RCM Technologies, Inc. Announces Second-Quarter Results

PENNSAUKEN, N.J., Aug. 09, 2023 (GLOBE NEWSWIRE) -- RCM Technologies, Inc. (NasdaqGM: RCMT), a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced engineering, specialty health care, and information technology services, today announced financial results for the thirteen and twenty-six weeks ended July 1, 2023.

RCM Technologies reported revenue of $67.0 million for the thirteen weeks ended July 1, 2023 (the current period), a decrease of 9.8% compared to $74.3 million for the thirteen weeks ended July 2, 2022 (the comparable prior-year period). Gross profit was $18.8 million for the current period, a 13.5% decrease compared to $21.7 million for the comparable prior-year period. The Company experienced GAAP operating income of $5.7 million for the current period compared to $8.2 million for the comparable prior-year period. The Company experienced GAAP net income of $4.0 million, or $0.47 per diluted share, for the current period compared to $6.0 million, or $0.57 per diluted share, for the comparable prior-year period. The Company experienced adjusted EBITDA (non-GAAP) of $6.0 million for the current period compared to $8.4 million for the comparable prior-year period.

RCM Technologies reported revenue of $134.2 million for the twenty-six weeks ended July 1, 2023 (the current period), a decrease of 14.2% compared to $156.3 million for the twenty-six weeks ended July 2, 2022 (the comparable prior-year period). Gross profit was $37.8 million for the current period, a 16.2% decrease compared to $45.1 million for the comparable prior-year period. The Company experienced GAAP operating income of $11.5 million for the current period compared to $17.2 million for the comparable prior-year period. The Company experienced GAAP net income of $7.8 million, or $0.87 per diluted share, for the current period compared to $12.5 million, or $1.18 per diluted share, for the comparable prior-year period. The Company experienced adjusted EBITDA (non-GAAP) of $11.7 million for the current period compared to $17.7 million for the comparable prior-year period.

Bradley Vizi, Executive Chairman of RCM Technologies, commented, "Despite a slow start to the year in Engineering, we made the decision to maintain stride in building what we believe to be a highly differentiated platform in the professional service marketplace. Our decision was supported by our view of the secular growth markets and our strong portfolio of capabilities, and we now see the business continuing to strengthen as we move through the year."

Kevin Miller, Chief Financial Officer of RCM Technologies, commented, "We believe our strong cash generating business model and clean balance sheet afford us the ability to invest in value accretive growth throughout the economic cycle. Considering normal third quarter seasonality, we believe we are set up for a healthy double-digit earnings increase in the fourth quarter, consistent with our long-term trajectory. Also, we expect to continue to see strong cash flow from operations during the second half of fiscal 2023."

Conference Call
On Thursday, August 10, 2023, RCM Technologies will host a conference call to discuss these results. The call will begin at 11:30 a.m. Eastern Time. The dial-in number is [phone].

About RCM
RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced information technology and engineering services. RCM is an innovative leader in delivering these solutions to commercial and government sectors. RCM is also a provider of specialty healthcare services to major health care institutions and educational facilities. RCM's offices are located in major metropolitan centers throughout North America and Serbia. Additional information can be found at www.rcmt.com.

The statements contained in this release that are not purely historical are forward-looking statements within the Private Securities Litigation Reform Act of 1995. They are subject to various risks, uncertainties, and other factors that could cause the Company's actual results, performance, or achievements to differ materially from those expressed or implied by such forward-looking statements. These statements often include words such as "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," "believe," "plan," "seek," "could," "can," "should," "are confident" or similar expressions. In addition, statements that are not historical should also be considered forward-looking statements. These statements are based on assumptions that we have made in light of our experience in the industry, and our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate in these circumstances. Forward-looking statements include, but are not limited to, those relating to demand for the Company's services, expectations regarding our future revenues and other financial results, our pipeline, and potential project wins, and our expectations for investment and growth in our business. Such statements are based on current expectations that involve several known and unknown risks, uncertainties, and other factors, which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Risk, uncertainties, and other factors may emerge from time to time that could cause the Company's actual results to differ from those indicated by the forward-looking statements. Investors are directed to consider such risks, uncertainties, and other factors described in documents filed by the Company with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The Company assumes no obligation (and expressly disclaims any such obligation) to update any forward-looking statements contained in this release as a result of new information or future events or developments, except as may be required by law.

