U.S. Markets open in 2 hrs 45 mins

Edited Transcript of RCMT earnings conference call or presentation 10-Aug-17 2:00pm GMT

Thomson Reuters StreetEvents

Q2 2017 R C M Technologies Inc Earnings Call

Pennsauken Aug 16, 2017 (Thomson StreetEvents) -- Edited Transcript of R C M Technologies Inc earnings conference call or presentation Thursday, August 10, 2017 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Kevin D. Miller

RCM Technologies, Inc. - CFO, Treasurer and Secretary

* Rocco Campanelli

RCM Technologies, Inc. - CEO and President

================================================================================

Conference Call Participants

================================================================================

* William Sutherland

The Benchmark Company, LLC, Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for joining RCM Technologies second quarter earnings conference call.

Your host for today, Rocco Campanelli, will begin.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [2]

--------------------------------------------------------------------------------

Good morning, everyone. This is Rocco Campanelli, President and CEO. Welcome to the RCM Technologies 2017 Second Quarter Earnings Call. I'm joined today by Kevin Miller, our Chief Financial Officer. Kevin will begin with the legal disclaimer, and then I will summarize the operating results for each of our operating units. Then we will open it up to questions.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [3]

--------------------------------------------------------------------------------

Good morning, everyone. Our presentation in this call will contain forward-looking statements. The information contained in the forward-looking statements is based on our beliefs, estimates and 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.

Rocco, take that away.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [4]

--------------------------------------------------------------------------------

Thanks, Kevin. We are pleased with our 2017 second quarter results, meeting our expectations. We are particularly excited about finishing the second quarter with a strong June, which bodes well for the second half of fiscal 2017. Despite third quarter seasonality across our business units, especially in our Health Care division due to school closings over the summer, we expect our operating income for the second half of fiscal 2017 to exceed our first half of fiscal 2017. I'll discuss each division separately.

Following a strong first quarter, our second quarter 2017 engineering revenues and gross profits grew about 10% and 13%, respectively, over second quarter 2016. Most of that growth came from our Energy Services and Power Systems group in both the U.S. and Canada. Our best performer for the second quarter was our Energy Services Group, which operates in both the USA and Canada. Our focus on the transmission and distribution market a few years ago is really starting to pay dividends, as this division posted revenues of $8.7 million in the second quarter of 2017, growth of about 23% over second quarter 2016. Energy Services expects to continue the solid performance through the remainder of the year. Some notable accomplishments included the Exelon award of a Specialty Engineer of Choice contract for their nuclear and fossil groups. In addition, we were awarded a general services agreement on the transmission and distribution side for Baltimore Gas and Electric, Delmarva and Atlantic City Electric and Gas and continue to be awarded small to medium-size projects.

RCM continues to provide support to be PSEG and is supporting the building of a new 400 -- a 480-megawatt plant for PSEG at Bridgeport. RCM has personnel on site to oversee the construction, procurement, logistics and engineering for the new facility. In addition, RCM is working with SNC-Lavalin in designing the 345-KV high-voltage interface, prefabricated metal buildings and other tasks for this new plant in addition to continuing to support the building of a new 550-megawatt plant for PSEG at Sewaren.

RCM was recently awarded a sole-supplier contract for Wisconsin Electric to provide design and drafting services for their entire fossil fleet. RCM has expanded our presence in the Midwest to support this contract. We have personnel performing tasks on-site and in our Wisconsin and Pennsauken offices for this 3-year contract.

The Mississauga Energy Services office has seen excellent growth in 2017, and we are forecasting it to continue into 2018 through large contract awards, with GE Austin to perform high-voltage DC testing and commissioning and engineering projects with, American Electric Power. The pipeline for Energy Services is projected to be strong through 2017 and 2018.

June was our best month of the year for our Canadian Power Systems Group, as utilization was much improved. As you know, our Canadian Power Systems Group is mainly focused on supporting Bruce Power and Ontario Power Generations, both of which have attractive spend profiles for the foreseeable future. We generated about $11 million in revenues from this group in the first half of 2017. We are expecting a big contribution from our Canadian Power Systems Group in the second half of fiscal 2017. We are cautiously optimistic that we'll see revenues in the neighborhood of $13 million. 2018 looks very promising for our Canadian Power System Group as well.

