Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RCM Technologies Inc (RCMT, Financial) reported a 6.6% increase in consolidated gross profit for Q2 2024, growing from $18.8 million to $20.0 million.
- The engineering division demonstrated robust growth with a 23.7% increase in gross profit, driven by strong project activity and a solid backlog.
- The healthcare division expanded its operations significantly, adding new school districts and enhancing recruitment and credentialing processes.
- RCM Technologies Inc (RCMT) has expanded its operations in the Philippines, increasing recruitment and operational support teams, which positions the company for continued growth.
- The aerospace and defense group saw a 54% increase in new hires in Q2 2024, indicating strong recruitment efforts and potential for future growth.
Negative Points
- Life sciences, data, and solutions division experienced a 17.9% decrease in gross profit, attributed to project timing and the end of a high-margin project.
- The aerospace and defense group faced mixed results due to a slower-than-anticipated recovery in the aftermarket.
- SG&A expenses increased by over 6% year-over-year, driven by investments in technology, cybersecurity, and infrastructure.
- Despite strong growth in the healthcare division, there is uncertainty regarding the revenue potential of new school districts.
- RCM Technologies Inc (RCMT) is maintaining a conservative outlook for EBITDA growth, despite bullish performance in several segments.
Q & A Highlights
Q: The schools business is performing well, and the engineering segment seems strong. Why is the EBITDA growth target conservative?
A: Kevin Miller, CFO: The revenue for Q3 and Q4 is largely set, as schools start in September. We are optimistic about the school year but prefer a conservative target due to potential variability. Predicting a 10% increase in EBITDA already assumes a significant sequential increase.
Q: Which segment do you expect to grow the fastest over the next 12 months?
A: Bradley Vizi, Executive Chairman: It's challenging to predict short-term growth for each division due to various drivers. However, the platform's strength across all divisions provides confidence in our long-term success.
Q: What are your capital allocation priorities given the strong balance sheet?
A: Bradley Vizi, Executive Chairman: We aim to remain flexible and opportunistic, balancing share buybacks and M&A opportunities. We focus on bolting on businesses that align with our culture and vision, particularly in engineering.
Q: Can you clarify the 54% increase in new hires? Is it specific to engineering?
A: Bradley Vizi, Executive Chairman: The increase is specific to aerospace. Although aerospace was slower than expected in the first half, the pipeline is improving, and we are confident in future growth.
Q: What is driving the 6% increase in SG&A expenses, and how are you managing it?
A: Kevin Miller, CFO: The increase is due to natural inflation, investments in technology and cybersecurity, and infrastructure to support growth, especially in healthcare. We continue to look for ways to optimize SG&A, including leveraging talent in the Philippines.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
