RCM Technologies, Inc.

Welcome to the RCM Technology second quarter earnings call. I will now turn the call over to Kevin Miller. You may begin.

Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of 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, 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 over the call to Brad Veazey, Executive Chairman, to provide an overview of RCM's operating performance during the quarter.

Thanks, Kevin. Good morning, everyone. Consistent with our prior discussion, after starting the year off slow due to project timing and a key client's unexpected program loss impacting the first half, we made the decision to maintain stride in building what we believe to be a highly differentiated platform in the professional service and marketplace. Our secular growth markets and strong portfolio of capabilities made the decision to ignore the perpetual drumbeat of economic prognostications an easy one. In fact, as with any economic scare, we knew we would be in position to take advantage of opportunities to further strengthen the business and enhance long-term returns while others taking a more short-term approach tapped the brakes. Since we last spoke, Progress has been made across each of our divisions, and I am excited to discuss in more detail, starting with our healthcare division. RCM's healthcare division continues to raise the bar in various aspects of the business. Our commitment to delivering best-in-class staffing services and solutions has led us to focus on several key areas. First and foremost, our steadfast dedication to improving the delivery of behavioral healthcare has seen very positive outcomes and growth in new school districts nationwide. By implementing innovative and evidence-based approaches, we have made significant strides in addressing the behavioral and mental health challenges facing children and their ability to learn and succeed in school. Moreover, our effort to expand our school and healthcare facility clients have not only broadened our reach but also strengthened our ties with local communities and providers. These initiatives have bolstered client penetration and allowed us to serve more students and patients in need, making a sustainable impact. We have also invested significantly in technology to enhance the applicant user experience and optimize operational efficiency. This digital transformation, including the launch of our new app, has paved the way for expedited onboarding of service providers, and an overall better candidate experience. Furthermore, our reinvigorated branding strategy has solidified our position as a trusted and forward-thinking healthcare staffing provider, setting us apart from the competition and opening new avenues of growth. As we look ahead, we remain committed to our pursuit of excellence and continuous improvement. Embracing new technologies and staying attuned to emerging educational and behavioral health care trends will be pivotal in shaping our continued success. With a strong foundation and a dedicated team, we are confident in our ability to navigate challenges and seize new opportunities, driving our business to new heights in the ever-evolving education and health care landscape. On the life sciences and IT front, we believe the division has reached a tipping point as we continue to grow our project and manage solutions business. Just 30 months ago, the division has had less than 5% of its business in these areas. In 2023, the number has grown to more than 33% in Q1 and 43% in Q2. With a much improved revenue stream comes a more robust margin profile. Again, when analyzing the same sequential quarterly periods in 2023, We improved gross margin by 500 basis points on top of over 10% revenue growth. HCM continues to galvanize partnerships within its core clients, becoming the number one partner in its flagship offering and securing a long-term contract within the client's second key offering. Our HCM team continues to raise the bar, and the rapid growth of our core clients has required increasing levels of support, We think the success of this group is in the early innings as we continue to grow our share within a fast-growing client base. Our life sciences practice has introduced several new service offerings, including commercial operations, a new ERP practice, and a series of target assessments to help clients quickly improve quality processes and data management. Our life sciences practice has also secured three new managed service clients and continues to strengthen its leadership and sales personnel. We continue to be optimistic for the remainder of 2023 and beyond. As mentioned earlier, I believe this group has reached a tipping point where it will serve as a strategic pillar within the RCM portfolio. Energy services closed Q2 with strong results, seeing continuous growth through the first half of 2023. The team added a significant amount of backlog in Q2 through major contract wins and was selected to be the engineering firm for a large new substation project in the Northeastern United States. This win was made possible by delivering results as promised and being a trusted partner to our major utility clients year after year. Across the globe, the energy transition is driving investment in new projects to strengthen the grid for the future, and RCM is proud to expand its services to support our clients' and communities' evolving electricity