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RCM Technologies, Inc. Announces Second Quarter Results

PENNSAUKEN, N.J., Aug. 07, 2019 (GLOBE NEWSWIRE) -- RCM Technologies, Inc. (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 week periods ended June 29, 2019.

RCM Technologies reported revenue of $50.7 million for the thirteen week period ended June 29, 2019 (the current period), a 1.9% decrease as compared to $51.7 million for the thirteen week period ended June 30, 2018 (the comparable prior year period). Gross profit was $12.8 million for the current period, a 0.5% increase as compared to $12.7 million for the comparable prior year period.  The Company experienced GAAP operating income of $2.2 million for the current period, as compared to $0.9 million for the comparable prior year period.  GAAP net income was $1.3 million, or $0.10 per diluted share, for the current period as compared to $0.4 million, or $0.03 per diluted share, for the comparable prior year period.

RCM Technologies reported revenue of $102.3 million for the twenty-six week period ended June 29, 2019 (the current period), a marginal decrease as compared to $102.5 million for the twenty-six week period ended June 30, 2018 (the comparable prior year period). Gross profit was $25.3 million for both periods presented.  The Company experienced GAAP operating income of $3.8 million for the current period, as compared to $2.6 million for the comparable prior year period.  GAAP net income was $2.7 million, or $0.21 per diluted share, for the current period as compared to $1.4 million, or $0.12 per diluted share, for the comparable prior year period.

The Company experienced $1.4 million in severance, professional fees and other charges for both the thirteen and twenty-six week periods ended June 30, 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. 

Bradley Vizi, Executive Chairman of RCM Technologies, commented, “Allowing for third-quarter seasonality in our Healthcare segment from summer school closings, we believe we are poised for a strong finish to fiscal 2019 and that we have positioned RCM to demonstrate higher earnings power in 2020.”

Kevin Miller, Chief Financial Officer of RCM Technologies, added, “We are pleased with generating $3.1 million in cash flow from operations in the second quarter of 2019. We expect continued strong cash flow through the remainder of the year.”

Conference Call
On Thursday, August 8, 2019, 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 (866) 403-9129.

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 Per Share Amounts)

  Thirteen Week Periods Ended  
  June 29, 
2019
  June 30, 
2018
 
Revenue $50,705   $51,710  
Cost of services 37,902   38,975  
Gross profit 12,803   12,735  
Selling, general and administrative 10,202   10,076  
Depreciation and amortization of property and equipment 325   381  
Severance, professional fees and other charges -   1,371  
Amortization of acquired intangible assets 83   17  
Operating income 2,193   890  
Other expense, net (483 ) (388 )
Income before income taxes 1,710   502  
Income tax expense 459   121  
Net income $1,251   $381  
         
Diluted net earnings per share data $0.10   $0.03  


  Twenty-Six Week Periods Ended  
  June 29, 
2019
  June 30, 
2018
 
Revenue $102,300   $102,522  
Cost of services 76,980   77,232  
Gross profit 25,320   25,290  
Selling, general and administrative 20,667   20,497  
Depreciation and amortization of property and equipment 640   778  
Severance, professional fees and other charges -   1,371  
Amortization of acquired intangible assets 165   34  
Operating income 3,848   2,610  
Other expense, net (949 ) (695 )
Income before income taxes 2,899   1,915  
Income tax expense 185   483  
Net income $2,714   $1,432  
         
Diluted net earnings per share data $0.21   $0.12  

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

  March 30, 
2019
  December 29, 
2018
  (Unaudited)    
Cash and cash equivalents $868   $482
Accounts receivable, net $58,230   $52,335
Total current assets $63,935   $58,811
Total assets $92,099   $81,510
Total current liabilities $21,824   $23,188
Borrowing under line of credit $30,943   $27,540
Net debt (borrowings less cash) $30,075   $27,058
Total liabilities $61,550   $54,311
Stockholders’ equity $30,549   $27,199

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 twenty-six week periods ended June 29, 2019 and June 30, 2018. 

