RCM Technologies(RCMT) - 2024 Q1 - Quarterly Results

RCM Technologies, Inc. Announces First-Quarter Results RCM Technologies reported strong first-quarter 2024 financial results with significant growth in revenue, gross profit, and adjusted EBITDA First-Quarter Financial Highlights 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 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] - 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] Company Overview and Disclosures This section provides an overview of RCM Technologies' business, conference call details, and forward-looking statement disclosures About RCM Technologies 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] - The company operates at the intersection of resources, critical infrastructure, and modernization of industries through advanced technologies[7] - RCM provides services in Health Care, Engineering, Aerospace & Defense, Process & Industrial, Life Sciences, and Data & Solutions[7] Conference Call Information 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] - The dial-in number for the conference call is (800) 285-6670[6] Forward-Looking Statements 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] - 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] - The Company assumes no obligation to update any forward-looking statements, except as required by law[8] Detailed Financial Results 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) 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) 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] - 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] Adjusted Operating Income, EBITDA, and Adjusted EBITDA Reconciliation 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 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 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 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 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 |