RCM Technologies(US:RCMT)2021-11-12 19:21Financial Data and Key Metrics Changes - The company's revenue grew by over $13.9 million year-over-year, representing an increase of approximately 44% compared to Q3 2020, while sequentially decreasing by $1.9 million after adjusting for the Canada Power Systems divestiture [15] - Adjusted EBITDA for Q3 2021 was $1.9 million, reflecting a year-over-year increase of about 780% from $0.2 million in Q3 2020 [12][15] - Gross profit increased to $12.1 million, a 38% rise over Q3 2020 and a 15% increase over Q3 2019 [16] Business Line Data and Key Metrics Changes - The Health Care Services (HCS) segment generated revenue of $19.6 million in Q3 2021, marking a 118% increase year-over-year, although it decreased by $3.3 million compared to Q2 2021 [11][17] - The IT division reported revenue of $9.3 million in Q3 2021, up from $7.5 million in Q3 2020 and $9.1 million in Q2 2021, indicating strong performance [18] - The Engineering Division generated revenue of $16.0 million in Q3 2021, showing growth both sequentially and year-over-year [19] Market Data and Key Metrics Changes - The demand for health care professionals remains robust, particularly from school districts for testing and nursing personnel, contributing to the strong performance of the health care segment [12][41] - The Engineering division is optimistic about its backlog and pipeline as it heads into 2022, with several new client wins anticipated [19] Company Strategy and Development Direction - The company aims to become a world-class services organization by embracing digital transformation and modernizing its solutions for a digital-first world [6][13] - Investments are being prioritized to revamp the company's digital architecture and enhance CRM capabilities, which are expected to facilitate a digital-first go-to-market strategy [7][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about operational momentum continuing into Q4 2021 and beyond, particularly in the health care segment [12][41] - The company anticipates a material uptick in net debt towards the high end of its target range of 1 to 2x EBITDA as it enters its strongest seasonal quarter [13] Other Important Information - The company ended Q3 with a favorable net debt position of $5.1 million, primarily due to proceeds from the sale of Canadian assets [12] - Management highlighted the importance of leveraging technology to fulfill its vision and improve operational efficiency [7][8] Q&A Session Summary Question: Health care performance relative to expectations - Management noted strength across all businesses, with strong demand for health care professionals and significant testing revenue contributing to the upside [22][23] Question: Engineering pipeline outlook - Management expects a meaningful uptick in the Engineering group's performance, with optimism across all divisions, particularly in Aerospace [29][31] Question: Health care revenue breakdown - In Q3, approximately $10.1 million of health care revenue came from schools, while $9.5 million was from nonschool sources [37] Question: Margin sustainability - Management indicated that margins in health care are sustainable in the short term, with expectations for strong gross margins moving forward [40] Question: Potential shareholder rewards - Management discussed the board's ongoing consideration of capital allocation strategies, including potential rewards to shareholders, but indicated that a dividend is unlikely in the short term [54][55]