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RCM Technologies, Inc. Announces Fourth Quarter and Full Year 2017 Results

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PENNSAUKEN, N.J., March 06, 2018 (GLOBE NEWSWIRE) -- RCM Technologies, Inc. (NASDAQ: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 fifty-two week periods ended December 30, 2017.

RCM Technologies reported revenues of $51.1 million for the thirteen week period ended December 30, 2017, a 15.5% increase as compared to $44.2 million for the thirteen week period ended December 31, 2016 (the comparable prior year period). Gross profit was $12.8 million for the thirteen week period ended December 30, 2017, a 5.8% increase as compared to $12.1 million for the comparable prior year period.  The Company experienced a GAAP operating loss of $3.2 million for the thirteen week period ended December 30, 2017, as compared to operating income of $0.1 million for the comparable prior year period.  GAAP net income was $0.3 million, or net earnings $0.02 per diluted share, as compared to a net loss of $0.2 million, or a net loss of $0.02 per diluted share, for the comparable prior year period.

RCM Technologies reported revenues of $186.7 million for the fifty-two week period ended December 30, 2017, a 5.8% increase as compared to $176.4 million for the fifty-two week period ended December 31, 2016 (the comparable prior year period). Gross profit was $48.4 million for the fifty-two week period ended December 30, 2017, a 2.9% increase as compared to $47.0 million for the comparable prior year period.  GAAP operating income was $0.3 million for the fifty-two week period ended December 30, 2017 as compared to $3.8 million for the comparable prior year period. GAAP net income was $2.0 million, or net earnings $0.17 per diluted share, as compared to net income of $1.8 million, or a net earnings of $0.14 per diluted share, for the comparable prior year period.

The Company had adjusted EBITDA (non-GAAP) for the fourth quarter and for the full year fiscal 2017 of $2.5 million and $8.0 million, respectively. 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 legal, office closures and other charges for the fifty-two week period ended December 30, 2017.  These charges included costs relating to the closure of the Company's Purchase, NY engineering and Edina, MN Information Technology offices, totaling approximately $0.8 million; severance to a senior executive of $0.3 million; legal fees of $0.2 million associated with the acquisition of an approximately 30 person engineering firm in Serbia; and other legal related and miscellaneous charges of approximately $0.1 million.  The Company also experienced the following charges for the fifty-two week period ended December 30, 2017: $3.5 million in goodwill impairment charges associated with the Information Technology segment, $0.8 million for an increase to estimated contingent payments associated with prior year acquisitions in the Engineering segment, and $0.3 million for tax credit professional fees.

Rocco Campanelli, President and Chief Executive Officer of RCM Technologies, commented, "We are very pleased with our results in the fourth quarter of 2017 as revenue, gross profit and adjusted EBITDA grew by 15.5%, 5.8% and 24.4%, respectively, as compared to fourth quarter 2016. Our Specialty Health Care segment again set quarterly records for both revenues and gross profit, growing by 35.5% and 26.4%, respectively, over fourth quarter 2016, primarily from further growth in our school contracts. Our fourth quarter Engineering segment revenues grew by 12.8% as compared to fourth quarter 2016. Additionally, we made a small acquisition of an engineering firm in Belgrade, Serbia that we believe has significant potential for growth and diversification expansion for both our Engineering and IT segments. We look forward to carrying our fourth quarter momentum into fiscal 2018."

Kevin Miller, Chief Financial Officer of RCM Technologies, added, "Further augmenting our focus on strong free cash flow generation, as a result of certain tax charges in fiscal 2017, we anticipate paying minimal federal income tax in 2018 and 2019.  We continue to see improvement to our balance sheet with our lowest day's sales outstanding in our trade accounts receivables in many years. Our strong balance sheet and fourth quarter increase in adjusted EBITDA allowed us to issue a special dividend of $1.00 per share in the fourth quarter. Since fiscal 2012, we have returned close to $80 million to our shareholders through special dividends and stock repurchases. We are proud of our record of being good stewards of capital for our shareholders."

Conference Call
On Wednesday, March 7, 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.

Tables to Follow

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

  Thirteen Week Periods Ended  
  December 30, 2017   December 31, 2016  
Revenues $51,057   $44,198  
Cost of services 38,253   32,092  
Gross profit 12,804   12,106  
Selling, general and administrative 10,293   10,087  
Depreciation and amortization 528   392  
Legal, office closure and other charges 1,447   1,283  
Tax credit professional fees 259   -  
Change in contingent consideration -   285  
Goodwill impairment 3,478   -  
Operating (loss) income (3,201 ) 59  
Other expense, net (154 ) (115 )
Loss before income taxes (3,355 ) (56 )
Income tax benefit (3,606 ) (160 )
Net income (loss) $251   ($216 )
         
Diluted net earnings (loss) per share data $0.02   ($0.02 )


  Fifty-Two Week Periods Ended  
  December 30, 2017   December 31, 2016  
Revenues $186,737   $176,448  
Cost of services 138,350   129,418  
Gross profit 48,387   47,030  
Selling, general and administrative 40,385   40,063  
Depreciation and amortization 1,757   1,569  
Legal, office closure and other charges 1,447   1,283  
Tax credit professional fees 259   -  
Change in contingent consideration 781   285  
Goodwill impairment 3,478   -  
Operating income 280   3,830  
Other expense, net (525 ) (528 )
(Loss) income before income taxes (245 ) 3,302  
Income tax (benefit) expense (2,255 ) 1,544  
Net income $2,010   $1,758  
         
