Q1 2024 RCM Technologies Inc Earnings Call
Okay.
Operator: Ladies and gentlemen, welcome to the RCM Technologies First Quarter Earnings Update. I will now turn the program over to RCM Management. Good morning.
Hello, ladies and gentlemen, and welcome to the RCM Technologies' first quarter earnings update.
RCM Management: I will now turn the program over to you are see in management.
Kevin D. Miller: Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies. I am joined today by Brad Vizi, RCM's Executive Chairman.
Operator: Good morning, and thank you for joining US. This is Kevin Miller, Chief Financial Officer of RCM technologies, I am joined today by Brad Vesey Rcm's Executive Chairman our presentation. In this call will contain forward looking statements. The information contained in the forward looking statements is based on our beliefs.
Kevin D. Miller: Our presentation in this call will contain forward-looking statements. The information contained in the forward-looking statements is based on our beliefs, estimates, assumptions, and information currently available to us, and these matters may materially change in the future. Many of these beliefs, estimates, and assumptions are subject to rapid changes. For more information on our forward-looking statements and the risks, uncertainties, and other factors to which they are subject, please see the periodic reports on Forms 10-K, 10-Q, and 8-K that we file with the SEC, as well as our press releases that we issue from time to time. I will now turn the call over to Brad Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the quarter.
Bradley S. Vizi: Estimates assumptions and information currently available to us and these matters may materially change in the future. Many of these beliefs estimates and assumptions are subject to rapid changes for more information on our forward looking statements and the risks uncertainties and other factors to which they are subject. Please.
Bradley S. Vizi: See the periodic reports on forms 10-K, 10-Q, and 8-K that we filed with the SEC as well as our press releases that we issue from time to time I will now turn the call over to Brad Vesey Executive Chairman to Rob to provide an overview of our CMS operating performance during the quarter.
Bradley S. Vizi: Thanks, Kevin.
Bradley S. Vizi: As discussed in our prior call, the first quarter concluded as expected, with a seasonally slow start in January and acceleration as we move through the quarter. Our breadth of focus is both widening and deepening throughout the organization, with all teams executing on current initiatives while seeding new initiatives to propel growth well into the future. Further galvanizing the strength of the platform, we have introduced the shared services team, whose mandate is to help streamline the strategic focus of our groups, strengthen collaboration, and enhance communication about the RCM platform.
Bradley S. Vizi: Good morning, everyone.
Bradley S. Vizi: As discussed in our prior call. The first quarter concluded as expected with a seasonally slow start in January and acceleration as we moved through the quarter.
Bradley S. Vizi: Our breadth of focus both widening and deepening throughout the organization with all teams executing on current initiatives, while seeding new initiatives to propel growth well into the future.
Bradley S. Vizi: Further galvanizing the strength of the platform. We have introduced the share services shared services team, whose mandate is to help streamline the strategic focus of our groups strengthen collaboration and enhance communication about the RCM platform.
Bradley S. Vizi: Throughout the month, we will launch a much-improved digital initiative highlighting the mission-critical work of each of our groups and helping distinguish us as what I believe to be a one-of-a-kind platform in the marketplace. Without further ado,
Bradley S. Vizi: Throughout the month, we will launch a much improved digital initiative highlighting the mission critical work of each of our groups and helping distinguish us as what I believe to be a.
Bradley S. Vizi: One of a kind platform in the marketplace.
Bradley S. Vizi: Without further Ado.
Bradley S. Vizi: I will get into updates on the progress of each of our teams, starting with health care. The Healthcare Division started 2024 with a continued emphasis on its core, excluding business we consider to be non-strategic, primarily consisting of a slow-paying, long-term care facility client we made the decision to reduce. Healthcare demonstrated solid double-digit top-line growth year over year. As we finish lapping the bulk of this headwind in Q2, we anticipate a reacceleration of growth in the second half.
Bradley S. Vizi: I won't get into updates on the progress of each of our teams starting with healthcare.
Bradley S. Vizi: The health care Division started 2024 with a continued emphasis on its core excluding business, we consider to be non strategic.
Bradley S. Vizi: Primarily consisting of a sloping long term care facility client, we made the decision to reduce.
Bradley S. Vizi: Health care demonstrated solid double digit topline growth year over year.
Bradley S. Vizi: As we finished lapping the bulk of this headwind in Q2, we anticipate a reacceleration of growth in the second half for health care.
Bradley S. Vizi: This progress is a testament to the hard work and dedication of the team. Our K-12 education business, one of our key focus areas, continues to strengthen. We are confident about the potential of five new school districts already onboarded and 12 more in the final stages of negotiation, each anticipated to generate revenue in excess of $300,000.
Bradley S. Vizi: This progress is a testament to the hard work and dedication of the team.
Bradley S. Vizi: Our K through 12 education business, one of our key focus areas continues to strengthen.
Bradley S. Vizi: We are confident about the potential of five new school districts already on boarded and 12 more in the final stages negotiate negotiation.
Bradley S. Vizi: We anticipate the driven generate revenue in excess of $300000.
Bradley S. Vizi: Also of note, there are 11 new districts toward the late stages of the sales cycle that show promise of promising contribution in the 2024-2025 school year. Our expansion efforts to grow our client base nationwide continue to yield substantial results. We are leveraging our leadership position in K-12 staffing to capture new opportunities and strengthen our advantage. As we continue to execute our strategy, we are confident in our ability to deliver sustained value and growth to our shareholders. Transitioning to Life Sciences and Data Solutions
Bradley S. Vizi: Also of note there are 11, new districts toward the late stages of the sales cycle that show promise promising contribution and the 'twenty 'twenty four 2025 school year.
Bradley S. Vizi: Our expansion efforts to grow our client base nationwide continues to yield substantial results.
Bradley S. Vizi: We are leveraging our leadership position in K through 12 staffing to capture new opportunities and strengthen our advantage.
Bradley S. Vizi: As we continue to execute our strategy, we are confident in our ability to deliver sustained value and growth to our shareholders.
Bradley S. Vizi: Transitioning to life Sciences, and data solutions first quarter results demonstrated continued progress in executing against our strategy to pursue project solution and managed service solutions client engagements.
Bradley S. Vizi: First quarter results demonstrated continued progress in executing against our strategy to pursue project, solution, and managed service solutions client engagement. Our renewal business doubled year over year. We have seen increased demand for our services in life sciences, HCM, and Puerto Rico solutions, and our pipeline continues to grow quarter over quarter. Our customers have challenged us to expand our services in HCM with the introduction of direct, white glove, and post-implementation support. We have expanded our data management team and built a dedicated ERP solutions team.
Bradley S. Vizi: Our renewal business doubled year over year.
Bradley S. Vizi: We have seen increased demand for our services and life Sciences, HCN, and Puerto Rico solutions, and our pipeline continues to grow quarter over quarter.
Bradley S. Vizi: Our customers have challenged us to expand our services in H C M with the introduction of direct white glove and post implementation support.
Bradley S. Vizi: We have expanded our data management team and built a dedicated ERP solutions team.
Bradley S. Vizi: We have broadened our program practice team by introducing a robust series of organizational change management services that will enhance all of our solution practices. As we look toward the remainder of 2024, we continue to see strong momentum in the business. Energy Services closed the first quarter of 2024 with strong results, delivering double-digit forecasted revenue and EBITDA increases.