Our Aerospace Group has been relatively flat over the last year but we believe we will see an increase in the second half of 2017, as we begin to address needs under a new Lockheed Martin staffing general services agreement, we were awarded and continue to support our United Technologies contracts.

Our Health Care division did not experience the massive growth we have enjoyed for many consecutive quarters. With revenue growing about 4% and gross profit declining slightly, there is a lot to be excited about in our Health Care division, as we look to the second half of fiscal 2017. We'll see some expected seasonality in Q3, but we believe we will see record revenues and gross profit again in Q4. We think we have a good shot at hitting $20 million of revenue in Q4.

Our nursing group -- our Travel Nursing group had revenues of $2.6 million, growing about 2%, as compared to second quarter 2016 but declined from record revenues of $3.6 million in the first quarter of 2017. We attributed the decline to a combination of factors, including, general slowdown in the Travel Nursing business, second quarter seasonality and the inability to maintain the aggressive pace we've achieved over the last 2 years. We expect improved results in Q3 and Q4 of fiscal 2017 and are already seeing significant growth in new orders.

Our HIM group also experienced a downturn in the second quarter with $660,000 in revenue, as compared to $947,000 in second quarter of 2016 and just over $1 million in the first quarter of 2017. We had a large project with a major client that came to an end after first quarter. Based on our current pipeline, we expect improved results going forward.

The seasonality in our Hawaii Department of Education contract actually starts in Q2, as their school year finishes at the end of May. Based largely on the strength of our paraprofessional contracts, that started in October 2016, our Honolulu office generated $3.4 million in revenue, as compared to $2.8 million in second quarter of 2016. We finished the Hawaii school year with 100 paraprofessionals on our payroll. We hope to conservatively double that number for 2017 and '18 school year, considering, we anticipating -- have to anticipate having 150 by the end of August.

For many years the New York City Department of Education has been our largest health care client. We believe that RCM is the #1 health care staffing company serving New York City, the largest school district in the United States. We submitted a new RFP early in 2017 and based on recent verbal indications of our position with certain disciplines in certain school districts, we expect significant growth in this contract, as much as 30%. It's important to note, that we have not signed anything yet but the contract is expected to be for 5 years, a 3-year contract starting with the 2017, '18 school year, with two 1-year renewal options available to the Department of Education. We are very excited about starting this new contract in September.

Our Information Technology Group revenues for the second quarter continued to lag prior year results. In the past year, we continue to experience shorter consultant assignments as well as fewer opportunities than in previous years. However, we did see some positive results in the second quarter, as gross dollars -- gross profit dollars grew about 9% and gross margin improved to 27.5% from 25%, as compared to the first quarter of 2017. IT's Q2 financial improvement were facilitated by the improved utilization of our full-time consulting staff and adjustments to our solutions offerings. Utilization is anticipated to remain at Q2 levels, while other organizational adjustments are being considered and implemented. Coupling those improvements with an expected increase in revenue, should fuel improved sequential results from our Information Technology business. Thank you for attending RCM second quarter conference call. We look forward to updating you on 2017 in a few months.

We'd like to open it up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question is going to come from Bill Sutherland from Benchmark.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [2]

--------------------------------------------------------------------------------

Just a couple of -- actually start, Kevin, with you. EPS, wanted to just get the -- it's not in the press release, I know it's in the Q, but the shares outstanding that you used, it looks like it's pretty much unchanged. And then, what would be EPS adjusted for the changing contingent consideration?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [3]

--------------------------------------------------------------------------------

Actually, we did put it in the press release.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [4]

--------------------------------------------------------------------------------

Oh, it is?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [5]

--------------------------------------------------------------------------------

Yes, the adjusted. So for the 13 weeks ended 2017, it would be $0.08.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [6]

--------------------------------------------------------------------------------

Okay. That's what I calculated for the...

