RCM Technologies(US:RCMT)2019-03-07 20:48Financial Data and Key Metrics Changes - The fiscal 2018 adjusted EBITDA was $8.9 million, representing a growth of approximately 12% compared to fiscal 2017 [4] - The company reported a revenue of $23.1 million in Q4 2018, which is a 4.3% increase from Q4 2017 [5] - Fiscal 2018 revenue reached $83.7 million, exceeding fiscal 2017 by 17% [5] Business Line Data and Key Metrics Changes - The Specialty Healthcare Staffing Group achieved a record revenue of $23.1 million in Q4 2018, driven by school contracts which generated $16.2 million in Q4 2018, up from $14.7 million in Q4 2017 [5][6] - Revenue from school contracts for fiscal 2018 was $55.1 million, a growth of 36% from $40.5 million in the prior year [6] - The Locum Tenens business generated $1.5 million in revenue for 2018, up from $120,000 in 2017, while the HIM group saw revenue increase to $4.6 million from $3.9 million [7] - The permanent placement business underperformed, with fiscal 2018 revenue of approximately $1.5 million compared to $2.3 million in 2017 [7] Market Data and Key Metrics Changes - The engineering segment rebounded in Q4 2018 with revenue of $23.6 million, compared to $19.4 million in Q3 2018 and $21.2 million in Q4 2017 [10] - The information technology group reported revenue of $8.5 million in Q4 2018, the highest since Q2 2017, reflecting an 18% growth when accounting for divested units [15][16] Company Strategy and Development Direction - The company aims to continue investing in business development resources to enhance strategic client relationships and enter new geographic markets [13][14] - There is a focus on sustainable growth in engineering and monetizing core capabilities, with expectations for a strong second half of 2019 and an even better 2020 [15][18] - The company plans to prioritize debt repayment and seek low-risk acquisitions to support growth strategies [39][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for strong performance in fiscal 2019, despite potential softness in Q1 due to project timing and strong comparables from Q1 2018 [18] - The company anticipates improvements in gross margins and operating performance in 2019, particularly in healthcare and engineering [9][18] Other Important Information - The company expects to see a retroactive bill rate increase in New York City to address minimum wage increases, which should positively impact gross margins [9] - The Days Sales Outstanding (DSO) improved to approximately 86.2 days at year-end, down from 99.8 days in Q3 2018, with expectations for further improvement [33] Q&A Session Summary Question: How is the year expected to start? - Management expects healthcare to perform well, some softness in engineering, and decent revenues in IT, with payroll tax increases impacting margins [21][24] Question: Performance of Thermal Kinetics? - Thermal Kinetics contributed about $2.58 million in revenues in Q4 with a gross margin of roughly 27%, but their performance can be lumpy due to project timing [25] Question: Insights on Canadian Power Systems and Arrow Energy Services? - Weakness was noted in aerospace and power systems, but strong performance is expected from energy services and process industrial units [27] Question: Growth trajectory in healthcare? - While top-line growth in healthcare may not match 2018 levels, increases in bill rates and headcount are expected to drive gross profit growth [31][32] Question: DSO improvement? - DSO improved to 86.2 days, with expectations to maintain DSOs in the 80s, potentially reaching the high 70s after resolving arbitration issues [33][36] Question: Capital plans and debt management? - The primary focus is on paying down debt, with plans for strategic acquisitions once debt levels are more aligned with targets [39][41]