Release Date: November 08, 2024

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

Positive Points

• RCM Technologies Inc (NASDAQ:RCMT) reported a 3.2% increase in consolidated gross profit for Q3 2024 compared to the previous year.
• The healthcare segment showed strong performance with an 11.1% increase in gross profit.
• The company has a robust pipeline of international nurses, which is expected to accelerate growth in healthcare and education sectors.
• RCM Technologies Inc (NASDAQ:RCMT) secured several new clients in the pharmaceutical and biotech sectors, enhancing its reputation as a trusted advisor.
• The engineering segment is on track to exceed 2024 budgeted revenue, with significant projects in the US, Europe, and Puerto Rico contributing to growth.

Negative Points

• The Life Sciences, Data, and Solutions division experienced a 13.1% decrease in gross profit.
• Non-school healthcare revenue saw a decline, attributed to a deliberate reduction in services for a large long-term care group.
• Interest expenses and foreign currency losses contributed to a $620,000 other expense net for the quarter.
• The company faces challenges in expanding its direct workforce due to smaller and shorter time frame contracts.
• Cash flow was impacted in Q3, although improvements are expected in Q4 and Q1 of the next year.

Q & A Highlights

Q: Can you clarify the expected growth in school revenue for the current school year? A: Kevin Miller, CFO: We anticipate school revenue growth to be in the neighborhood of 20% for the current school year, which spans from July 2024 to June 2025. This growth is driven by more than 20 new school contracts, although not all will immediately reach significant revenue levels. However, we expect continued growth in both new and existing contracts.

Q: What is the outlook for non-school revenue in the fourth quarter? A: Kevin Miller, CFO: We expect a healthy sequential growth in non-school revenue in Q4 2024 compared to Q3 2024, despite deliberately winding down services with one of our largest non-school clients. We have several new clients in this area, and if we can start bringing in more foreign nurses, it will significantly boost growth.

Q: Can you provide insights into the expected EBITDA growth for 2025? A: Brad Vesy, Executive Chairman: We anticipate at least low double-digit earnings growth over the long term, consistent with our past performance. We are optimistic about all three of our business segments and expect record years among them, driven by our strategic initiatives and market opportunities.

Q: What is your approach to stock buybacks given your cash flow situation? A: Brad Vesy, Executive Chairman: We have been aggressive in buying back stock, having repurchased about half of the outstanding shares. While buybacks remain on the table, we prioritize maintaining no debt and being opportunistic with capital deployment to create value.

Q: How do recent political developments impact the company? A: Brad Vesy, Executive Chairman: The recent election outcomes are positive for us, especially in terms of clarity around corporate taxes and continued investment in infrastructure and defense. These developments align with our business focus and present opportunities for growth.

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