Bradley S. Vizi: We have broadened our program practice team by introducing a robust series of organizational change management services that will enhance all of our solution practices.
Bradley S. Vizi: As we look toward the remainder of 2024, we continue to see strong momentum in the business.
Bradley S. Vizi: Energy services closed the first quarter of 2024 with strong results delivering double digit forecasted revenue and EBITDA increases.
Bradley S. Vizi: Client development continues to be an area of investment for us, given the technical success of several marquee projects within the industry. To say it differently, widely followed technical success is conducive to growth, and we are highly focused on leveraging our momentum in the marketplace. During Q1, energy services invested in client development in the Northeast and Midwestern United States, Puerto Rico, and Europe, building partnerships with the net for the Net Zero Transition and Modernization of the Electrical Grid.
Bradley S. Vizi: Client development continues to be an area of investment for us given the technical success of several marquee projects within the industry.
Bradley S. Vizi: To say it differently.
Bradley S. Vizi: Widely followed technical success is conducive to growth and we are highly focused on leveraging our momentum in the marketplace.
Bradley S. Vizi: During Q1 energy services invested in client development in the northeast and Midwestern United States, Puerto Rico, and Europe building partnerships with the Mets.
Bradley S. Vizi: For the net zero transition and modernization of the electrical grid.
Bradley S. Vizi: Yeah.
Bradley S. Vizi: Also of note, organizational changes have strengthened the ETC and transmission line business to capitalize on increasing market demand. We believe that the foundation is set for energy services to provide a material economic contribution to RCM in 2024 and well into the future. Within our process industrial group, RCM Thermokinetics continued execution efforts for multiple equipment contracts in the zero carbon chemical manufacturing sector. The Thermokinetics Office also won new engineering business in Q1 related to an ethanol plant expansion and optimization study.
Bradley S. Vizi: Also of note organizational changes have strengthened E T C and transmission line business to capitalize on increasing market demand.
Bradley S. Vizi: We believe that the foundation is set for energy services to provide immaterial economic contribution to RCM in 2024 and well into the future.
Bradley S. Vizi: Within our process industrial group RCM thermal kinetics continued execution efforts for multiple equipment contracts and the zero carbon chemical manufacturing sector.
Bradley S. Vizi: The thermal kinetics office has also won new engineering business in Q1 related to ethanol plant expansion and optimization studies.
Bradley S. Vizi: The thermal kinetics team feels that this is a strategic area of focus as production plants try to reduce their carbon footprint and are incentivized by state and federal governments to do so. In addition, a large engineering order related to an SAF production plant was also received in Q1. The new Thermokinetics Testing Lab was at 100% utilization through Q1 2024.
Bradley S. Vizi: The thermal kinetics team feels that this is a strategic area of focus as production plants try to reduce their carbon footprint and are incentivized by state and federal governments to do so.
Bradley S. Vizi: In addition, a large engineering order related to an S. AF production plant was also received in Q1.
Bradley S. Vizi: The new thermal kinetics testing lab was at 100% utilization through Q1 2024.
Bradley S. Vizi: Client interest in the facility continues, and we anticipate utilization of the lab will continue through 2024. The team remains focused on the continuation of its emergence as a market leader in responsible and sustainable chemical process design. The Aerospace and Defense Group had mixed results in Q1 2024 due to a low workload in our aftermarket segment during January and February. [inaudible] You can go for the division still grew year over year.
Bradley S. Vizi: Client interest in the facility continues and we anticipate utilization of the lab will continue through 2024.
Bradley S. Vizi: The team remains focused on the continuation of its emergence as a market leader in responsible and sustainable chemical process design.
Bradley S. Vizi: The aerospace and Defense group had mixed results in Q1 2020 for future AWOL and workload in our aftermarket segment during January and February.
Bradley S. Vizi: However.
Bradley S. Vizi: EBITDA for the division still grew year over year.
Bradley S. Vizi: The engineering piece of the business is thriving, executing with three new clients in Q1 2024. There are RFIs, RFQs, and MSAs in the process. Most notably, engineering and aftermarket services with two new OEMs in vertical lift and land vehicles, three new tier one manufacturers in power supplies, inverters, electronics, and aerospace components, and one new air mobility client throughout the Aerospace and Defense Division by the end of Q2 2024. Our strategy to continue to drive and expand our model-based expertise, digital conversion, and software and systems expertise throughout the organization and customer base has resulted in continuing inquiries and partnership opportunities throughout the quarter.
Bradley S. Vizi: The engineering piece of the business, describing executing with three new clients in Q1 2024.
Bradley S. Vizi: They're our RFID, RF queues and Msas and process.
Bradley S. Vizi: Most including engineering and aftermarket services with two new Oems and vertical lift and land vehicles, three new tier one manufacturers and power supplies Inverters electronics and aerospace components.
Bradley S. Vizi: Okay, and one new air mobility client throughout the aerospace and defense Division by the end of Q2 'twenty 'twenty four.
Bradley S. Vizi: Our strategy to continue to drive and expand our model based expertise digital conversion and software and systems expertise throughout the organization and customer base has resulted in continuing inquiries and partner.
Bradley S. Vizi: Opportunities throughout the quarter.
Bradley S. Vizi: Our new service offering, which revolves around solving quality and production issues within our client's supply bases, continues to grow with interest and engagement throughout our client base. This expertise is also attracting new client interest. We will continue to expand our reach with these clients and prioritize these engagements in 2024. Our project and program management additions in our engineering and aftermarket sectors are instituting welcomed changes with the entire team excited and engaged. We have already seen quantifiable results from the Program Management Office stemming from the team's exceptional effort. I will return the call to Kevin to discuss the Q1 2024 financial results in more detail.
Bradley S. Vizi: Our new service offering which revolves around solving quality and production issues within our clients supply basis continues to grow with interest and engagement throughout our client base.
Bradley S. Vizi: This expertise is also attracting new client interest.
Kevin: We will continue to expand our reach with these clients and prioritize these engagements in 2024.
Bradley S. Vizi: Our project and program management additions and our engineering and aftermarket sectors are instituting welcomed the changes with the entire team excited and engaged.
Kevin: We have already seen quantifiable results from the program management office stemming from the team's exceptional efforts.
Bradley S. Vizi: I will return the call to Kevin to discuss the Q1 2024 financial results in more detail.
Kevin D. Miller: Thank you, Brad. Regarding our consolidated results, consolidated gross profit for the first quarter of 2024 grew by 7.1% as compared to 2023, from $19.0 million to $20.4 million. Adjusted EBITDA for the first quarter grew 11.1%, from $6.1 million to $6.8 million. Adjusted diluted EPS for the first quarter of 2024 grew by 30.4%, from $0.41 to $0.53. As for segment performance in the first quarter of 2024, engineering gross profit grew by 27.1%, and Life Sciences, Data, and Solutions gross profit grew by 7.9%. Healthcare gross profit was down 2.4%.
Kevin: Thank you Brad regarding our consolidated results.
Kevin D. Miller: Holiday to gross profit for the first quarter of 2024 grew by seven 1% as compared to 2023 from 19.0 million to $20 4 million adjusted EBITDA for the first quarter grew 11, 1% from $6 1 million to $6 8 million adjusted diluted EPS.
