RCM Technologies, Inc. Announces Third Quarter Results

Globe Newswire 8-Nov-2018 4:05 PM

PENNSAUKEN, N.J., Nov. 08, 2018 (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 thirty-nine week periods ended September 29, 2018.

RCM Technologies reported revenues of $42.6 million for the thirteen week period ended September 29, 2018, a 2.9% decrease as compared to $43.8 million for the thirteen week period ended September 30, 2017 (the comparable prior year period). Gross profit was $11.0 million for the thirteen week period ended September 29, 2018, a 6.2% decrease as compared to $11.7 million for the comparable prior year period.  The Company experienced operating income of $1.2 million for the current quarter as compared to $1.6 million for the comparable prior year period.  Net income was $0.7 million, or $0.06 per diluted share, for the current quarter as compared to net income of $1.0 million, or $0.08 per diluted share, for the comparable prior year period.

RCM Technologies reported revenues of $145.1 million for the thirty-nine week period ended September 29, 2018, a 6.9% increase as compared to $135.7 million for the thirty-nine week period ended September 30, 2017 (the comparable prior year period). Gross profit was $36.3 million for the thirty-nine week period ended September 29, 2018, a 2.0% increase as compared to $35.6 million for the comparable prior year period.  The Company experienced operating income of $3.8 million for the current year period as compared to $3.5 million for the comparable prior year period.  Net income was $2.1 million, or $0.17 per diluted share, for the current year period as compared to net income of $1.8 million, or $0.15 per diluted share, for the comparable prior year period.

The Company had adjusted EBITDA (non-GAAP) of $1.6 million for the thirteen weeks ended September 29, 2018, a 21.9% decrease as compared to $2.0 million for the comparable prior year period.  The Company had adjusted EBITDA (non-GAAP) of $6.4 million for the thirty-nine weeks ended September 29, 2018, a 16.0% increase as compared to $5.5 million for the comparable prior year period.  A reconciliation of adjusted EBITDA (non-GAAP) to EBITDA (non-GAAP) and net income (GAAP) can be found on the fourth page of this press release.

The Company experienced $1.4 million in severance, professional fees and other charges for the thirty-nine week period ended September 29, 2018.  These charges include severance accrued for the Company's former chief executive officer and related payroll taxes, continuation of certain benefits and professional fees, totaling approximately $0.9 million.  The additional charges of $0.5 million incurred related to transactional financial advisory fees, legal fees associated with defending a frivolous lawsuit with a competitor of the Company, and search fees associated with hiring a senior executive.  The Company did not incur any such charges in the comparable prior year period. The Company incurred charges of $0.8 million for increases to contingent consideration for the thirty-nine week period ended September 30, 2017.  The increase can be principally attributed to the PCI acquisition.  Since the PCI acquisition was for stock in Canada the increase in purchase price is not tax deductible and is treated as a permanent difference. There was no change to contingent consideration for the thirty-nine week period ended September 29, 2018.

Bradley Vizi, Executive Chairman of RCM Technologies, commented, "Though third quarter operating income came in at the low end of our expectation, as the result of project timing within Engineering Services, we believe that we are well positioned to deliver a strong finish to the year and enter 2019 with momentum. On a year-to-date basis, our 2018 adjusted EBITDA of $6.4MM exceeds 2017 by a robust 16%."

Kevin Miller, Chief Financial Officer of RCM Technologies, added, "We generated $5.7 million in cash flow from operations during our third quarter of 2018. We believe we will see good cash flow from operations in the fourth quarter as we look to strengthen our balance sheet."

Conference Call
On Friday, November 9, 2018, RCM Technologies will host a conference call to discuss these results. The call will begin at 10:00 a.m. Eastern Time.  The dial-in number is (800) 285-6670.

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 the delivery of 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.  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 and 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, as well as 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 growth in our business. Such statements are based on current expectations that involve a number of 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.


RCM Technologies, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 (In Thousands, Except Share and Per Share Amounts)

  Thirteen Week Periods Ended  
  September 29,
2018
  September 30,
2017
 
Revenues $42,559   $43,827  
Cost of services 31,571   32,109  
Gross profit 10,988   11,718  
Selling, general and administrative 9,412   9,700  
Depreciation and amortization 344   422  
Operating income 1,232   1,596  
Other expense, net (295 ) (154 )
Income before income taxes 937   1,442  
Income tax expense 253   422  
Net income $684   $1,020  
         
Diluted net earnings per share data $0.06   $0.08  


  Thirty-Nine Week Periods Ended  
  September 29,
2018
  September 30,
2017
 
Revenues $145,081   $135,680  
Cost of services 108,803   100,097  
Gross profit 36,278   35,583  
Selling, general and administrative 29,909   30,092  
Depreciation and amortization 1,156   1,229  
Severance, professional fees and other charges 1,371   -  
Change in contingent consideration -   781  
Operating income 3,842   3,481  
Other expense, net (990 ) (371 )
Income before income taxes 2,852   3,110  
Income tax expense 736   1,351  
Net income $2,116   $1,759  
         
Diluted net earnings per share data $0.17   $0.15  


RCM Technologies, Inc.
Summary Consolidated Selected Balance Sheet Data
 (In Thousands)


  September 29,
2018
      December 30,
2017
 
  (Unaudited)      
Cash and cash equivalents $710   $2,851  
Accounts receivable, net $46,663   $46,080  
Total current assets $55,685   $55,639  
Total assets $73,428   $73,279  
Total current liabilities $22,687   $22,188  
Borrowing under line of credit $24,460   $27,279  
Net debt (borrowings less cash) $23,750   $24,428  
Total liabilities $48,751   $51,248  
Stockholders' equity $24,677   $22,031  


