• Consolidated Gross Profit (Q4 2024): $21.6 million, flat compared to Q4 2023.
• Consolidated Gross Profit (Fiscal 2024): $79.8 million, up from $76.7 million in Fiscal 2023.
• Adjusted EBITDA (Q4 2024): $6.3 million, down from $8.9 million in Q4 2023.
• Adjusted EBITDA (Fiscal 2024): $25.9 million, compared to $26.6 million in Fiscal 2023.
• Adjusted EPS (Fiscal 2024): $2.03, compared to $2.04 in Fiscal 2023.
• Engineering Gross Profit (Q4 2024): $5.2 million, down from $6.1 million in Q4 2023.
• Engineering Gross Margin (Q4 2024): 19.7%, compared to 27.0% in Q4 2023.
• IT, Life Sciences, and Data Solutions Gross Profit (Q4 2024): $3.9 million, down from $4.5 million in Q4 2023.
• IT, Life Sciences, and Data Solutions Gross Margin (Q4 2024): 40.0%, up from 38.7% in Q4 2023.
• Healthcare Gross Profit (Q4 2024): $12.5 million, up from $11.0 million in Q4 2023.
• Healthcare Gross Margin (Q4 2024): 30.0%, compared to 29.8% in Q4 2023.
• School Revenue (Q4 2024): $34.9 million, up from $29.8 million in Q4 2023.
• Non-School Revenue (Q4 2024): $6.2 million, down from $6.9 million in Q4 2023.
• Days Sales Outstanding (DSO) (Q4 2024): Reduced to 92 from 114 in Q3 2023.

• Warning! GuruFocus has detected 3 Warning Sign with RCMT.

Release Date: March 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RCM Technologies Inc (NASDAQ:RCMT) demonstrated strong topline momentum with strategic initiatives gaining traction.
• The company reported a resumption of growth in hours and increasing activity across most business units despite macroeconomic uncertainties.
• RCM Healthcare closed 2024 on a high note with growth in hours and a robust pipeline of new school districts and clients.
• The aerospace and defense group experienced significant growth, increasing headcount by 20% in 2024 and realizing a healthy increase in EBITDA.
• RCM Technologies Inc (NASDAQ:RCMT) secured multi-year renewals for managed service engagements, demonstrating client loyalty and consistent quality delivery.

Negative Points

• Profitability in Q4 was disappointing due to discrete items that materially impacted the quarter.
• A significant industrial process equipment order was abruptly canceled, causing a reduction in gross profit.
• The technical publications group experienced significant rework on a large project, impacting revenue and profit.
• The company's self-insured medical plan had abnormally high costs, increasing SG&A expenses.
• A class action lawsuit settlement regarding California wages added unexpected legal and settlement costs.

Q & A Highlights

Q: Can you explain the unusually high tax rate observed this quarter? A: Kevin Miller, CFO, explained that the effective tax rate for the year was 34%, which is higher than usual due to permanent differences affecting deferred tax liabilities. This does not impact cash taxes but affects GAAP taxes. The normal tax rate is expected to be between 26% and 29% in the future, with an effective rate likely below 30%.

Q: What were the specific costs impacting the engineering segment's performance? A: Kevin Miller, CFO, noted that two main issues affected the engineering segment: a canceled industrial process equipment order and significant rework on a large aerospace project. These issues resulted in approximately $900,000 in reduced gross profit due to lower revenue and increased direct costs.

Q: Was the canceled order in the engineering segment related to any political changes or the recent election? A: Kevin Miller, CFO, clarified that the canceled order was not related to political factors but was a specific issue with a particular client.

Q: Are there any anticipated impacts from government-related changes or headlines on RCM's business? A: Kevin Miller, CFO, and Bradley Vizi, Executive Chairman, stated that there are no direct impacts expected from government changes. While broader IT environments might be affected, RCM's work as a subcontractor in aerospace is not anticipated to face major impacts.

Q: What are the expectations for growth in operating income, considering the one-time charges? A: Kevin Miller, CFO, mentioned that absent the one-time charges, operating income would have grown over 12%. The company aims for at least low double-digit growth in adjusted EBITDA each quarter in 2025, considering any quarter without such growth as a failure.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.