Speaker Change: Yes for the quarter for the first quarter of 2024 grew by 34% from 41 to 53 cents per.
Kevin D. Miller: For segment performance in the first quarter of 2020 for engineering gross profit grew by 27, 1% life Sciences data and solutions gross profit grew by seven 9% health care gross profit was down two 4%.
Kevin D. Miller: However, if we remove the impact of COVID from the comparable first quarter in 2023, we estimate that 2024 revenue grew by about 7.3%. If we remove the impact of COVID and the deliberate reduction in services to a large, long-term and slow-paying long-term care facility, we estimate that 2024 revenue grew by about 12.8%. School revenue of $31.9 million for the first quarter of 2024 grew by 19.1% after removing COVID revenue from the first quarter of 2020.
Kevin D. Miller: Over if we remove the impact of Covid from the comparable first quarter in 2023, we estimate the 'twenty 'twenty four revenue grew by about seven 3%.
Kevin D. Miller: If you remove the impact of Covid in a deliberate reduction in services to a large longtime and slow paying long term care facility. We estimate the 'twenty 'twenty four grew by about 12.8% school revenue of $31 9 million for the first quarter of 2024 grew by nine.
Kevin D. Miller: T 0.1% after removing COVID-19 revenue from the first quarter of 2023.
Kevin D. Miller: As for the remainder of fiscal 2024, we continue to anticipate that we will see at least low double-digit consolidated adjusted EBITDA growth as compared to fiscal 2023, with a similar quarterly cadence to EBITDA when compared to fiscal 2024. We also believe that there are significant upsides to the fourth quarter with such a robust school pipeline. Starting in the 2024-2025 school year. This concludes our prepared remarks. At this time, we will open the call for questions.
Kevin D. Miller: For the remainder of fiscal 2024, we continue to anticipate that we will see at least low double digit consolidated adjusted EBITDA growth as compared to fiscal 2023 with a similar quarterly cadence to EBITDA when compared to fiscal 2023. We also believe that there is significant.
Kevin D. Miller: Upside to the fourth quarter with such a robust school pipeline.
Kevin D. Miller: Starting in the 'twenty 'twenty four 2025 school year. This concludes our prepared remarks at this time, we will open the call for questions.
Operator: Yes, and with that, ladies and gentlemen, please press star one on your telephone keypad if you would like to ask a question that is star one on your telephone keypad if you would like to ask a question. And first up, it looks like we have Bill Sutherland. Your line is now open.
Speaker Change: Yes, and with that ladies and gentlemen, Please press star one on your telephone keypad, if you would like to ask a question.
William Sutherland: At Star one on your telephone keypad, if you would like to ask a question.
Operator: And our first stop it looks like we had bill Sutherland. Your line is now open.
William Sutherland: Thank you.
William Sutherland: Hello, gentlemen, nice quarter and very impressive in terms of some of the new business you've got lined up here, the health care side. You have five districts that are onboarded, so they will impact the 24-25 year, right, Kevin? So far.
William Sutherland: Hello, gentlemen.
William Sutherland: Nice quarter, and a very impressive in terms of.
William Sutherland: Some of the new business, you've got lined up here the health care side.
William Sutherland:
William Sutherland: Is you've got.
William Sutherland: Five districts that are on boarded so they will impact the 'twenty four 'twenty five year right Kevin.
William Sutherland: So far.
Kevin: Yeah, I didn't did might be my phone.
Unknown Attendee: It might be my phone. I didn't quite hear it. Yeah.
William Sutherland: Didn't quite hear it.
Bradley S. Vizi: Yeah, Bill, I'll go ahead and take that one. I think Kevin might have been on mute. We're having audio difficulties here.
Unknown Attendee: Yes, Bill I'll go ahead, and take that one I think Kevin might've been on mute.
Bradley S. Vizi: Sure.
Speaker Change: Or have any audio difficulty here.
Bradley S. Vizi: We have five that we're highly confident on already executed and quite a few in the pipeline that are very much advanced. I think the figure is 11 or so that are pending execution and roughly the same amount that we believe should get there. So I think, in aggregate, something around the 30 mark that we think has quite a bit of potential.
Bill: We have five that where we're highly confident on already executed.
Bradley S. Vizi: And you know quite a few in the pipeline that are very much advanced I forgot.
Bradley S. Vizi: Figure was 11 or so.
Bradley S. Vizi: Better planning execution and and I'll.
Bradley S. Vizi: Roughly the same amount that we would.
Bradley S. Vizi: We believe you should get there so I think in aggregate something around.
Bradley S. Vizi: Uh huh.
Bradley S. Vizi: The 30.
Bradley S. Vizi: Mark that we think is quite a bit of potential.
William Sutherland: Hey, Brad, while you've got the mic, can you just give a little more color on the, I think you said expanding services. This is LifeSci, expanding services in the HCM part of it.
Speaker Change: Yeah, Brett you've got the mic.
Brad: Can you just provide a little more color on the I think you said expanding services. This is lifestyle expanding services in HCM part of it.
William Sutherland: Mhm.
Bradley S. Vizi: Yeah, so two of our strongest practices in that business, or in that division, are life sciences and HCM, as you are aware. And we've had quite a bit of success in HCM the last couple of years and have been embraced by some of our clients here. And naturally, when that happens, when you are successful with one particular need, you're at the front of the queue with respect to ancillary opportunities and opportunities to build on the business that you worked with them to build.
Brad: Yeah. So.
Bradley S. Vizi: Two of our strongest practices in that business or in that division are our life Sciences and HCM as Youre aware.
Bradley S. Vizi: And we've had quite a bit of success in HCM. The last couple of years.
Bradley S. Vizi: <unk> been embraced.
Bradley S. Vizi: But what are some of our clients here and naturally when that happens.
Bradley S. Vizi: When you.
Bradley S. Vizi: Our success with one particular need.
Bradley S. Vizi: You're at the front of the queue with respect to you know.
Bradley S. Vizi: Ancillary opportunities right and opportunities to build on the business that you worked with them to build.
Bradley S. Vizi: So it's very much along the lines of what you look for in terms of identifying strategic clients, putting our energy into them, doing well for them, and then, ultimately, that leading to incremental opportunities. So, again, benefiting from our growth in terms of our ability to deliver value to them, as well as their growth. And that particular market is very robust.
Bradley S. Vizi: So it's very much along the lines of what you look for in terms of.
Bradley S. Vizi: To find strategic clients, putting our energy entered them doing well for them and then ultimately that leading to incremental opportunities. So again benefiting from.
Bradley S. Vizi: Our growth rate in terms of our ability to deliver value to them as well as their growth and that particular.
Bradley S. Vizi: Where market is very robust.
Bradley S. Vizi: Okay.
William Sutherland: And in engineering, just one other one. You mentioned aerospace, picking up, coming out of one queue. Is this a sort of a slow ramp, do you think, or because you did mention three new clients? starting up to try to get a feel for the cadence for Aero this year.
Bradley S. Vizi: And in engineering, just one other one.
William Sutherland: You mentioned aerospace you know kicking up.
William Sutherland: Coming out of one Q.
William Sutherland: Is this a sort of a slow ramp do you think or you because you had mentioned three new clients.
