index=162&type=chunk) - As of September 30, 2023, the Company had **$36.3 million** available for additional borrowings under the Revolving Credit Facility[160](index=160&type=chunk) - Current assets of **$73.0 million** exceeded current liabilities of **$67.3 million** by **$5.7 million** as of September 30, 2023[163](index=163&type=chunk) - The Company was **in compliance with all financial covenants** of the Revolving Credit Facility and expects to maintain compliance for the foreseeable future[159](index=159&type=chunk)[164](index=164&type=chunk) [Commitments and Contingencies](index=43&type=section&id=Commitments%20and%20Contingencies) - Primary uses of capital in future periods are for working capital, with funding from the Revolving Credit Facility, operations, or future financing[165](index=165&type=chunk) - The Company has accrued **$2.8 million** for asserted claims as of September 30, 2023, and is involved in other legal proceedings[167](index=167&type=chunk) - A specific client claim in the Industrial Processing Group has a potential liability limited to **$3.3 million**, with **$0.5 million** reserved and potential insurance coverage[168](index=168&type=chunk) - The Company is upgrading its SAP financial reporting and accounting system, estimated to cost between **$0.5 million** and **$1.0 million**, with a go-live expected in 2024[170](index=170&type=chunk) [Future Contingent Payments](index=44&type=section&id=Future%20Contingent%20Payments) Estimated Future Contingent Payments (as of September 30, 2023) | Period | Total (in thousands) | | :-------------------------------- | :------------------- | | The four quarters following Sep 30, 2023 | $300 | | Thereafter | $1,671 | | **Estimated future contingent consideration payments** | **$1,971** | - Potential future contingent payments for acquisitions after September 30, 2023, are capped at a cumulative maximum of **$11.6 million**[50](index=50&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate changes on its debt - The Company's market risk exposure primarily relates to interest rates on its Revolving Credit Facility[174](index=174&type=chunk) - A **1.0% increase** in the variable interest rate on the line of credit would increase annualized interest expense by **$0.1 million** based on balances during the thirty-nine weeks ended September 30, 2023[174](index=174&type=chunk) - The Company does not use interest rate derivative instruments and does not expect material losses with respect to its investment portfolio[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) The company details the effectiveness of its disclosure controls, identified material weaknesses, and remediation plans [Planned Material Weakness Remediation Activities](index=46&type=section&id=Planned%20Material%20Weakness%20Remediation%20Activities) - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2023, due to material weaknesses in internal control over financial reporting[175](index=175&type=chunk) - Material weaknesses identified include deficiencies in IT controls related to separation of duties, administrator access, program change management, and user access controls for SAP ERP and General Ledger[177](index=177&type=chunk) - These material weaknesses **did not result in a misstatement** of the annual or interim consolidated financial statements[178](index=178&type=chunk) - Remediation efforts are in progress, focusing on formalizing control procedures, improving IT general controls, assessing segregation of duties, implementing annual user access reviews, designing IT controls in change management, and providing additional training[180](index=180&type=chunk)[183](index=183&type=chunk) [Changes in Internal Control Over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - In Q3, management implemented and designed IT general controls to address and mitigate identified material weaknesses, including enhancing role design, eliminating sensitive access, and segregating developers[181](index=181&type=chunk) - Significant progress has been made in executing the remediation plan, and a final assessment of these efforts will be carried out as part of the annual review of internal controls[182](index=182&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 15 for details on legal proceedings and contingencies - See discussion of Contingencies in Note 15 to the Condensed Consolidated Financial Statements included in Item 1 of this report[184](index=184&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the company's Annual Report on Form 10-K for a discussion of risk factors - For information regarding factors that could affect the Company's business, refer to the risk factors discussed under Part I, Item 1A, Risk Factors, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022[185](index=185&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's common stock repurchases during the third quarter of 2023 Common Stock Purchases (Third Quarter 2023) | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :-------------------------- | :------------------------------- | :------------------------------------ | :--------------------------------------------------------------------------- | | July 2, 2023 - July 31, 2023 | 97,016 | $19.09 | $16,471,000 | | August 1, 2023 - August 31, 2023 | 59,177 | $18.56 | $15,372,000 | | September 1, 2023 - September 30, 2023 | 22,235 | $19.46 | $14,940,000 | | **Total** | **178,428** | **$18.96** | | [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[187](index=187&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[188](index=188&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - None of the Company's directors and officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended September 30, 2023[189](index=189&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - Includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[190](index=190&type=chunk) - Includes XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Label Linkbase, Presentation Linkbase, and Definition Linkbase Documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF)[190](index=190&type=chunk) [Signatures](index=49&type=section&id=Signatures) The report is signed by the Executive Chairman and President, and the Chief Financial Officer - The report was signed by Bradley S. Vizi (Principal Executive Officer and Executive Chairman and President) and Kevin D. Miller (Principal Financial Officer) on November 9, 2023[195](index=195&type=chunk)

