Q1 2025 RCM Technologies Inc Earnings Call
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Operator: May I have your name? Hello, David Brown.
Operator: And what is your company name, Mr. Brown? Ayiera Can you spell it, please? A I E R A Perfect.
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Kevin Miller: [music] © BF-WATCH TV 2021 © BF-WATCH TV 2021 © transcript Emily Beynon © BF-WATCH TV 2021 [music] Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies, and I am joined today by Brad Vizi, RCM's Executive Chairman.
Kevin 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.
Kevin Miller: 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.
Brad Vizi: I will now turn the call over to Brad Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the quarter. Thanks, Kevin. Good morning, everyone. Consistent with prior remarks, the internals of our business continue to strengthen at an increasing rate. We believe the company is well positioned based on the thoughtful investment strategy we have deployed and significant reductions in our share count should enhance the compounding of returns to the benefit of shareholders. With stewardship as a foundational pillar to our zeitgeist, we believe we are positioned for continued outperformance. In fact, we have sharpened our focus on cultivating the next generation of leadership as we look through the end of the decade.
Brad Vizi: Not only do we aim to maintain continuity when passing the baton, but assurance that the next generation is simply better than the one before it. I strongly believe this is not only the capstone of one's career and a defining component of their legacy, but fundamental to the longevity and continued success of every organization.
Brad Vizi: I am keenly focused on this being one of our hallmarks as a company and a strategic advantage when we look back years from now.
Brad Vizi: With great enthusiasm about the present and well into the future, I will now provide an update on the progress of each of our business units. RCM Health Care is off to a strong start in 2025. More importantly, as we look forward to next school year, the stage is set for continued momentum. Many of our largest school districts are on a robust growth trajectory. Our presence in K-12, particularly in behavioral health, is stronger than ever as we expand in many existing schools and sign new school contracts for next school year. Also of note, our HIM division is starting to blossom, having cultivated a robust pipeline filled with high potential projects.
Brad Vizi: With many prospective clients across all our groups and plans to expand our direct sales team, we are poised to seize these opportunities and drive significant growth. As we work towards a strong close of the 2024-2025 school year, planning is well underway for a strong start to the fall.
Brad Vizi: Looking forward, the future of our health care segment is bright. In addition to onboarding new school districts, the hand-in-glove execution of our offshore team has been critical to extending our advantage, allowing us to ensure that children in schools receive the essential care they need. Unlocking efficiencies in our organization has allowed us to double down on our investment in best practices and quality of care, further cementing our position as the go-to provider in K-12 nationwide. Success in our core K-12 market has opened other direct adjacencies, fueling investment in our sales team to galvanize growth for years to come.
Brad Vizi: Transitioning to Life Sciences Data and Solutions. 2025 has brought significant opportunity for the IT industry in the form of accelerated technological advancements in the areas of artificial intelligence and machine learning. One year ago, only a few clients had an AI ML strategy. Today, we are seeing system deployments. We also see a significant expansion of manufacturing across our life sciences client base. Financial highlights in the quarter include the division posting a 40% gross profit. while maintaining a solid 23% NOI contribution. This is a tribute to strong managed service contracts, over seven SG&A costs, and consistent delivery management of our projects.
Brad Vizi: respectively.
Brad Vizi: We're in the early stages of building out our offshore resources base in this division. Continuing momentum with this initiative will be key to helping us maintain and improve our market position for our key practices, while being highly competitive in our new BPO payroll offering. Our focus is revenue expansion and new client attainment. So far in 2025, the division has opened six new clients, leveraging new service offerings, ranging from asset management to design engineering. At the industry level, we are expecting to see shifts in services demand in the life sciences sector over the coming months. Facing increased lead times, organizations are seeking alternative sources of materials and talent.
Brad Vizi: Using technology for quality improvement, direct cost reduction, and headcount, automating manual or repetitive tasks is key for the remainder of 2025.
Brad Vizi: In conclusion, our Q1 results demonstrate the strength of our core services. We have maintained a 90% plus renewal rate while not losing strength in our margins or bottom line.
Brad Vizi: Turning to engineering, starting with energy services. Since Q4, we have made significant strides with a strong focus on market opportunities and partnerships. Several substantive multi-year preferred partner agreements for comprehensive engineering services with increased scope are now in various stages of execution, progressing at an accelerating pace. We are capitalizing on the momentum we have built over the last several years as RCM quickly becomes a go-to partner in the industry. Opportunities for growth are abundant, driven by multi-decade themes, including grid modernization, grid interconnect, and the proliferation of data centers. Any one of these variables represents strong secular demands.
Brad Vizi: However, I believe that the confluence of all of them is propelling unprecedented exponential growth and the need for innovative turnkey engineering and EPC solutions. Operationally, we continue to mature as an organization. We are quickly graduating from a hard-charging entrepreneurial organization with a drive to innovate to one that can effectively channel that innovative spirit to deliver the same distinguished outcomes at scale. Our shared services functions not only facilitate knowledge transfer and best practices across business units, but further enhance operational efficiency and capacity to expand. We are seeing synergies across our core recruitment businesses, where we have demonstrated a clear competency to satisfy a hard-to-fill requirement.
Brad Vizi: then rapidly assimilating our new teammates into our can-do culture. Furthermore, we are in the early stages of scaling up our nearshore and offshore capabilities, piggybacking on decades of goodwill built in these geographies, affording us access to high quality candidate pools.
Brad Vizi: In summary, our outlook for the business has never been stronger as we believe we are in the early stages of capitalizing on a foundation that was methodically laid over the last five years.
Brad Vizi: In Processing Industrial, last quarter, we announced the launch of the RCM Thermokinetics Office Plant Expansion Program, primarily focused on the ethanol industry. The TK office is completing the first NEXT project in early May. The project is an intensive process and equipment engineering effort followed by a six-week field coordination and management of installation crews, pipe fitters, and related sub-suppliers that will result in a 20% ethanol plant capacity increase. There has been much interest from other ethanol plants in the project. We anticipate our next pipeline to increase significantly once this first project completes.
Brad Vizi: The plant restart in early May.
Brad Vizi: Other project activity includes the initiation of a pilot campaign at the TK Test Center as a follow-up to an engineering design purchase order related to lithium extraction and recovery from brine extraction.