demands. Our European footprint has been developing well through Q2, and the team is building a strong foundation to serve our growing list of utility clients. The focus on developing a sturdy foundation across all engineering and project management disciplines has enabled Energy Services to take on more large, complex projects to provide our clients with complete turnkey solutions. The second half of 2023 is expected to be consistently strong as the team continues to convert opportunities into backlog and expand our client list. Second quarter results in our process and industrial business were again in line with the plan. Focus over the past three months was on project execution, growing and strengthening relationships. One important increase to the backlog came in the form of additional engineering for critical elements of an advanced ethanol facility to produce sustainable aviation fuel. We had a noticeable acceleration in pipeline throughout the quarter stemming from projects with both new and established customers. Aside from the significant revenue potential expected in 2024, This expansion of the sales funnel is strong evidence that our growth and market diversification plans are being realized and strengthening RCM's presence in the global energy transition. RCM Thermal Kinetics, a key unit within Process Industrial, continues to advance projects while performing engineering and lab testing for future demonstration and production scale facilities. It was rewarding to see the impact the RCM team is making to the community through the open house of our new 10,000 square foot office and lab held in July. Many members of local universities, vendors, clients, friends, and families joined us to learn from a variety of educational demonstrations. These demonstrations in our state of the art lab highlight how our approach can provide clients with higher quality output saving time and money while de-risking projects across the many markets that we serve. The team and company history was also featured by the local business journal, Buffalo Business First. Aerospace and Defense is seeing a marked recovery in the third quarter. After a key client experienced an unexpected program loss at the end of last year, the Aerospace and Defense team rose to the occasion. accelerating business development activity with new clients and deepening relationships with existing clients. Thus far in 2023, the division has already added eight new clients, well on the way to achieving our goal of 12 by the end of 2023. Also of note, we have almost tripled the number of hires across our client base in the second quarter compared to the first quarter 2023. This expansion includes new clients in defense, specifically sea vessels, new vertical lift customers, as well as new customers in aerospace component part manufacturers, assisting them on the production floor and within the aftermarket domain. The expansion of existing clients and new clients with our core expertise and new arenas provides much desired depth and breadth to the organization and strongly positions us for 2024. We have also begun to see traction on one of our largest awards from our strongest OEM client across the entire spectrum of engineering resources with potential opportunities spanning into 2026. In addition, we have been awarded a sole source contract for one of our space clients where we are providing support from conceptual design through aftermarket services in hybrid and flexible scenarios. We now have a proven track record with our digital conversion expertise and methodology within Aftermarket, as well as our model-based definition prowess, which now expands across multiple clients throughout the United States. With the addition of our new senior vice president, our Aftermarket group is now touting the S factor, which broadens our reach beyond S1000D publications into S2000M material management S3000L logistic support analysis, S4000P maintenance, and S5000F in-service data feedback. Once the realization of the support we have provided our customers was apparent, we decided it was time to market the full solution in an offering that we believe is differentiated in the marketplace. I believe when we look back on 2023, RCM Aerospace and Defense will serve as a shining example of our culture at work, one of continuous improvement, even in the face of adversity, day in and day out, an incessant focus on upgrading the quality of our business through value-creative growth. Before turning the call to Kevin, who will cover our financial results in more detail, I will take a moment to touch on our progress on the capital allocation front. During the second quarter, we repurchased over 939,000 shares, bringing our year-to-date share repurchase to nearly 1.6 million shares. Our clean balance sheet and high cash-generating business model and dedicated culture committed to continuous improvement of our business have allowed us to repurchase approximately 40% of the company over the last three years at an average price of $7.50 per share. consistent with our prior commentary. Taking into account normal Q3 seasonality, the business continues to strengthen as we move through the year, setting up a healthy double-digit earnings increase in the fourth quarter, a trajectory consistent with our long-term objectives. Now I will return the call over to Kevin to discuss the Q2 2023 financial results in more detail. Thank you, Brad.