Financial Data and Key Metrics Changes - Gross profit for Q3 2023 was $17.3 million, essentially flat year-over-year compared to $17.4 million in Q3 2022 [51] - Healthcare gross profit decreased to $7.5 million in Q3 2023 from $9.0 million in Q3 2022, primarily due to the absence of COVID-related revenue and a strategic decision to reduce low-margin services [51][52] - The overall gross margin improved to 25.0% in Q3 2023 from 22.9% in Q2 2023, driven by a decrease in low-margin business [54][56] - Adjusted EBITDA for Q4 2023 is estimated to be between $7.6 million and $8.2 million, with consolidated revenue expected between $70.0 million and $74.0 million [57][58] Business Line Data and Key Metrics Changes - The Life Sciences and IT Group saw a 38.4% year-over-year growth in gross profit, attributed to high-value managed service offerings [56] - Engineering gross profit increased by 5.2% year-over-year, driven by project activity in the Energy Services group [55] - Healthcare revenue from schools was reported at $17.4 million for Q3 2023, with a 25% growth in school revenue in September and October compared to the previous year [63][70] Market Data and Key Metrics Changes - The macroeconomic landscape in Information Technology was challenging in 2023, but the company continued to invest in segments demonstrating secular growth [17] - The company is expanding its EPC capabilities in Europe and North America to meet increased demand for EPC projects in 2024 and beyond [22] Company Strategy and Development Direction - The company aims to build long-term partnerships by leveraging its high-value capabilities, which serve as a key differentiator in the marketplace [10] - There is a commitment to sustainable growth and innovation, with plans for further expansion into new markets and development of cutting-edge staffing solutions [15] - The company is focused on organic growth through talent acquisition and opportunistic M&A, rather than entering new markets from scratch [65] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for 2024 and beyond, anticipating continued growth across all segments [9][60] - The company is experiencing increasing demand for behavioral health services, which is expected to accelerate further [38][40] - Management acknowledged the competitive landscape but believes there is significant business potential to capture [40] Other Important Information - The company is working to reduce Days Sales Outstanding (DSOs), which were reported at 90 in Q3 2023, with a historical low of 66 in Q4 of the previous year [99] - A one-time tax benefit was noted in Q3, with an expected tax rate of 28% to 29% for Q4 [105] Q&A Session Summary Question: What was your revenue from schools in the third quarter? - The schools revenue was $17.4 million [63] Question: Can you elaborate on expanding into new staffing markets? - The company is confident in its existing portfolio and plans to expand organically by adding talent, with opportunistic M&A as a secondary strategy [65] Question: What is the outlook for the engineering segment and its backlog? - The company anticipates good momentum in engineering, expecting a sequential increase in revenue throughout 2024 [67][115] Question: Was there any COVID-related revenue in the first quarter? - Yes, there was COVID-related revenue in Q1, but none is expected in Q4 [70] Question: Can you clarify the nature of the transit account related to subcontractors? - The transit account is primarily tied to engineering and EPC contracts, involving advanced payments for equipment and construction [71] Question: What is the status of share issuance? - Approximately 100,000 shares were issued to about 20 employees under long-term restricted share awards [80] Question: Is share buyback still a priority for capital deployment? - The company remains committed to share buybacks as part of its capital deployment strategy [88]

RCM Technologies, Inc. (NASDAQ:RCMT) Q2 2023 Earnings Conference Call August 10, 2023 11:30 AM ET Company Participants Kevin Miller - CFO Brad Vizi - Executive Chairman Conference Call Participants Alex Rygiel - B. Riley Bill Sutherland - Benchmark Operator Welcome to the RCM Technology Second Quarter Earnings Call. I will now turn the call over to Kevin Miller, you may begin. Kevin Miller Good morning. And thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies. I'm join ...

Financial Data and Key Metrics Changes - Revenue for Q1 2023 was $67.2 million, reflecting a decrease primarily due to a comparison against peak COVID impacts in Q1 2022, with a solid sequential growth in underlying non-COVID-related demand [36] - Gross margin in Q1 was 28.3%, slightly down from 28.6% in the previous quarter, with strong performance in Healthcare and Life Sciences but weaker margins in Engineering due to lower utilization [14] Business Line Data and Key Metrics Changes - The Specialty Healthcare Division showed solid first-quarter performance, exceeding Q4 results, driven by increased demand for healthcare professionals [7] - Engineering results were modestly above plan with strong growth in backlog and pipeline, although performance was below Q4 run rate due to project timing [9] - Energy Services Group reported substantial growth and backlog, with several new projects initiated [10] - Aerospace continued to drive growth by adding new customers and expanding existing client relationships [11] Market Data and Key Metrics Changes - The company is experiencing increased demand for healthcare staffing solutions, particularly in schools, due to a shortage of nurses and behavioral health professionals [28] - The Energy Services Group is expanding its footprint, including a new office in Germany, and has secured significant projects with European utility clients [32] Company Strategy and Development Direction - The company is focused on capitalizing on market opportunities by investing in workforce and expanding service offerings, particularly in healthcare and engineering [4][30] - There is a strategic shift towards long-term managed service contracts to mitigate business volatility and enhance growth potential [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sequential growth in the Engineering group and strong performance in Healthcare, particularly in Q4 2023 [15][37] - The company anticipates a strong fourth quarter as new school contracts ramp up and project backlogs are realized [38] Other Important Information - The company has repurchased over 1.2 million shares, indicating confidence in its business model and financial flexibility [13] - The company is actively evaluating bolt-on opportunities for growth and has a robust pipeline of potential new clients [65] Q&A Session Summary Question: Confirmation on sequential performance between Specialty Health and Engineering - Management confirmed optimism that sequential declines in Specialty Health could be offset by growth in Engineering [17] Question: Insights on backlog growth and pipeline activity - Management noted that backlog is building and pipeline activity is broadening, with increased client involvement and project sizes [18] Question: Discussion on seasonal trends and project timing - Management indicated that Q3 and Q4 are expected to be significantly better than Q2, with strong backlog realization anticipated [56] Question: Concerns regarding accounts receivable and interest expense - Management acknowledged increased DSOs in Q1 but expects improvements moving forward, with interest expenses being manageable [70][71] Question: Clarification on gain from asset sales - Management explained that the gain was related to the collection of escrow funds from a previous sale, marking the completion of that transaction [72] Question: Future capital allocation strategy - Management confirmed that the share repurchase program will continue throughout 2023, reflecting confidence in the business [73]