Diluted net earnings per share data $0.17   $0.14  

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

  December 30,
2017
  December 31,
2016
 
  (Unaudited)      
Cash and cash equivalents $2,851   $279  
Accounts receivable, net $46,080   $45,170  
Total current assets $55,639   $53,071  
Total assets $73,279   $69,831  
Total current liabilities $22,188   $23,713  
Borrowing under line of credit $27,279   $14,311  
Net debt (borrowings less cash) $24,428   $14,032  
Total liabilities $51,248   $38,576  
Stockholders' equity $22,031   $31,255  
Treasury stock ($14,987 ) ($14,622 )


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, primarily changes in contingent consideration, 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 is a performance measure and not a liquidity measure, and therefore 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", Neither EBITDA nor Adjusted EBITDA for the thirteen weeks and fifty-two weeks ended December 30, 2017 and December 31, 2016. 

  Thirteen Week Periods Ended   Fifty-Two Week Periods Ended  
  December 30,
2017
  December 31,
2016
  December 30,
2017
  December 31,
2016
 
GAAP net income (loss) $251   ($216 ) $2,010   $1,758  
Income tax (benefit) expense (3,606 ) 160   (2,255 ) 1,544  
Interest expense 181   117   590   539  
Depreciation and amortization 528   392   1,757   1,569  
EBITDA (non-GAAP) ($2,646 ) $453   $2,102   $5,410  
                 
Adjustments                
Legal, office closures and other charges 1,447   1,283   1,447   1,283  
Tax credit professional fees 259   -   259   -  
Change in contingent consideration -   285   781   285  
Goodwill impairment 3,478   -   3,478   -  
Gain on foreign currency transactions (27 ) (2 ) (65 ) (11 )
Adjusted EBITDA (non-GAAP) $2,511   $2,019   $8,002   $6,967  


RCM Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)

  Thirteen Week Periods Ended  
  December 30,
2017
  December 31,
2016
 
Net income (loss) $251   ($216 )
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities
1,634   1,859  
Changes in operating assets and liabilities        
Accounts receivable (4,141 ) (3,173 )
Prepaid expenses and other current assets (523 ) (619 )
Net of transit accounts receivable and payable 359   102  
Accounts payable and accrued expenses 995   1,456  
Accrued payroll and related costs 668   861  
Income taxes payable (1,128 ) (763 )
Total adjustments (2,136 ) (277 )
Cash used in operating activities ($1,885 ) ($493 )
         
Net cash used in investing activities (1,060 ) (102 )
Net cash provided by financing activities 4,795   541  
Effect of exchange rate changes 176   30  
Increase (decrease) in cash and cash equivalents $2,026   ($24 )


  Fifty-Two Week Periods Ended  
  December 30, 2017   December 31, 2016  
Net income $2,010   $1,758  
Adjustments to reconcile net income to cash
   provided by (used in) operating activities
4,660   3,834  
Changes in operating assets and liabilities        
Accounts receivable (459 ) 5,427  
Prepaid expenses and other current assets (293 ) 1,228  
Net of transit accounts receivable and payable (830 ) 966  
Accounts payable and accrued expenses (318 ) (290 )
Accrued payroll and related costs 483   (1,473 )
Income taxes payable (182 ) 185  
Total adjustments 3,061   9,877  
Cash provided by operating activities $5,071   $11,635  
         
Net cash used in investing activities (1,803 ) (831 )
Net cash used in financing activities (826 ) (11,556 )
Effect of exchange rate changes 130   46  
Increase (decrease) in cash and cash equivalents $2,572   ($706 )


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

  Thirteen Week Period Ended December 30, 2017  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $21,236   $22,104   $7,717   $51,057  
Cost of services 15,745   16,750   5,758   38,253  
Gross Profit $5,491   $5,354   $1,959   $12,804  
Gross Profit Margin 25.9 % 24.2 % 25.4 % 25.1 %


  Thirteen Week Period Ended December 31, 2016  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $18,834   $16,318   $9,046   $44,198  
Cost of services 13,323   12,082   6,687   32,092  
Gross Profit $5,511   $4,236   $2,359   $12,106  
Gross Profit Margin 29.3 % 26.0 % 26.1 % 27.4 %


  Fifty-Two Week Period Ended December 30, 2017  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $82,753   $71,316   $32,668   $186,737  
Cost of services 60,352   53,801   24,197   138,350  
Gross Profit $22,401   $17,515   $8,471   $48,387  
Gross Profit Margin 27.1 % 24.6 % 25.9 % 25.9 %


  Fifty-Two Week Period Ended December 31, 2016  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $73,853   $59,783   $42,812   $176,448  
Cost of services 54,182   44,091   31,145   129,418  
Gross Profit $19,671   $15,692   $11,667   $47,030  
Gross Profit Margin 26.6 % 26.2 % 27.3 % 26.7 %

RCM Technologies, Inc.
2500 McClellan Avenue
Pennsauken, NJ 08109

Tel:  856.356.4500
Fax: 856.356.4600
info@rcmt.com
www.rcmt.com

Corporate Contacts:
Rocco Campanelli
President & CEO
Kevin D. Miller
Chief Financial Officer

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