RCM Technologies(US:RCMT)2023-11-09 20:01Financial 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]