William Sutherland: Starting up just trying to get a feel of the cadence for arrow.
William Sutherland: This year.
Unknown Attendee: Kevin, do you want to speak to CADIS, or do you want me to take this one?
William Sutherland: Kevin do you want to speak to cadence you want me to take this one.
Unknown Attendee: Yeah.
Kevin: Please go ahead.
Kevin: Yeah Yeah.
Kevin: Yeah on the aerospace yeah, yeah on the aerospace front.
Unknown Attendee: That group has done quite a bit of work in terms of optimizing their business mix and positioning the portfolio for the long term.
Kevin: Yeah, basically to deliver good returns and higher margins.
Speaker Change: Making good strides on the engineering front, Oh really solid success as I alluded to in the prepared remarks.
Speaker Change: Aftermarket it was a bit of a wall.
Kevin: It is picking up.
Kevin: Yeah, particularly with some larger P o's.
Speaker Change: That are are crystallizing this quarter.
Kevin: As well as new clients that started small naturally and again as we continue to deliver for them and gain their trust they reward us with more work. So when you look at the combination of those two we have much higher expectations in the second half.
Kevin: What we saw in the first four months of the year.
William Sutherland: And just one more. Kevin, you take a victory lap here on the cash in the quarter, and you mentioned continued improvement. Is there any kind of dimension you want to put on that?
Speaker Change: And just one more Kevin.
William Sutherland: You take a victory lap here on the cash in the quarter.
William Sutherland: You mentioned continued improvement is there any.
William Sutherland: Yes.
William Sutherland: You mentioned you want to put on that.
Kevin D. Miller: Well, we, you know, quite frankly, we expect Q2 and Q3 to be better than Q1 in terms of cash flow from operations. Transcripts provided by Transcription Outsourcing, LLC.
Kevin: Well, we you know.
William Sutherland: Quite frankly, you know we.
Kevin: We expect Q2 and Q3 to be better than Q1 in terms of the cash flow from operations.
Kevin: How much better remains to be seen but but I'll be very disappointed. If we don't have you know when you add up Q2, and Q3 and I don't care. If it you know a lot of it comes in Q3 versus Q2 or whatever but when you add up those two.
Speaker Change: You know they should be a lot more than two times, our Q1 and if if if.
Kevin: If not significantly higher I'm going to be very disappointed with the with the cash flow.
Kevin D. Miller: And it's not only timing; you're also just making progress in terms of some of the working cap impacts.
Kevin: So again, it's not it's just not time and it's not only timing you also just making progress in terms of some of the working cap.
Kevin D. Miller: It's everything, you know, it's everything it's going to be, especially, you know, after considering seasonality, managing the working capital right up and down the balance. Obviously, the biggest one is receivables, and we expect our receivables to be down at the end of Q2, and from where they ended in Q1, and down even further at the end of Q3. Based on what I'm seeing in the receivables right now, we're making some progress in terms of getting them to a level that is more acceptable than where they are today.
Kevin D. Miller: <unk>.
Kevin D. Miller: It's everything you know its everything its it's gonna be obviously it starts with having you know.
Kevin D. Miller: Good good net income.
Kevin D. Miller: Especially after considering seasonality are managing the working capital right up and down the balance sheet.
Kevin D. Miller: Obviously, the biggest one is receivables and we expect our receivables to be down at the end of Q2 and from.
Kevin D. Miller: From where they ended in Q1 and down even further at the end of Q3.
Kevin D. Miller: Based on what what I'm seeing you know in the receivables right now.
Kevin D. Miller: We're making some progress in terms of getting them too.
Kevin D. Miller: A level that is more acceptable than where they are today.
Unknown Attendee: Yeah, remind us about, well, first off, what was the DSL on the course?
Speaker Change: Can you remind us about.
Unknown Attendee: First off what was the DSO in the quarter, and then remind us kind of where you want to get.
Kevin D. Miller: Well, it's 93. In the long term, I'd like to be in the low 70s.
Speaker Change: Well, it's it's 93.
Kevin D. Miller: Long term I'd like to be in the low seventies that may be a little too optimistic over the next few quarters, but we.
Kevin D. Miller: That may be a little too optimistic for the next two quarters. But we need to first, you know, get it to 85, and then get it to 80, and then get it to 75. And, you know, we're just going to keep working to get it down.
Kevin D. Miller: We need to first you know does it get to 85, and then get it to 80, and then get it to 75 and you know, we're just going to keep working to get it down.
Kevin D. Miller: Obviously, there are always factors that influence that, you know, sometimes we do take on, you know, high-margin clients that maybe have a little bit slower profile. And, you know, sometimes when you're working with, you know, like, big companies, you know, well, school districts, you know, school districts are interesting, you know, they pay quickly. But sometimes there are just a lot of administrative hoops you need to jump through. Right?
Kevin D. Miller: Obviously, there are always factors that influence that sometimes we do take on you know high margin clients that maybe have a little bit slower profile and you know sometimes when you're working with like you know like big.
Kevin D. Miller: Big Conference.
Kevin D. Miller: Yeah, well at school districts School districts are interesting you know they pay quickly, but sometimes there are just a lot of administrative hoops you need to jump through.
Kevin D. Miller: So that causes some significant fluctuation. We've seen quarters where our school DSOs are incredibly clean, and then we've seen other quarters where they're just a little bit higher. But the great thing about the schools is that they pay, and they pay quickly once they approve invoices. And once the POs get all tied up in a bow and get on somebody's desk, the schools historically pay pretty well. It's just up to us to do a little bit better job of getting through some of the administrative sort of traps that are out there. Right, but yeah, we're excited because, you know, I can see with our two largest clients that we're going to be in really, really good shape on those receivables over the next two quarters.
Kevin D. Miller: That causes some significant fluctuations.
Kevin D. Miller: You know and we've seen quarters, where our school dsos are incredibly pristine and then we've seen other quarters, where there just a little bit higher but you know the great thing about the schools is yeah.
Kevin D. Miller: They pay and they pay.
Kevin D. Miller: Once they have once they approve invoices.
Kevin D. Miller: And once the polls get all tied up in a bow and then on somebody's desk.
Kevin D. Miller: For the schools historically paid pretty well, it's just up to us to do a little bit better job of getting through some of the administrative.
Kevin D. Miller: Sort of trapped within are out there right.
Kevin D. Miller: But but yeah. We're excited because our you know I can see on our two largest clients that we're gonna be in really really good shape.
Kevin D. Miller: On those receivables over the next two quarters.
William Sutherland: Sounds good. Thanks, guys.
Speaker Change: Sounds good thanks, guys.
Operator: Okay, next up we have Alex Rygiel. Your line is now open. Alex, your line is now open. Perhaps you have us on mute.
Speaker Change: Oh, okay.
William Sutherland: Next definitely have Alex Rigel. Your line is now open.
Alexander John Rygiel: I did. I apologize for that.
Alexander John Rygiel: Alex Your line is now open perhaps you have us on mute.
Alexander John Rygiel: Brad and Kevin, nice quarter here. Quick question as it relates to the robust school pipeline and the potential for the fourth quarter upside. When do you think you're going to have good visibility on this?
Alexander John Rygiel: I did I apologize for that.