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [7]

--------------------------------------------------------------------------------

And for the 26 weeks, it's $0.12. We put a -- I don't know if you saw the supplemental operating results page in the press release?

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [8]

--------------------------------------------------------------------------------

Yes, I've got too many pages open here.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [9]

--------------------------------------------------------------------------------

Yes, no worries.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [10]

--------------------------------------------------------------------------------

The RAF contribution in the quarter, Rocco, was that one reason for the 23% uptick in the...

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [11]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [12]

--------------------------------------------------------------------------------

No, RAF is very small.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [13]

--------------------------------------------------------------------------------

No. The RAF acquisition, just so you understand, we bought a name and a lot of referenceable projects, and we brought over 2 engineers, we're excited to have on staff. We didn't really pay much for that, as you'll see in the quarter. We paid -- we basically assumed about $100,000 in liabilities, roughly. There was no cash exchanged for that. We bought that, and Rocco can talk a little bit more about the capabilities, but we bought it because they have a lot of referenceable projects in a new service line for us. There are some nice projects coming up that we're going to bid on, as a result of having these 2 people on board. And the former owner is a -- had been retained as a consultant, to help us sell some new projects. But this was really a purchase about potential future projects that we think we can win, the contribution in the quarter was, I don't know, maybe $25,000 in revenues, it's really not insignificant contribution in the short term.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [14]

--------------------------------------------------------------------------------

Yes, RAF was all about getting into tank inspection, cleaning and repair -- oil tank inspection, cleaning and repair. They're significant requirements for utilities to maintain the structural integrity of their large oil and gas tanks. And RAF, believe it or not, being as small as they were, were the go-to people to do the vast majority of tank inspection, cleaning, engineering and repair on EPC basis for Consolidated Edison Company of New York. And they had several contracts in the order of $5 million for this small company to manage a very, very multimillion gallon tank cleaning and repair for Con Edison in the past. And we know the future will bring similar contracts. And the main principle of the organization is someone we've known for a really long time and have worked with. And he was ready to retire and decided that he was going to turn the company over to his partner or sell it. And they thought -- were comfortable selling it with us. So these were -- this is not an unknown company to us, we've dealt with them for many years.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [15]

--------------------------------------------------------------------------------

Yes. This is a high upside, zero-risk acquisition for us. Historically, their net revenues, in a good year, could be $300,000 or $500,000 because they would outsource the majority of the work. When we win some of these projects, we are going to try and keep a little bit more of that work in-house, rather than hiring subs. So we think the combination of a much bigger balance sheet and bigger company and with a reputation that we have at the same clients that RAF was serving, that -- this could help us win some nice contracts in the future. So this was a very low-risk acquisition with some nice upside to it.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [16]

--------------------------------------------------------------------------------

No, I didn't mean to -- yes, it looks like just a...

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [17]

--------------------------------------------------------------------------------

Yes, I just wanted to give you a little bit more background because obviously, you're can only glean so much from a press release. But the answer to your question they had virtually no contribution in the second quarter.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [18]

--------------------------------------------------------------------------------

Rocco, when you talked about the Health Care group. You said potentially getting to a $20 million quarter in Q4, did I get that?

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [19]

--------------------------------------------------------------------------------

Yes, you did.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [20]

--------------------------------------------------------------------------------

Okay. And what would be kind of some of the more important pieces -- does that mean -- is that kind of like all the -- does that just proportionately mean something?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [21]

