RCM Technologies, Inc.

Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer at RCM Technologies. I am joined today by Brad Veazey, RCM's Executive Chairman. 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. I will now turn the call over to Brad Veazey executive chairman, to provide an overview of RCM's operating performance during the quarter.

Thanks, Kevin. Good morning, everyone. I am pleased to announce strong performance throughout the company as we continue to execute against our long-term strategy. I have always believed that combining leading talent and technology with secular growth markets and excellent capital allocation would lead to superior long-term returns. Furthermore, I believe a virtuous cycle has emerged where the success of RCM as a platform can be leveraged to attract top talent and investment opportunities in a talent and return starved environment. Specifically, many of the participants in the workforce today, especially those with highly specialized skill sets, are passive participants. Often these individuals are not looking for work, but if a particular firm or colleague calls that the cannon holds in high regard, the candidate will engage with alacrity and join the team. When a company reaches a critical mass comprising both tangible and intangible assets, like the ones described above, economic benefits can increase at a compounding rate. As we look to the rest of this year and beyond, we expect our performance to carry forward as we grow our share in existing markets and scale into new adjacencies. Turning to our second quarter, Each unit demonstrated solid execution and performed well in our mostly recession-resistant end markets. Our engineering team continued to gain traction on multiple fronts and exceed our financial expectations for the quarter. Our healthcare services team continues to expand its strategic footprint within the education market and deliver against the backdrop where decades of underinvestment have left the country's social infrastructure in disrepair. Finally, Our life sciences and IT group have made demonstrable progress in its journey toward a managed service and solutions-driven model. In summary, while other companies are falling back to a defensive position, we continue to invest in the team and fill out our leadership ranks. Kevin will cover our financial performance in more detail, but I want to share several financial and operational highlights from the quarter, starting with our financial performance. RCM generated second quarter revenue of $74 million, a 59% increase year over year after adjusting for the power systems Canada sale. Regarding profitability, we also performed well with RCM generating EBITDA of $8.4 million in Q2, representing growth of 281% on a year over year basis. Our finance team under Kevin's leadership continues to raise the bar. with RCM generating record cash flow from operations for the quarter of $18.3 million. I remain enthusiastic about our future, and I'm excited about some of the industry developments we see across each of our end markets and the strategic pursuits within our organization. First, I want to highlight my appreciation for the engine that ultimately drives our performance, which is our people. Our vision and demonstrated success is resonating with folks across the industries we operate in, but more importantly, good people attract good people. Again, a virtuous cycle, enabling us to attract top talent to RCM. In particular, I'm excited to announce that Mark Francis has joined RCM as Senior Vice President of Engineering for our aerospace group. Mark brings a wealth of experience that will help us continue to build out our engineering and manufacturing engineering teams to successfully execute, as well as support new client business pursuits and development. Mark has held leadership positions in operations, manufacturing, engineering, and quality, most recently for Lockheed Martin. Mark has also held general manager roles for Tier 1 manufacturing companies in the aerospace industry. I am excited to have Mark aboard to help accelerate the increasing success of our aerospace team. Staying within the engineering group, Our P&I team is also working on several innovative projects within the biofuel space and is ideally positioned to take advantage of recent developments on the policy front. As many of you know, the path to realizing a more sustainable carbon footprint starts with smart legislation to provide the industry with the necessary incentives. We believe the recent breakthrough in Washington regarding the Inflation Reduction Act is a great start. With investments totaling roughly $369 billion, allocated to energy security and climate change. We believe our expertise in advanced biofuels, ethanol, and carbon capture and conversion technologies affords us a strategic advantage in helping our clients decarbonize the economy. Pivoting to our healthcare services group, the team is doing a tremendous job in profitably scaling the division, even as the organization's size has grown considerably over the past year. Part of the success is attributable to the strategic investments the group has made in its technology systems. For example, the team is revamping its front-end and back-end systems with the new platform enabling the group to deliver solutions to our clients more efficiently and productively than ever before. However, the team's success is also attributable to leveraging its strategic footprint in the primary and secondary education market to expand its solutions offering to clients across the U.S. In particular, I'm excited about the investments the team is making in behavioral health and special education. As we expand our footprint, it has become clear that a holistic solution is desperately needed to address the education industry's growing talent shortage. According to the U.S. Center of Education Statistics, approximately 14% of all public school students receive special education services during the 2019-2020 school year. Unfortunately, schools nationwide can't find enough special education teachers to fill the vacancies needed to serve this cohort of children. I am confident that the creative solutions we will be able to deliver for our clients will help address this growing pain point in school districts across the country. Finally, our life sciences team continues to expand its managed service contract base. We have secured multi-year deals with select clients and have several contracts we are bidding on that we remain very excited about. In parallel with these efforts, the team continues to make strategic investments across its leadership ranks to ensure we have the bandwidth to take advantage of all opportunities in front of us. I am also excited to share that the group is expanding the breadth of its offerings by bolstering our expertise in data analytics and other emerging technologies. I'm looking forward to sharing more updates related to these initiatives in the future. In closing, our team executed well during the first half of 2022. Despite the macroeconomic headwinds we've been all reading about in the newspapers, we anticipate our progress to remain unabated due to our strong culture and robust secular growth tailwinds driving each of our end markets. I want to thank all of RCM employees for a job well done. Your unwavering commitment to delivering value to our clients day in and day out has put all of RCM stakeholders firmly on offense. I'm excited about what the future holds for our organization, and I look forward to sharing more updates as the year progresses. Now I will turn the call back to Kevin to discuss the Q2 2022 financial results in more detail.

Thank you, Brad. Regarding our consolidated results, revenue for the quarter was $74.3 million, growing over 25 million on a year-over-year basis. Adjusted EBITDA in Q2 2022 was 8.4 million, representing about a $6 million increase on a year-over-year basis. Gross profit came in at 21.6 million during the quarter, about a 77% year-over-year increase. Given robust cash flow generation from operations of 20.8 million during the first half of 2022, we were able to pay down the remaining balance on our revolving credit facility, and now we are debt-free. Turning to our healthcare segment, the group generated revenue of $43.4 million in Q2 2022, which represents an 89% increase year-over-year. The performance was broad-based, and we remain excited regarding several growth initiatives the team is engaging in within the K-12 education and market. Turning to our life sciences and information technology segment, the team continues to execute across each of its practice groups and demonstrated solid year-over-year growth in revenue and profitability. Regarding revenue, we generated about 10 million in Q2 2022 compared to 9.1 million in Q2 2021. We believe that as the group expands its managed service contract base in the future, the group's revenue base will continue to become stickier and more profitable. And finally, turning to our engineering segment, we continue to see vigorous activity across our client base and the respective end markets. After adjusting for the sale of our Canada Power Systems offices in Q3 of 2021, our engineering Q2 2022 revenue of $20.9 million grew by 41% as compared to the adjusted Q2 2021 engineering revenue of $14.9 million. Our engineering units performed well during the quarter, with our aerospace and process and industrial groups leading the way. As mentioned, we are very excited about what the future holds for our process and industrial group. They continue to gain traction with the sustainable fuels market and are ideally suited to address the growing demand for decarbonization technologies. Turning our attention to the second half of the year, I'll echo Brad's earlier comments that we remain confident in the demonstrable progress we've made and anticipate our strong operating performance will carry forward into the back half of the year. This concludes our prepared remarks. At this time, we will open the call for questions.