Alexander John Rygiel: [laughter], Brad and Kevin a nice quarter here.
Alexander John Rygiel: Quick question as it relates to the robust school pipeline and the potential for the fourth quarter upside when do you think you're going to have good visibility on this.
Bradley S. Vizi: Well, it will certainly be better the next time we talk in early, and we'll have better visibility in terms of the contracts that we have in place, right? We'll probably have a feel for some of them in terms of what kind of revenue they're going to generate out of the chute. And then, obviously, we won't really have a feel for how much revenue all of the schools are going to generate until we get to sometime into September or October.
Speaker Change: Well it will certainly be better the next time, we talk in or in early August.
Bradley S. Vizi:
Bradley S. Vizi: And we'll have better visibility in terms of the contracts that we have in place right. We will probably have a feel for some of them in terms of what kind of revenue that we're going to generate you know out of the chute.
Bradley S. Vizi: And then.
Speaker Change: We see you.
Bradley S. Vizi: We won't really have a feel for you know how much revenue all of the schools are going to generate until we get you know kind of like sometime into September October because it just you know some some.
Bradley S. Vizi: Sometimes, you know, schools kind of surprise you in terms of when you first ramp up, sometimes in a good way and sometimes in a bad way. But, you know, we've got so many new schools that we think we're going to have for next year that, you know, Brad and I are sitting here going, well, at least a few of them are going to pop up and come in as pretty good clients, you know, right from day one.
Bradley S. Vizi: Times are the you know the <unk>.
Bradley S. Vizi: Schools kind of surprised you in terms of you know when you first ramp up with them.
Bradley S. Vizi: Times in a good way and sometimes in a bad one but you know we've got so many new schools that we think we're going to have for next year that you know, Brad and I are sitting here going well.
Bradley S. Vizi: And then the others will work, you know, to get them to be significant clients later on in the year or, you know, 25, 26. But, you know, we've not had a pipeline like this of new schools that I can, that I can remember, frankly, ever in history. So it's exciting.
Bradley S. Vizi: At least a few of them are going to pop and come in as pretty good clients.
Bradley S. Vizi: Right from day, one and then the others will work to get them to be significant clients later on in the year or you know 'twenty five 'twenty six but you.
Bradley S. Vizi: We've not had a pipeline like this that you know of new schools that I can and I can remember frankly ever in the history of your company. So let's.
Bradley S. Vizi: Exciting.
Alexander John Rygiel: And when you sign up and execute on these new contracts with the schools, can you address if there's any sort of margin headwind, maybe in the first 90 days of that new contract, or if there's a notable receivable headwind?
Bradley S. Vizi: And when you sign up and.
Alexander John Rygiel: And execute on these new contracts with the schools.
Alexander John Rygiel: Can you address if there's any sort of margin headwind.
Alexander John Rygiel: Maybe in the first 90 days of that new contract or.
Alexander John Rygiel: If theres a notable receivables headwind.
Kevin D. Miller: Well, certainly, I certainly don't feel like there's any receivables headwinds. Sometimes when we get into a new school client, every school, you know, has... can have, like, quirky administrative procedures in terms of getting POs approved and getting invoices approved and getting timesheets approved and IEPs approved. So sometimes, you know, when you find that it takes a little while to get the... cadence down of the administrative burdens that are at a particular school.
Speaker Change: Well certainly.
Speaker Change: Certainly don't feel like there's any receivables headwinds, sometimes when we get into a new school, calling it.
Kevin D. Miller: Every school you know has.
Kevin D. Miller: Have like quirky administrative procedures in terms of getting <unk> approved and getting invoices approved and getting time sheets approved in IEPS approved so.
Kevin D. Miller: Sometimes you know when you find when it takes a little while to get the.
Kevin D. Miller: The cadence down of the administrative burdens that are at a particular school because sometimes those slow paying in the beginning until we sort of really you know work through everything that they need.
Kevin D. Miller: So sometimes there's slow paying in the beginning until we sort of really, you know, work through everything that they need. But we typically, you know, the schools always pay. And really, there's no one school where they're going to take a long time to pay. The only time they take a long time to pay is if there's some administrative stuff you need to get through. So that doesn't concern me at all. [inaudible] to really impress them and get the contract rolling, but we're not typically... Right now, we're not really seeing a lot of headwinds as far as the margins are concerned.
Kevin D. Miller: But we typically you know the school always Peng.
Kevin D. Miller: And really there's no one school, where like Theyre going to take a long time to pay the only time they take a long time to pay as if if theres. Some administrative stuff you need to get through so that doesn't that doesn't concern me at all.
Kevin D. Miller: But in terms of the you know revenue you know you just don't know.
Kevin D. Miller: For sure until you get in there and start work in it and you don't really know the gross margin until you get in there and start working as well, but we believe that you know the schools that we're gonna be adding should all have pretty similar margin profile to what we have right now and.
Kevin D. Miller: And we don't see that.
Kevin D. Miller: Sometimes you might need to put a few people in there at a little bit lower margin to really impress them and get them and get the contract rolling.
Kevin D. Miller: But we're not typically right now we're not really seeing a lot of headwinds as far as the margins are concerned for schools.
Alexander John Rygiel: And then more broadly across all three of your business segments, are there any other kind of sizable contracts that are nearing conclusion or you're contemplating or have recently sort of walked away from that are worth discussing?
Kevin D. Miller: And then more broadly across all three of your business segments. There any other kind of sizable contracts that are nearing.
Alexander John Rygiel: Nearing conclusion, or you are contemplating or have recently sort of walked away from that are worth discussing.
Kevin D. Miller: Well, there is a large healthcare client that Brad mentioned that's a long-term care facility that, you know, is mostly funded by Medicare. Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker, but you know it just doesn't it just doesn't make sense to service them at the level that we were servicing them in 2022 and 2023 because of the, you know, because we just don't want that much capital tied up in one client.
Speaker Change: Well there is a large health care client that Brad mentioned, you know that's a long term care facility that you know it was mostly funded by Medicaid.
Kevin D. Miller: That just is really slow pain, we always get paid.
Kevin D. Miller: By now you know Theyre 20, plus your client we've never had a write off but you know it just doesn't it.
Kevin D. Miller: It just doesn't make sense to service them at the level that we were servicing them in 2022 and 2023 because of the because we just don't want that much capital tied up in one client.
Kevin D. Miller: It's not really a risk in terms of payment, but it's just a pure capital allocation decision that Brad and I decided we've got to sort of slow this down a little bit. And it hurts in the short term, but it's the right decision in the long term. But as far as, you know, major contracts, I mean, we don't really talk too much about that because, you know, we just don't want to talk about a big contract.
Kevin D. Miller: Not really a risk in terms of payment, but it just it's just a pure capital allocation decision that Brad and I decided we got a sort of slow this down a little bit and it hurts in the short term, but it's the right decision long term.
Kevin D. Miller: We think they're going to win and then not win it. But, you know, the pipeline and the backlog is strong across, across, you know, across all divisions. And, Brad, I don't know if you want to add something to that, but...
Kevin D. Miller: But as far as you know major contracts I mean, you know, we don't really talk too much about that because.
Kevin D. Miller: No.
Brad: We just don't want to talk about a big contract, we simply don't know when theyre not win it.
