RCM Technologies, Inc.

Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer for 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 third quarter.

Thanks, Kevin. Good morning, everyone. Our SCIM delivered continued strong performance in our seasonally weak third quarter. I am proud of the team's execution. Our results demonstrate the leverageability of our team's business model driven by our unwavering commitment to delivering value for our world-class client base. During the quarter, strong performance was demonstrated across each division. Our life sciences and IT group bolstered its RPO offering with the addition of Talent Herder. I will speak more about the acquisition in a moment. Turning to our engineering team, each of our business units delivered solid performance and I'm excited about the traction we are gaining across several new business initiatives. Lastly, our healthcare services team continues to expand its presence across the K-12 end market with the addition of several strategic accounts. Kevin will cover our financial performance in more detail. but I want to share several financial and operational highlights from the quarter. RCM generated third quarter revenue of $58 million, a 28% increase year over year after adjusting to the power systems Canada sale. As for profitability, RCM generated adjusted EBITDA of $4.8 million in Q3, representing growth of approximately 162% on a year over year basis. On the operational front, there were several highlights worth calling out in more detail. First, as previously mentioned, our life sciences and IT group recently acquired Talent Herder, a leading talent services acquisition company. Talent Herder will bolster RCM's existing RPO capabilities by expanding candidate reach, extending alternative service models to our current base, and providing proven methods to new clients, responding to a changing employment landscape at incredibly competitive rates. Talent Herder's proven recruitment processes can help scale both in-person and remote working environments for companies across the globe. We are excited about the growth opportunities Talent Herder presents to our clients and staff. Over the near term, the focus remains on the seamless integration of the Talent Herder team. We are integrating the recruiting groups in addition to gaining leverage from our acquired offshore sourcing staff and we have already identified several new opportunities through our joint sales efforts. I look forward to sharing more updates on our progress in future calls. On the engineering front, I'm excited to announce the grand opening of our Innovation Center at Thermal Kinetics. The implementation of this state-of-the-art facility complements our team's existing equipment capabilities and enables our engineers to develop new processes alongside our customers. For many process applications, the ability to run a small-scale version of a system yields the required empirical data to design and de-risk the process successfully. This go-to-market approach will be essential as we scale up initiatives across select emerging technologies in which we have the necessary expertise, including sustainable aviation fuels. With an estimated $40 to $50 billion in SAF investment planned through 2025 and a further $1 trillion required by 2040, we believe there will be robust demand for identifying ways to scale supply cost effectively. Our test center has a strategic role to play, and it will be a powerful tool as we position ourselves to become the go-to partner for clients looking to scale emerging process technologies in the future. Fitting to our healthcare services group, the team continues to excel amidst the ever-changing healthcare landscape. The industry's issues are structural and will not be solved over the near term. COVID-19 has caused many healthcare professionals in the US to reconsider their plans. For example, in a recent survey by McKinsey, 29% of RNs in the US said they were likely to leave their current role in direct patient care. Many respondents indicated they were considering leaving the workforce entirely. The bottom line. The U.S. health sector is facing a substantial talent shortfall, with several studies estimating that by 2025, there may be a supply-demand imbalance of 200,000 to 450,000 nurses. We have the expertise to help close this gap for our clients, as it will require a combination of innovation and robust execution that comes from decades of service committed to this head market. Thankfully, these are two of RCM's healthcare's greatest attributes. We believe our SIEM healthcare will play an important role in addressing this structural deficiency, most prominently in our core education and market where our experience and scale is unrivaled. Our team is leveraging technology to take a more analytical, data-driven approach to resource allocation. This focus has enabled us to engage with our clients more strategically by providing tailored holistic solutions according to their needs. as opposed to the non-scalable practices of yesteryear that focused on placing individuals on an ad hoc basis. We are confident this model will lead to a more sustained value creation for our customers and a more defensible economic moat for RCM. Finally, I would like to take a minute to express appreciation to our shareholders on behalf of RCM and its employees. I have spent nearly my entire career helping publicly traded companies realize their potential. I cannot recall a more supportive, constructively engaged group. I know a substantial portion of you are long-term shareholders, more than one-third of which are current and prior RCM employees. Your support is one of many latent assets at RCM. Your commitment has allowed us to retire over 25% of the company's shares outstanding since the summer of 2020 while investing heavily in the company's future. We are committed to further rewarding your support with a scalable platform and clean balance sheet to compound value to all stakeholders for years to come. In closing, as our clients grapple with the realities of scaling their businesses in a talent-starved, increasingly technology-driven world, our expanding suite of cross-functional capabilities and technical expertise have positioned RCN as the de facto platform of choice when searching for solutions. I remain optimistic about the company's future as we have many exciting initiatives underway. I will now turn the call back to Kevin to discuss the Q3 2022 financial results in more detail.

Thank you, Brad. Regarding our consolidated results, revenue for the third quarter was 58.2 million, growing by 12.7 million on a year-over-year basis. Adjusted EBITDA in Q3 2022 was 4.8 million. representing an approximately 3 million increase on a year-over-year basis. RCM generated gross profit of $17.4 million during the quarter, a 42% year-over-year increase. Turning to our healthcare segment, the group generated revenue of $28 million in Q3 2022, which represents a 43% increase year-over-year. The team continues to make great progress within the K-12 market and has expanded its footprint with the onboarding of several new accounts. The opportunities across behavioral health and special education remain robust, and the team is positioned to take advantage. Turning to our life sciences and information technology segment, as Brad mentioned, the team's integration efforts regarding the talent herder acquisition are going very well, and the execution across each of the remaining practice groups has not missed a beat. In terms of revenue, we generated $9.2 million in Q2 2022, which is essentially flat with Q3 2021. From a profitability standpoint, the group's gross margin profile increased by 200 basis points as the team transitioned the business model to a more leverageable managed service contract profile. And finally, regarding our engineering segment, after adjusting for the sale of our Canada Power Systems office in Q3 2021, Our engineering Q3-22 revenues of 20.9 million grew by 31% as compared to adjusted Q3-21 engineering revenue of 16 million. The performance was broad-based across each of the divisions, and the team is doing an excellent job of expanding into adjacent service offerings that leverage each unit's diverse skill sets. As we migrate through the fourth quarter, we remain confident that we will finish the year strong and enter 2023 in stride. We are in a strong position financially to be opportunistic across each of our segments, and we are excited about 2023 as our teams continue to execute throughout the organization. This concludes our prepared remarks.