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

The following non-GAAP data, which adjusts for the categories of expenses described below, is a non-GAAP financial measure.  Our management believes that this non-GAAP financial measure is useful information for investors, shareholders and other stakeholders of our Company in gauging our results of operations on an ongoing basis.  We believe that EBITDA and Adjusted EBITDA are performance measures and have provided a reconciliation between net income and EBITDA and Adjusted EBITDA.  Neither EBITDA nor Adjusted EBITDA should be considered as an alternative to net income as an indicator of performance.  In addition, neither EBITDA nor Adjusted EBITDA takes into account changes in certain assets and liabilities as well as 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 measure and the corresponding adjustments used to calculate "EBITDA" and "Adjusted EBITDA" for the thirteen and thirty-nine week periods ended September 29, 2018 and September 30, 2017. 

  Thirteen
Week Periods Ended
  Thirty-Nine
Week Periods Ended
 
  September 29,
2018
  September 30,
2017
  September 29,
2018
  September 30,
2017
 
GAAP net income $684   $1,020   $2,116   $1,759  
Income tax expense 253   422   736   1,351  
Interest expense 305   137   971   409  
Depreciation and amortization 344   422   1,156   1,229  
EBITDA (non-GAAP) $1,586   $2,001   $4,979   $4,748  
                 
Adjustments                
  Severance, professional fees and other charges -   -   1,371   -  
  Change in contingent consideration -   -   -   781  
  (Gain) loss on foreign currency transactions (10 ) 17   19   (38 )
Adjusted EBITDA (non-GAAP) $1,576   $2,018   $6,369   $5,491  


RCM Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
  Thirteen Week Periods Ended  
  September 29,
2018
  September 30,
2017
 
Net income $684   $1,020  
Adjustments to reconcile net income to cash provided by operating activities 1,125   419  
Changes in operating assets and liabilities:        
  Accounts receivable 4,496   2,075  
  Prepaid expenses and other current assets (867 ) (21 )
  Net of transit accounts receivable and payable (466 ) (917 )
  Accounts payable and accrued expenses 1,206   (777 )
  Accrued payroll and related costs (760 ) (653 )
  Income taxes payable 256   480  
Total adjustments 4,990   606  
Cash provided by operating activities $5,674   $1,626  
         
Net cash used in investing activities (810 ) (192 )
Net cash used in financing activities (4,552 ) (972 )
Effect of exchange rate changes (33 ) (28 )
Increase in cash and cash equivalents $279   $434  


  Thirty-Nine Week Periods Ended  
  September 29,
2018
  September 30,
2017
 
Net income $2,116   $1,759  
Adjustments to reconcile net income to cash provided by operating activities 2,527   3,026  
Changes in operating assets and liabilities:        
  Accounts receivable (1,664 ) 3,682  
  Prepaid expenses and other current assets (593 ) 230  
  Net of transit accounts receivable and payable (1,560 ) (1,189 )
  Accounts payable and accrued expenses (219 ) (1,313 )
  Accrued payroll and related costs 905   (185 )
  Income taxes payable 552   946  
Total adjustments (52 ) 5,197  
Cash provided by operating activities $2,064   $6,956  
         
Net cash used in investing activities (1,423 ) (743 )
Net cash used in financing activities (2,735 ) (5,621 )
Effect of exchange rate changes (47 ) (46 )
(Decrease) increase in cash and cash equivalents ($2,141 ) $546  


RCM Technologies, Inc.
Summary of Selected Income Statement Data
(Unaudited)
(In Thousands)

  Thirteen Week Period Ended September 29, 2018  
  Engineering   Specialty
Health Care
  Information
Technology
  Consolidated  
                 
Revenue $19,424   $15,106   $8,029   $42,559  
Cost of services 14,049   11,665   5,857   31,571  
Gross Profit $5,375   $3,441   $2,172   $10,988  
Gross Profit Margin 27.7 % 22.8 % 27.1 % 25.8 %


  Thirteen Week Period Ended September 30, 2017  
  Engineering   Specialty
Health Care
  Information
Technology
  Consolidated  
                 
Revenue $21,708   $14,335   $7,784   $43,827  
Cost of services 15,533   10,805   5,771   32,109  
Gross Profit $6,175   $3,530   $2,013   $11,718  
Gross Profit Margin 28.4 % 24.6 % 25.9 % 26.7 %


  Thirty-Nine Week Period Ended September 29, 2018  
  Engineering   Specialty
Health Care
  Information
Technology
  Consolidated  
                 
Revenue $62,412   $60,599   $22,070   $145,081  
Cost of services 45,706   46,822   16,275   108,803  
Gross Profit $16,706   $13,777   $5,795   $36,278  
Gross Profit Margin 26.8 % 22.7 % 26.3 % 25.0 %


  Thirty-Nine Week Period Ended September 30, 2017  
  Engineering   Specialty
Health Care
  Information
Technology
  Consolidated  
                 
Revenue $61,517   $49,212   $24,951   $135,680  
Cost of services 44,598   37,069   18,430   100,097  
Gross Profit $16,919   $12,143   $6,521   $35,583  
Gross Profit Margin 27.5 % 24.7 % 26.1 % 26.2 %


RCM Technologies, Inc. Tel:  856.356.4500 Corporate Contacts:
2500 McClellan Avenue Fax: 856.356.4600 Bradley S. Vizi
Pennsauken, NJ 08109 info@rcmt.com Executive Chairman
  www.rcmt.com Kevin D. Miller
    Chief Financial Officer

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