  Thirteen 
Week Periods Ended
  Twenty-Six
Week Periods Ended
  June 29, 
2019
  June 30, 
2018
  June 29, 
2019
  June 30, 
2018
GAAP net income $1,251   $381   $2,714   $1,432
Income tax expense   459     121     185     483
Interest expense   458     400     887     666
Imputed interest on contingent consideration   48     -     96     -
Depreciation of property and equipment   325     381     640     778
Amortization of acquired intangible assets   83     17     165     34
EBITDA (non-GAAP) $2,624   $1,300   $4,687   $3,393
               
Adjustments              
Severance, professional fees and other charges   -     1,371     -     1,371
(Gain) loss on foreign currency transactions   (23 )   (12 )   (34 )   29
Adjusted EBITDA (non-GAAP) $2,601   $2,659   $4,653   $4,793

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

  Thirteen Week Periods Ended  
  June 29,
2019
    June 30,
2018
 
Net income $1,251     $381  
Adjustments to reconcile net income to cash
  used in operating activities
761     623  
Changes in operating assets and liabilities:          
Accounts receivable 353     (82 )
Prepaid expenses and other current assets 548     276  
Net of transit accounts receivable and payable 917     149  
Accounts payable and accrued expenses (639 )   (213 )
Accrued payroll and related costs (345 )   1,735  
Right of use assets and liabilities (7 )   -  
Income taxes payable 239     565  
Total adjustments 1,827     3,053  
Cash provided by operating activities $3,078     $3,434  
           
Net cash used in investing activities (136 )   (313 )
Net cash used in financing activities (3,743 )   (3,111 )
Effect of exchange rate changes (24 )   (31 )
Decrease in cash and cash equivalents ($825 )   ($21 )


  Twenty-Six Week Periods Ended  
  June 29,
2019
  June 30,
2018
 
Net income $2,714   $1,432  
Adjustments to reconcile net income to cash
  used in operating activities
1,494   1,402  
Changes in operating assets and liabilities:        
Accounts receivable (5,911 ) (6,160 )
Prepaid expenses and other current assets 658   274  
Net of transit accounts receivable and payable 962   (1,094 )
Accounts payable and accrued expenses (1,465 ) (1,425 )
Accrued payroll and related costs (1,217 ) 1,665  
Right of use assets and liabilities 259   -  
Income taxes payable 29   296  
Total adjustments (5,191 ) (5,042 )
Cash used in operating activities ($2,477 ) ($3,610 )
         
Net cash used in investing activities (238 ) (613 )
Net cash provided by financing activities 3,140   1,817  
Effect of exchange rate changes (39 ) (14 )
Increase (decrease) in cash and cash equivalents $386   ($2,420 )

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

  Thirteen Week Period Ended June 29, 2019  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $18,583   $23,370   $8,752   $50,705  
Cost of services 13,324   18,057   6,521   37,902  
Gross Profit $5,259   $5,313   $2,231   $12,803  
Gross Profit Margin 28.3 % 22.7 % 25.5 % 25.3 %


  Thirteen Week Period Ended June 30, 2018  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $21,571   $22,858   $7,281   $51,170  
Cost of services 15,934   17,771   5,270   38,975  
Gross Profit $5,637   $5,087   $2,011   $12,735  
Gross Profit Margin 26.1 % 22.3 % 27.6 % 24.9 %


  Twenty-Six Week Period Ended June 29, 2019  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $37,638   $47,540   $17,122   $102,300  
Cost of services 27,682   36,593   12,705   76,980  
Gross Profit $9,956   $10,947   $4,417   $25,320  
Gross Profit Margin 26.5 % 23.0 % 25.8 % 24.8 %


  Twenty-Six Week Period Ended June 30, 2018  
  Engineering   Specialty
Health Care
  Information
Technology
   

Consolidated
 
                 
Revenue $42,988   $45,492   $14,042   $102,522  
Cost of services 31,658   35,156   10,418   77,232  
Gross Profit $11,330   $10,336   $3,624   $25,290  
Gross Profit Margin 26.4 % 22.7 % 25.8 % 24.7 %


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