--------------------------------------------------------------------------------

Well the biggest drivers there, frankly, are going to be -- we think we're going to see a pickup in the Travel business, which faced a little bit of a low in Q2, relative to where we've been. But probably the 2 biggest pieces are -- we won that para contract in Hawaii last year, and we got -- we've started behind the eight ball because of the protest, we didn't get to start placing paras until October. So our competitors had a 2 months of a head start on us. We were still able to get about 100 paras by the end of the year and that was just like a slow month-by-month ramp. We have 140 paras out right now for the August school year and a lot of the paras don't start -- Hawaii school year starts in August -- starts in early August. And we already have 140 on. We think we have a real good chance of getting it up to 200 by the end of this year. I mean this is a little bit speculative, because it's one thing to think that you're going to put x number of paras out but it's another thing to actually do it. But we think we can put 200 out by the end of this calendar year. And then there is a possibility to put more on that, as we stretch out through the second half of the '17, '18 Hawaii school year. Also, Rocco mentioned New York. And as you know, New York is -- the New York Board of Education has been a client of ours for 20 years. And they bid new contracts about every 5 years, and we just did a new contract in early 2017 for the start of 27 (sic) [2017], 2018 school year, and we expect that contract to be 5 years, a 3-year initial contract and then hopefully two 1-year renewals that are at the exclusive option of the New York City Board of Education. At our height, we had to 240 paras out last year, but we won way more districts, we won way more primary listings through paras and we're hearing...

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [22]

--------------------------------------------------------------------------------

We won way more than this.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [23]

--------------------------------------------------------------------------------

Well, yes. There's been a verbal award, thank you, Rocco. We have not signed a contract there yet. But -- and even in some of the other nonpara areas, we're very excited about what we're being told in terms of what we've won. And it's hard to say, how many paras going to put out at New York but we think we're going to do a lot more than 240. So that's what's driving our -- those 3 factors are the biggest factors, driving our optimism for fourth quarter, which -- so Hawaii starts the beginning of August, okay. So we'll get 2 months of Hawaii in Q3 and 3 months in Q4 and then when we look at New York City and Chicago, they both start in early September. So we'll get 1 month from those 2, we're not expecting any material shifts in the Chicago contract but -- because we're in the middle of a contract there, we're 2 years into a 4-year contract with two 1-year renewals there as well. But as far as the New York City contract, we think we did $12 million with them in this '16, '17 contract, and we're really optimistic about getting some nice growth on that $12 million, starting in September of Q3. So it won't have as big of an impact on Q3 because it's only 1 month, but we think we can have a real nice uptick in both New York and Hawaii and Travel in the fourth quarter of this year, which is what is causing us to think we have a good shot at hitting $20 million. Obviously, we have to execute and we have to put the people out that we think we can but we're real optimistic about -- basically, a hitting a new run rate level with the Health Care business in the fourth quarter of this year.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [24]

--------------------------------------------------------------------------------

So that New York City Contract, they must be -- you must be pretty close to a signing, given it's mid-August?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [25]

--------------------------------------------------------------------------------

Well, you would hope so. But we -- those contracts, we've signed them in July and we've signed them in late September. It just, you're talking about a government institute and...

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [26]

--------------------------------------------------------------------------------

That signs when it's ready.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [27]

--------------------------------------------------------------------------------

Signs when it's is ready. So we'll say.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [28]

--------------------------------------------------------------------------------

And generally, if they say go, we go.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [29]

--------------------------------------------------------------------------------

And Kevin, did you guys say that you've seen early signs of a pickup in travel racks?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [30]

--------------------------------------------------------------------------------

Yes. I can't say we're going to get back to the $3.6 million quarterly level, but I think we're going to see a nice uptick from where we were in Q2.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [31]

--------------------------------------------------------------------------------

And your seasonality in Q2, what's is related to?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [32]

--------------------------------------------------------------------------------

For the travel business?

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [33]

--------------------------------------------------------------------------------

Yes..

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [34]

--------------------------------------------------------------------------------

I just -- I think that, there's just less travel during nontravel months, right. People tend to travel more in the summer. As you know, the travel business a lot of time is filling gaps in the hospitals, right. Additionally, we've seen some other pressures in that business, one related to all the uncertainty around our health care nationally, right. I think we've sort of -- our guys are feeling like the hospitals are a little bit cautious about some of these discretionary-type spends because there's so much uncertainty around what's going on with health care in general, right. And then, one of other thing that we've seen is, and as you know, Bill, we work through the big guys like Cross Country and AMN, and what we've seen is, as there's been a little bit of pressure on the amount of spending there, they've sort of tried to contract a little bit and keep more of the business and not coming out of few...