Tables to Follow

RCM Technologies, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In Thousands, Except Per Share Amounts)
	Thirteen Weeks Ended
	July 1, 2023			July 2, 2022
Revenue	$67,035			$74,346
Cost of services		48,275			52,663
Gross profit		18,760			21,683
Selling, general and administrative		12,723			13,264
Depreciation and amortization of property and equipment		242			225
Amortization of acquired intangible assets		46			-
Operating income		5,749			8,194
Other expense (income), net		418			(28	)
Income before income taxes		5,331			8,222
Income tax expense		1,348			2,208
Net income	$3,983			$6,014
Diluted net earnings per share data	$0.47			$0.57
Diluted weighted average shares outstanding		8,558,396			10,550,896

	Twenty-Six Weeks Ended
	July 1, 2023			July 2, 2022
Revenue	$134,159			$156,307
Cost of services		96,375			111,204
Gross profit		37,784			45,103
Selling, general and administrative		26,119			27,411
Depreciation and amortization of property and equipment		513			463
Amortization of acquired intangible assets		91			-
Gain on sale of assets		(395	)		-
Operating income		11,456			17,229
Other expense, net		825			24
Income before income taxes		10,631			17,205
Income tax expense		2,811			4,671
Net income	$7,820			$12,534
Diluted net earnings per share data	$0.87			$1.18
Diluted weighted average shares outstanding		8,976,714			10,583,519

RCM Technologies, Inc.
Supplemental Operating Results on a Non-GAAP Basis
(Unaudited)
(In Thousands)

The following non-GAAP measures, which adjust for the categories of expenses described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures ("Adjusted operating income," "EBITDA" and "Adjusted EBITDA") are useful information for investors, shareholders, and other stakeholders of our Company in gauging our results of operations on an ongoing basis and to enhance investors' overall understanding of our current financial performance and period-to-period comparisons. Adjusted operating income, EBITDA and Adjusted EBITDA should not be considered alternatives to net income as an indicator of performance. In addition, Adjusted operating income, EBITDA and Adjusted EBITDA do not take into account changes in certain assets and liabilities and interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read-only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

The following unaudited table presents the Company's GAAP net income and the corresponding adjustments used to calculate Adjusted operating income, EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022.

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	July 1, 2023			July 2, 2022			July 1, 2023			July 2, 2022
GAAP net income	$3,983			$6,014			$7,820			$12,534
Income tax expense		1,348			2,208			2,811			4,671
Interest expense, net		425			69			785			166
Depreciation of property and equipment		242			225			513			463
Amortization of acquired intangible assets		46			-			91			-
EBITDA (non-GAAP)	$6,044			$8,516			$12,020			$17,834
Adjustments
Gain on sale of assets		-			-			(395	)		-
(Gain) loss on foreign currency transactions		(7	)		(97	)		40			(142	)
Adjusted EBITDA (non-GAAP)	$6,037			$8,419			$11,665			$17,692

RCM Technologies, Inc. Summary of Selected Income Statement Data (Unaudited) (In Thousands)
	Thirteen Weeks Ended July 1, 2023
	Specialty Health Care			Engineering			Life Sciences and IT			Consolidated
Revenue	$35,528			$21,014			$10,493			$67,035
Cost of services		25,727			16,192			6,356			48,275
Gross profit	$9,801			$4,822			$4,137			$18,760
Gross profit margin		27.6	%		22.9	%		39.4	%		28.0	%

	Thirteen Weeks Ended July 2, 2022
	Specialty Health Care			Engineering			Life Sciences and IT			Consolidated
Revenue	$43,457			$20,906			$9,983			$74,346
Cost of services		30,575			15,395			6,693			52,663
Gross profit	$12,882			$5,511			$3,290			$21,683
Gross profit margin		29.6	%		26.4	%		33.0	%		29.2	%

	Twenty-Six Weeks Ended July 1, 2023
	Specialty Health Care			Engineering			Life Sciences and IT			Consolidated
Revenue	$74,658			$39,504			$19,997			$134,159
Cost of services		53,185			30,365			12,555			96,375
Gross profit	$21,473			$8,869			$7,442			$37,784
Gross profit margin		28.8	%		22.5	%		37.2	%		28.2	%

	Twenty-Six Weeks Ended July 2, 2022
	Specialty Health Care			Engineering			Life Sciences and IT			Consolidated
Revenue	$95,641			$40,804			$19,862			$156,307
Cost of services		67,758			30,059			13,387			111,204
Gross profit	$27,883			$10,745			$6,475			$45,103
Gross profit margin		29.2	%		26.3	%		32.6	%		28.9	%

