RCM Technologies(US:RCMT)2019-08-12 21:13Financial Data and Key Metrics Changes - RCM Technologies reported a second quarter revenue of $23.4 million in the specialty health care staffing group, a 3% increase compared to the same period in 2018 [4] - Engineering segment revenue declined by 14% year-over-year to $18.6 million [6] - Information technology group revenue increased by 20% year-over-year to $8.7 million [8] Business Line Data and Key Metrics Changes - Specialty health care staffing achieved a record revenue, with a 7% increase in revenue per school day compared to the first quarter of 2019 and a 17% increase compared to the second quarter of 2018 [4] - Engineering segment is expected to finish the year strong despite current softness, with new contracts anticipated to boost performance in 2020 [6][7] - IT group demonstrated strong growth due to a significant transformation in sales and management personnel, resulting in a 20% revenue increase [8] Market Data and Key Metrics Changes - The company is seeing increased demand in the life sciences space within the IT business, indicating a broader market opportunity [22] - The engineering segment is experiencing a pipeline of significant EPC opportunities, although the exact revenue guidance remains uncertain [16] Company Strategy and Development Direction - RCM Technologies is focused on enhancing its engineering business and positioning it for sustainable long-term results despite current revenue softness [7] - The company is investing in training and recruiting RBTs to capitalize on the new contract with the Hawaii Department of Education, which has an annual cap of $40 million [12][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of the company amid global uncertainties, highlighting the stable drivers of each business unit [3] - The company anticipates a gradual build-up in revenue from the new RBT contract, with more significant impacts expected in the fourth quarter and into 2020 [29] Other Important Information - The engineering segment's gross margin improved to 28%, attributed to better utilization and a shift away from lower-margin work [18][19] - The company is focused on reducing days sales outstanding (DSOs) and paying down debt, with a significant cash influx expected from an ongoing arbitration [32][35] Q&A Session Summary Question: Is there any improvement in permanent placements in healthcare? - Management noted no meaningful change in permanent placements, but remains encouraged by the team [10] Question: What is the outlook for the Hawaii contract? - The contract has a maximum annual value of $40 million, but the actual spending will depend on the number of RBTs that can be trained [25][27] Question: How is the engineering gross margin performing? - The gross margin of 28% is expected to be a typical target moving forward, with improvements due to better project management [18][19] Question: What is the expected revenue timeline for new engineering projects? - Revenue from the cannabis project is expected to be recognized by the end of the year, while the calcium chloride project may start generating revenue in early 2020 [20][21] Question: How is the IT business performing in terms of market demand? - The IT business is experiencing strong growth, particularly in life sciences, with opportunities for market share expansion [22] Question: What is the status of accounts receivables and debt reduction? - Management expressed disappointment in the progress of reducing receivables but expects positive cash flow in the upcoming quarters [32][35]