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [35]

--------------------------------------------------------------------------------

Yes, they are filling towards themselves, right?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [36]

--------------------------------------------------------------------------------

They're trying to fill more than -- but as we hope the demand will increase, it becomes more and more difficult for them to fill up themselves because they just don't have enough recruiters.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [37]

--------------------------------------------------------------------------------

Right. And then just -- well actually 2 more -- one more on IT. What signs are you seeing the 2H -- that the second half could be up a bit from first half?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [38]

--------------------------------------------------------------------------------

I'm sorry, for which on, Bill?

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [39]

--------------------------------------------------------------------------------

For IT, what are the signs that you're seeing that the second half could be up a bit from the first half?

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [40]

--------------------------------------------------------------------------------

Well, we just have more staff at this point and seem to be having more opportunities than we had in the first half and our solutions group is doing pretty well at their key clients. So it's just a matter of starting the second half with more billable heads and more higher-percentage wins than we had in the first half. And in the first half in a couple of our solutions groups, we've had higher underutilized permanent staff then we had -- that we generally have. And right now, our utilization is much improved with our permanent staff. So that's why we feel that we're going to do better.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [41]

--------------------------------------------------------------------------------

Okay. DSO, Kevin, as you guys calculate them?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [42]

--------------------------------------------------------------------------------

Yes, hold on I have some statistics in front of me here. So we ended Q2 with about 86 DSOs, which is an improvement -- a pretty big improvement. We had about 103 at the end of Q1, '16, and we've just slowly initiated various actions to get them down. So we've gotten them down to 86 as of the end of Q2. I don't know if we're going to get there, but my goal is to get it under 80 by the end of the year.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [43]

--------------------------------------------------------------------------------

Okay. And what are you guys thinking about with all the cash? What are the capital, sort of a, plans?

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [44]

--------------------------------------------------------------------------------

Well, that's a really good question. This is something we discussed frequently in terms of the capital allocation in our board meetings. And certainly, we've got a take a balanced approach in terms of investing in the business and striving to maximize return on equity. But you know what the obvious levers are, which are potentially doing some small low-risk, high-reward acquisitions. And potentially giving some money back to the shareholders through either a buyback or a dividend. Although I would say a dividend is probably a more likely scenario than doing a buyback. But I will say that, where our current debt levels are right now, they are little a bit low. So certainly, by the end of the year, we'd like to see a little bit more leverage. We're at the low end of our leverage ratio right now. We do have a couple of earnouts that need to be paid at the end of this year, but I think that probably in the November time frame, we'll make some decisions in terms of what we want to do, and we'll look and see what kind of acquisition -- potential acquisitions we have on tap. We're very conservative about making acquisitions.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [45]

--------------------------------------------------------------------------------

But we do have a pretty nice high probability, attractive acquisition on the horizon, that we're very interested in.

--------------------------------------------------------------------------------

Kevin D. Miller, RCM Technologies, Inc. - CFO, Treasurer and Secretary [46]

--------------------------------------------------------------------------------

Right. But that's a relatively small -- but we do have an acquisition -- a small acquisition on the engineering side that we expect to close, if not late in Q3, early in Q4. But we will take a hard look at where our debt is and make whatever decision we think make sense, as far as capital allocation towards the end of the year. But I think, a dividend will be a very strong consideration.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

(Operator Instructions) Mr. Campanelli, Mr. Miller, I'm waiting for callers to join the queue at this present time. And gentlemen, I don't see any callers in queue.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [48]

--------------------------------------------------------------------------------

Okay. Thank you, very much. Thanks, everyone, for joining the call, and we'll update you again in a couple of months.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

I would like to say thank you, ladies and gentlemen, for joining. Now disconnect, and I hope you have a great day.

--------------------------------------------------------------------------------

Rocco Campanelli, RCM Technologies, Inc. - CEO and President [50]

--------------------------------------------------------------------------------

Thank you.