RCM Technologies, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In Thousands, Except Share Amounts)
			July 1,			December 31,
			2023			2022
			(Unaudited)
Current assets:
	Cash and cash equivalents		$1,273			$339
	Accounts receivable, net			61,614			50,762
	Transit accounts receivable			9,875			3,280
	Prepaid expenses and other current assets			4,324			4,636
		Total current assets		77,086			59,017
Property and equipment, net				2,158			2,098
Other assets:
	Deposits			169			173
	Goodwill			22,147			22,147
	Operating right of use asset			3,203			3,665
	Intangible assets, net			774			864
		Total other assets		26,293			26,849
		Total assets	$105,537			$87,964

Current liabilities:
	Accounts payable and accrued expenses			$12,947			$14,147
	Transit accounts payable				37,190			9,767
	Accrued payroll and related costs				11,836			13,023
	Finance lease payable				464			462
	Income taxes payable				233			85
	Operating right of use liability				1,091			1,349
	Contingent consideration from acquisitions				300			472
	Deferred revenue				504			1,119
			Total current liabilities		64,565			40,424
Deferred income taxes, net, foreign					169			166
Deferred income taxes, net, domestic					1,599			1,495
Finance lease payable					-			232
Contingent consideration from acquisitions, net of current position					1,671			1,970
Operating right of use liability, net of current position					2,508			2,932
Borrowings under line of credit					14,851			8,783
		Total liabilities			85,363			56,002
Stockholders' equity:
	Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding				-			-
	Common stock, $0.05 par value; 40,000,000 shares authorized; 17,516,469 shares issued and 7,934,088 shares outstanding at July 1, 2023 and 17,287,967 shares issued and 9,285,318 shares outstanding at December 31, 2022				873			863
	Additional paid-in capital				115,314			113,878
	Accumulated other comprehensive loss				(2,857	)		(2,863	)
	Accumulated deficit				(28,276	)		(36,096	)
	Treasury stock, 9,582,381 shares at July 1, 2023 and 8,002,649 shares at December 31, 2022, at cost				(64,880	)		(43,820	)
			Total stockholders' equity		20,174			31,962
			Total liabilities and stockholders' equity	$105,537			$87,964

RCM Technologies, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands)
		Thirteen Weeks Ended
		July 1, 2023			July 2, 2022
Net income		$3,983			$6,014
Adjustments to reconcile net income to cash used in operating activities			1,043			449
Changes in operating assets and liabilities:
	Accounts receivable		(2,804	)		13,779
	Prepaid expenses and other current assets		(648	)		343
	Net of transit accounts receivable and payable		19,356			(731	)
	Accounts payable and accrued expenses		654			389
	Accrued payroll and related costs		(3,598	)		(2,392	)
	Right of use liabilities		(335	)		(382	)
	Income taxes payable		6			1,111
	Deferred revenue		(305	)		(315	)
	Deposits		(9	)		9
Total adjustments			13,360			12,260
Net cash provided by operating activities		$17,343			$18,274
Net cash used in investing activities			(227	)		(223	)
Net cash used in financing activities			(18,160	)		(15,563	)
Effect of exchange rate changes on cash and cash equivalents			(37	)		(235	)
Increase in cash and cash equivalents		($1,081		)	$2,253
Common stock repurchase		($12,876		)	($2,781		)

		Twenty-Six Weeks Ended
		July 1, 2023			July 2, 2022
Net income		$7,820			$12,534
Adjustments to reconcile net income to cash used in operating activities			1,746			1,186
Changes in operating assets and liabilities:
	Accounts receivable		(10,839	)		3,565
	Prepaid expenses and other current assets		312			434
	Net of transit accounts receivable and payable		20,828			(210	)
	Accounts payable and accrued expenses		(1,013	)		(585	)
	Accrued payroll and related costs		(1,194	)		3,048
	Right of use liabilities		(683	)		(926	)
	Income taxes payable		147			2,935
	Deferred revenue		(615	)		(1,237	)
	Deposits		2			11
Total adjustments			8,691			8,221
Net cash provided by operating activities		$16,511			$20,755
Net cash used in investing activities			(559	)		(453	)
Net cash used in financing activities			(15,215	)		(17,175	)
Effect of exchange rate changes on cash and cash equivalents			197			(250	)
Increase in cash and cash equivalents		$934			$2,877
Common stock repurchase		($21,060		)	($2,781		)

RCM Technologies, Inc.	Tel: [phone]	Corporate Contacts:
2500 McClellan Avenue	Fax: [phone]	Bradley S. Vizi
Pennsauken, NJ 08109	[e-mail]	Executive Chairman
	www.rcmt.com	Kevin D. Miller
		Chief Financial Officer