Brad: But the pipeline and the backlog is strong across across you know across all the divisions.
Kevin D. Miller: And Brad I don't know, if you want to add something to that but.
Bradley S. Vizi: Yeah, I know, Alex, to put a fine point on it, I think that there's always going to be some of our project orientation, you know, to the business, you know, but with respect to potential, you know, headwinds of projects, basically kind of, you know, ending, there's nothing really on the horizon, you know, that we're aware of that, you know, we're not, we don't think we we're going to grow right through, you know, just the biggest headwind, as we've mentioned, Kevin, reaffirmed, was in healthcare, and we think we're going to be largely through that at the end of this quarter. Unknown Speaker
Brad: Yes, I know.
Brad: Alex Let's put a fine point on it I think that there's always going to be some of our project orientation to the business.
Bradley S. Vizi: But with respect to potential headwinds of projects basically kind of ending.
Bradley S. Vizi: Ending theres nothing really.
Bradley S. Vizi: On the horizon.
Bradley S. Vizi: We're aware of that you know we're not we don't think we're gonna grow right through it.
Bradley S. Vizi: The biggest headwind is as we mentioned and Kevin.
Bradley S. Vizi: Reaffirmed it wasn't health care I don't think we're gonna be largely through that at the end of this quarter.
Speaker Change: You're not going to end with the capital allocation question here clearly your cash flow outlook is very positive balance sheet is really strong.
Alexander John Rygiel: And I'm going to end with the capital allocation question here. Clearly, your cash flow outlook is very positive, and your balance sheet is really strong. I don't believe you bought any shares back in the quarter, but... Could you talk about how you're thinking about prioritizing buybacks versus acquisitions?
Alexander John Rygiel: I believe you bought any shares back in the quarter, but could.
Alexander John Rygiel: Could you talk about how you're thinking about prioritizing buybacks versus acquisitions.
Bradley S. Vizi: Yeah, just to be clear on that, Alex, and you'll see when the queue is filed here, we bought a couple hundred thousand shares in the quarter, you know, and Yeah, and and look, you know, As the cash starts to come in here over the next couple of quarters, we should pretty much be de-levered at that point, or we're getting really close to it. And look, we're going to be opportunistic, and we're just fine and comfortable carrying around a little bit of cash for a period of time.
Speaker Change: Yeah, just just to be clear on that and you'll see when the Q is filed here we bought a couple of hundred thousand insurance in the quarter.
Bradley S. Vizi: You know in Q2.
Bradley S. Vizi: Yeah.
Bradley S. Vizi: And look.
Bradley S. Vizi: No.
Bradley S. Vizi: As the cash starts to come in here over the next couple of quarters.
Bradley S. Vizi: And we should pretty much be delever.
Bradley S. Vizi: At that point or are getting really close to to it and what we're gonna be opportunistic and we're just fine and comfortable.
Bradley S. Vizi: Carrying around a little bit of cash for a period of time and when the right opportunity presents itself that makes our return profile.
Bradley S. Vizi: And when the right opportunity presents itself that meets our return profile, we're going to be quick to move. That being said, we are looking at a couple of bolt-ons we're very intrigued by that we think that we can add significant value to. And the chemistry is certainly right with the sellers. So when they fit that profile with respect to a technical capability in a very attractive growing segment of the market, that we can put our heft behind in terms of sales horsepower, recruiting horsepower, and everything else that comes with the platform.
Bradley S. Vizi: Going to court to move.
Bradley S. Vizi: That being said you know we are looking at a couple of bolt ons and I'm very intrigued by.
Bradley S. Vizi: That we think that we can add significant value to <unk>.
Bradley S. Vizi: And now the chemistry of certainly right.
Bradley S. Vizi: Yeah with the sellers.
Bradley S. Vizi: So when they fit that profile with respect to you know a technical capability and a very attractive and growing segment of the market.
Bradley S. Vizi: That we can put our half.
Bradley S. Vizi: Behind it.
Bradley S. Vizi: In terms of.
Bradley S. Vizi: Salesforce power recruiting horsepower.
Bradley S. Vizi: And everything else that comes with the platform. So.
Alexander John Rygiel: We're a little closer to that, but perhaps there's more to talk about in August on one of those. Great. Thank you very much.
Bradley S. Vizi: We're a little closer.
Bradley S. Vizi: But.
Alexander John Rygiel: Perhaps there is more to talk about in August.
Alexander John Rygiel: Okay.
Alexander John Rygiel: Great. Thank you very much. A nice quarter.
Speaker Change: That's great. Thank you very much let's go to <unk>.
Speaker Change: Thank you.
Alexander John Rygiel: Yeah.
Operator: Oh, I'm so sorry. I was on mute there. Ladies and gentlemen, just as a quick reminder, you can press star 1 on your telephone keypad if you would like to ask a question. Again, that is star 1 on your telephone keypad if you would like to join the question queue. But next up, we have Ben Andrews.
Speaker Change: Oh I'm, so sorry, I was on mute there ladies.
Operator: And gentlemen, just as a quick reminder, you can press star one on your telephone keypad. If you would like to ask a question again that is star one on your telephone keypad. If you would like to join the question queue, but.
Ben Andrews: The next step we have Ben Andrew.
Ben Andrews: Hey, good afternoon.
Ben Andrews: Good afternoon. I have two questions for you.
Ben Andrews: Two questions. Please.
Ben Andrews: When I look at the healthcare year over year, it looks like gross margin went down a little bit. So the accounts that you're calling that are slow paying, they're also high-margin businesses.
Ben Andrews: When I look at the health care year over year, it looks like a <unk>.
Ben Andrews: Gross margin went down a little bit so the.
Ben Andrews: The accounts that you're calling that are slow paying.
Ben Andrews: They're also high margin business.
Kevin D. Miller: No, they're right around, you know, right around the normal margin. The main reason for the downturn in the margin, frankly, was we had a pretty big increase in some of our unemployment. Unknown Speaker in New York. That's sort of the biggest hit that we took in Q1. We had a pretty big increase. Unknown Speaker That will run through. And then you just have normal noise and mix shift in the margin, but you know that you're going to see, but there's nothing other than that that issue in Q1 that I would say is, you know, impacting the year over year comparison. And keep in mind that Q1 of last year was a pretty high margin, you know, compared to historic margin, and then
Ben Andrews: No they're right around right around the normal margin.
Kevin D. Miller: Yeah.
Kevin D. Miller: The main reason for the downturn in the margin frankly was we had a pretty big increase in some of our employment.
Kevin D. Miller: Taxes in New York, that's sort of the biggest hit that we took in Q1.
Kevin D. Miller: We had a pretty big increase.
Kevin D. Miller: That will run through and then you just have normal noise and mix shift in the margin, but you know that youre going to see but there's there's nothing.
Kevin D. Miller: Other than that that issue in Q1 that I would say is you know.
Kevin D. Miller: Impacting the year over year comparison keep in mind that Q1 of last year was pretty high margin.
Kevin D. Miller: Impaired to its historic margins.
Kevin D. Miller: Okay and then this.
Ben Andrews: Unknown Speaker And then this might be intertwined with that question as well. But regarding accounts receivable, for a long time now, many years, it seems that you guys have it together. And then it spins out of control; then you get it together. And then it, you know, spins out of control. Is that indicative of that client, or is that indicative of the, you know, the revenue split on the type of clients you have? Why is that?
Speaker Change: Might be intertwined with my question as well, but.
Ben Andrews: Regarding accounts receivable.
Ben Andrews: For a long time now many years it seems that you guys get it together and then it spins out of control and you get it together and then it spins.
Ben Andrews: Spins out of control.
Ben Andrews: Is that indicative of that client or is that indicative of the you know the revenue split on on the type of clients you have a why is that.
Kevin D. Miller: Yeah, I think that, you know, the best way I can explain it, Ben, is that, particularly in the schools, we do run into some administrative issues from time to time, especially with our biggest clients. Unknown Speaker And, you know, we've had a lot of quarters in a row, excluding the last couple where we had outstanding DSOs for those two clients, and we'll get it back, you know, to a better level.
Speaker Change: Yeah, I think the.
Ben Andrews: That's the way I can explain it Ben is just there's just.
Kevin D. Miller: Particularly in the schools, we do run into some administrative issues from time to time, especially with our biggest clients.
Kevin D. Miller: And then there's always going to be, you know, noise in terms of some of the clients that you're working with, especially on the project side, right? Because, you know, a lot of times, you can't get paid until the project's finished.
Kevin D. Miller: And you know we've had a lot of quarters in a row you know excluding the last couple of where we had outstanding DSO.
Kevin D. Miller: Dsos for those two clients and we will get back to a better level and then there's always going to be you know noise in terms of.
Kevin D. Miller: In terms of some of the clients that youre working with in terms of especially on the project side right because.
Kevin D. Miller: A lot of times you can't get paid until the project finished theres certain milestones built in.
Kevin D. Miller: There are certain milestones built in. So there's always going to be, you know, some fluctuations in terms of, you know, the AR. I think that if you look, if you sort of looked at this company over like a 12-year period, we don't have some of the issues that we had in the prior years in terms of some of the... I don't want to use the word systemic, but we had some issues where we just were not as diligent and not as really focused on AR as we should be, to be really honest.
Kevin D. Miller: So theres always going to be.
Kevin D. Miller: You know some fluctuations in terms of you know in terms of the E. R. I.
Kevin D. Miller: Think that if you look if you sort of looked at this company over like a 12 year period.
Kevin D. Miller: We don't have some of the issues that we've had in the prior years in terms of like some of the.
Kevin D. Miller: Don't want to use the word systemic but there was we had some issues where we just were not as diligent.
Kevin D. Miller: And not as really focused on a ours is we shouldn't be it to be to be really honest and I think that discipline and that focus is 100% clear today and it's been here for a while and I don't think that if you look out over the next three or four years that you're going to see the kind of fluctuations that you've seen.
Kevin D. Miller: And I think that discipline and that focus are 100% here today, and it's been here for a while. And I don't think that if you look out over the next three or four years, you're going to see the kind of fluctuations that you saw, you know, five years ago. But we do have a couple of, you know, a couple of areas that we need to work on right now, and that's what we're focused on.
Kevin D. Miller: <unk> you know five years ago.
Kevin D. Miller: But we do have a couple of you know a couple of areas that we need to work on right now and that's what we're focused on.
Kevin D. Miller: Okay, well, that's good to hear. Hopefully, you know, we'll see that going forward Kind of an ongoing lower DSO Yeah, and we will absolutely get them down. The only thing I would add to that also is, you know, we're very very focused on Obviously cash flow return on equity, you know Like so if we have a client that we know is going to be 90 days or 120 and a lot of these big companies You know, it's 90 120 or you know, there's eight companies behind us that will take the business We're pretty careful about how we select those companies, and we also need to make sure that if we're going to have high DSOs of the client, that the juice is worth the squeeze, right?
Speaker Change: Okay, well, that's good to hear hopefully.
Kevin D. Miller: We will see that going forward.
Kevin D. Miller: Oh got kind of an ongoing lower DSO, yeah, we will absolutely get them down the only thing I would add to that also as you know we're very very focused on obviously cash flow return on equity you know like so if we have a client that we know is going to be 90 days.
Kevin D. Miller: Our 120 and a lot of these big companies.
Kevin D. Miller: You know, it's 91 funny or you know those eight companies behind this that will take the business.
Kevin D. Miller: We're pretty careful about how we about how we select those companies and we also need to make sure that you know if we're going to have high dsos of the client.
Kevin D. Miller: You know the the juice is worth the squeeze right, we're going to make sure that we get good margin from that client to make sure that that capital allocation is worthwhile. So we spent a lot of time looking at this and we spent a lot of time thinking about it very very carefully.
Kevin D. Miller: We're going to make sure that we get a good margin from that client to make sure that that capital allocation is worthwhile. So we spent a lot of time looking at this, and we spent a lot of time thinking about it very, very carefully.
Ben Andrews: Unknown Speaker Right. And that's why I'm asking this, because it clearly looks like it is. I know it's happened before. And I'm just trying to understand your customer base.
Speaker Change: Right and that's why I'm asking this because it clearly it looks like it is.
Speaker Change: I know, it's happened before and I'm, just trying to understand your customer base more.
Bradley S. Vizi: Yeah, Ben, I'd also pair that and just, again, put a fine point on what Kevin said, is we look at DSOs in the context of overall returns on capital, right? So again, you know, if a client's going to pay at a 50% gross margin, right, but they want to pay in 90 days, and we feel it's absolutely good credit, yeah, great. You know, and so we try to be pretty holistic in the way we look at our client base.
Ben Andrews: Yes.
Ben Andrews: I'd also paradigm and just to put a fine point on it.
Bradley S. Vizi: Kevin said and since.
Bradley S. Vizi: Dsos in the context.
Bradley S. Vizi: Overall returns on capital right, so again for <unk>.
Bradley S. Vizi: It's going to pay.
Bradley S. Vizi: 50% gross margin right, but they won't pay in 90 days and we feel it's absolutely a good credit.
Bradley S. Vizi: Great.
Bradley S. Vizi: And so we we try to be pretty holistic and the way we look at our client base, but also kind of a subtle thing here is this.
Bradley S. Vizi: But also, you know, kind of a subtle thing here is, you know, we're scaling a services platform, right? I mean, naturally, that mix, you know, as you scale any business, you know, especially one that, you know, has a diverse set of project activity like ours, it starts to normalize. So you can get some gyrations, you know, from even just a couple of flare ups, or, you know, maybe one flare up and one missed cut off, you know, and, you know, furthermore, on the administrative front, you know, when we talk about administrative issues, right, they can be pretty fundamental, you know, say, you know, we have a school client that ends up being a great client, but actually onboarding them, you know, is pretty, I would say, you know, labor and intellectually intensive.
Bradley S. Vizi: We're scaling our services platform right I mean naturally that Mexico as you scale any business, especially one that has such a diverse set of project activity like ours, you'll start to normalize. So you can get some gyrations.
Bradley S. Vizi: You know from even just a couple of flare ups or maybe one flare up and one must cut off.
Bradley S. Vizi: You know.
Bradley S. Vizi: Furthermore, on the administrative front.
Bradley S. Vizi: When we talk about administrative issues right they can be pretty fundamental.
Bradley S. Vizi: We have a school quiet at that ends up being a great client.
Bradley S. Vizi: But actually onboarding them.
Bradley S. Vizi: It was pretty I would say you know what.
Bradley S. Vizi: And, you know, and when you have that in place, and that rhythm, right, and then all of a sudden, you might have some turnover on their side. So the next person that comes in, right, you know, there's, there's a little bit of a learning curve on that side, you know, on their side again, in terms of picking up their own system, right. So that could slow things down a little bit.
Bradley S. Vizi: A waiver and intellectually intensive and when.
Bradley S. Vizi: When you have that in place and that rhythm right and then all of a sudden you might have some turnover on their side. So the next person that comes in right. You know, there's there's a little bit of a learning curve on that side.
Bradley S. Vizi: On their side of that right in terms of taking up their sent their own system right. So that could slow things down a little bit.
Bradley S. Vizi: So there's just some natural things that just happen and as a whole we view this long term opportunity because anytime you have a you know a.
Bradley S. Vizi: So there's just some natural things that just happen. And as a whole, we view this, you know, long term, as an opportunity because anytime you have a pinch point with a client, right, or, you know, a challenge, right, in terms of, you know, getting them to a point in steady state where they're a great client, right, that ultimately is an opportunity, right, to help them resolve a pinch point So now, instead of, you know, just being a vendor, your partner, right, and you become a little bit more sticky with respect to that partnership.
Bradley S. Vizi: Pinch point with a client right or.
Bradley S. Vizi: <unk> right in terms of.
Bradley S. Vizi: It's just getting to a point and so that they stay where they were a great client right that ultimately is an opportunity right to help them resolve a pinch point so now instead of.
Bradley S. Vizi: Just being a vendor partner right and you become a little bit more sticky.
Bradley S. Vizi: With respect to that partnership.
Bradley S. Vizi: Mhm Mhm mhm.
Ben Andrews: Thank you, Brad. If I look at earnings in the quarter, I was impressed. I mean, when you back out the gain on sale, like for 400,000 from last year, clearly, your EBIT went up more than I thought it was going to go up, and definitely more than the street analysts thought. And you did it with, you know, the healthcare engine not really running this quarter, which is being masked by stuff falling off.
Speaker Change: Thank you Brad.
Ben Andrews: If I look at it.
Ben Andrews: If I look at earnings in the quarter.
Ben Andrews: I was impressed I mean, when you back out the gain on sale.
Ben Andrews: For 400000 from last year.
Ben Andrews: Clearly your EBIT went up.
Ben Andrews: More than I thought it was going to go up to go up and definitely more than the street analysts thought.
Ben Andrews:
Ben Andrews: And you did it with you know the healthcare engine not really running this quarter.
Ben Andrews:
Ben Andrews: Our being massed by stuff falling off.
Ben Andrews: Unknown Speaker So how should I look at that type of margin looking out over a few quarters, you know, when these schools and, you know, possibly aerospace, you know, clients are coming on? Should you maintain relatively?
Ben Andrews: So how should I look at that type of margin looking out over a few quarters you know when these schools and you know, possibly aerospace you know clients are coming on should you maintain relatively.
Kevin D. Miller: the same margin, or could we see, you know, nice growth like we did year over year in Q1 or even, even better? Unknown Speaker Well, on a sequential basis, Ben, I expect it to improve on a sequential basis. You know, I'm not going to sit here and tell you that we're going to see, you know, a catapult in gross margin from Q1. But we should see improvement as we move through the quarters.
Ben Andrews: The same margin or could we see you know.
Speaker Change: Nice growth like we did year over year and in Q1 or even even better.
Speaker Change: Well on a sequential basis and I expect I expect it to improve.
Speaker Change: Sequential basis, you know I'm not going to sit here and tell you that we're gonna see catapult in gross margin from Q1, but we should see improvement as we move through.
Kevin D. Miller: I mean, you know, when we start running through 100% of unemployment expenses for a lot of our employees, that alone will bring up the margins, you know, by 50 basis points. So, you know, we should see some improvement as we go through. You know, we had really good margins last year. So, you know, I don't know how we're going to compare year over year.
Kevin D. Miller: The quarters I mean, you know when we start running through 100% of unemployment expenses for a lot of our employees.
Kevin D. Miller: That alone will will.
Kevin D. Miller: Bring up the margins 50 basis points.
Kevin D. Miller: So.
Kevin D. Miller: We should see some improvement as we go through.
Kevin D. Miller: You know we have we had really good margins last year. So I you know I don't know, how we're going to compare year over year.
Ben Andrews: You know, but I would also stress that Brad and I, while gross margin is incredibly important and something we really focus on, we focus on growing gross profit dollars and getting a return on those gross profit dollars. So, you know, if it makes sense to sort of do a large deal for a 22% margin or a 20% margin that's not going to have a lot of direct SG&A, we'll do that.
Speaker Change: But I would also stress the Brian nice well well well gross margin is incredibly important and something we really focus on we focus on growing gross profit dollars.
Ben Andrews: For the.
Ben Andrews: And getting return on those gross profit dollars.
Ben Andrews: So if it makes sense to sort of.
Ben Andrews: Doing a large deal for 22% margin or a 20% margin.
Ben Andrews: That's not going to have a lot of SG&A.
Ben Andrews: A lot of direct SG&A you know.
Ben Andrews: We'll do that but as we look at the business today I do expect to see some sequential improvements in gross margin for all three of the businesses.
Ben Andrews: But as we look at the business today, I do expect to see some sequential improvements in gross margin for all three of them. Well, excellent. Well, hopefully, the world realizes the work you've done and you've turned RCM back into a growth company again. And I don't know, I guess buying it, you can kind of get a double whammy; you can get that growth and you're.
Ben Andrews: Well excellent O L. A.
Speaker Change: I hope.
Ben Andrews: Hopefully the world realizes the work you've done and you've turned RCM back into a growth company again and.
Ben Andrews: I don't know I guess buying it you can kind of get a double whammy you can get that growth and here.
Ben Andrews: The stock is clearly trading.
Ben Andrews: At a market multiple are well below market multiple now on valuation wise.
Speaker Change: So let's see so thank you for everything I appreciate it.
Bradley S. Vizi: Thank you, Ben. We appreciate it. Thank you.
Speaker Change: Thank you Ben.
Speaker Change: We appreciate it thank you.
Bradley S. Vizi: Yeah.
Operator: All right, gentlemen, at this time, there are no further questions in queue. So I can remind participants one final time, if you would like to get in a question, please press star one on your telephone keypad. Again, that's star one on your telephone keypad. All right. At this time, I'm seeing no further questions in queue. Thank you for attending.
Speaker Change: Alright, gentlemen at this time there are no further questions in queue. So I can remind participants one final time, if you would like to get in a question. Please press star.
Operator: One on your telephone keypad again that star one on your telephone keypad.
Operator: Alright, and at this time I'm seeing no further questions in queue.
Unknown Attendee: Thank you for attending RCM's first quarterly conference call. We look forward to our next update in August.
Operator: Thank you for attending.
Operator: <unk> first quarter conference call, we look forward to our next update in August.
Operator: And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you again for joining us today.
Speaker Change: And with that ladies and gentlemen. This does conclude your call. You may now disconnect your lines and thank you again for joining us today.