RCM Technologies, Inc.

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

Thanks, Kevin. Good morning, everyone. As alluded to our last call, the business remained resilient in the face of economic uncertainty, a testament to the model, which revolves around aligning the right talent in defensible positions of secular growth markets. Furthermore, our brand equity continues to strengthen, providing increased leverage to the business model while allowing us to diversify and strengthen our core client base. With increasing business success comes additional capital markets exposure and inclusion of RCM into the Russell 2000 growth index for the first time in its 50-year history. An important milestone in the journey of our great company and a testament to the strength and commitment of our employee base. I will now provide an update on the progress of each of our business units. We are pleased to report that the Healthcare Services Group posed out the 2024-2025 school year with the momentum. We saw strong growth across our portfolio, driven by our commitment to quality, innovation, and class satisfaction. As we looked ahead to the 2025-2026 school year, we are entering it with tremendous excitement and confidence. Our roster of new school partners is expanding, and we are equally encouraged by the commitments from our existing clients to broaden our role in staffing their schools. This speaks volumes about the trust we have built and the results we have delivered. One of the achievements we are most proud of is our ability to win over districts previously served by competitors. These wins are a direct result of RCM's consultative approach, one that emphasizes partnership, responsiveness, and a relentless focus on quality. Our internal training programs continue to sell us part. enabling us to deliver providers who are not only highly qualified, but also better prepared to meet the unique needs of each district. Our pipeline remains robust, with a strong flow of additional opportunities that position us well for continued growth. Additionally, we continue to leverage our outstanding team in the Philippines. This resource has proven to be a highly cost-effective asset, accelerating our ability to scale and support new client engagements with speed and efficiency. In short, we are entering the new school year with strong tailwinds, a clear strategy, and a deep commitment to delivering value to our clients and shareholders. Transition to life sciences data and solutions. In the life sciences division, we continue to see momentum driven by our strategic focus on innovation and operational excellence. Our recent investment in AI-driven equipment qualification has streamlined compliance protocols while reducing turnaround times across manufacturing sites. Additionally, advancements in data integrity solutions are improving audit readiness and strengthening our competitive position with pharma partners focused on speed to market. These initiatives reinforce our commitment to digital transformation in regulated environments and set the stage for scalable growth. This combined with building a dedicated life sciences engineering group will clearly differentiate RCM for the future. From an IT perspective, we have made meaningful progress in AI and analytics, particularly as applied to life sciences. This continues to unlock actionable insights from predictive forecasting to real-time monitoring. These updates reflect how we are leading technology not just to optimize operations but to fuel innovation at the core of our business. Lastly, we see continued evolution of our HCM practice beyond our flagship UKG ready managed service program with our reseller and extension to other future partners. Now shifting to engineering, energy services continues to move forward with increasing velocity. As we migrate into the second half of the year, we are seeing a sharp acceleration in activity as we align to an expansive integrated strategy, combining our custom engineering capabilities with our turnkey EPC solutions to meet surging market demand. As the need for reliable and resilient power delivery continues to outpace legacy infrastructure, our team is increasingly called upon for engineering design, builds, and upgrades. We have made a number of changes in the organization, including increasing efforts to align our brand with our marquee project work, and industry is taking notice. Furthermore, our ability to deliver precision engineered solutions across the most demanding environments at scale has served as a key differentiator. This is enabled by our growing EPC footprint, our high-performing engineering teams, and our focus on integrating advanced technologies and industry-leading 3D design into the delivery model. With continued growth in grid modernization, infrastructure upgrades, and data center expansion, our teams are delivering custom solutions that align with evolving market needs. Key developments this quarter include. Our integrated growth strategy, which is comprised of an expanded focus on custom engineering and turnkey EPC solutions for substations and infrastructure builds to support large-scale client programs. Expanding our depth of services with utility and industrial clients by designing and upgrading facilities with advanced energy-efficient technologies and providing engineering solutions for data centers and supporting substations and electrical infrastructure. Continue technical contributions to the IEEE Power and Energy Society, reinforcing RCM's leadership in the power engineering space. Operational maturity, resulting in streamlined project execution, enhanced talent integration, and improved cross-unit coordination through shared services. Our engineering teams remain in the forefront of enabling next-generation energy solutions, positioning RCM as a trusted partner in an increasingly complex, opportunity-rich market. Now to aerospace. Due to the ongoing significant ramp up on existing programs and the addition of new clients The Aerospace and Defense Group has exceeded our business plan goals through the second quarter by almost $3 million in revenue with a healthy margin EBITDA performance. Though we have an aggressive plan for 2025, barring any unforeseen circumstances, we are on our way to achieving it. That count continued to increase through Q2 2025 by 53 additional hires, topping Q1 performance. As projected, we have realized a significant year-over-year increase in gross margin and EBITDA in Q2 2025, as well as sequential increase of 11% and 8% in gross margin and EBITDA, respectively. Our vertical lift and technology innovator customers doing business with the US government continue to spearhead our growth thus far in 2025 with multiple opportunities on the horizon. As anticipated, Continued success in supply chain manufacturing and quality engineering with new clients continue to have a positive impact on 2025. Additionally, wins at the beginning of 2025 with two existing customers on two large multi-year projects for S1000D conversion continue to contribute to our success in delivering to our aftermarket clients. Our recruitment team, which continues to build trusted value relationships throughout the client and candidate base, have solidified our year-to-date goals. Our integration of new tools and technologies have kept our team in the forefront of providing enhanced speed to market capabilities. We continue to add new clients in Q2 2025 with customers requiring our expertise in supply chain manufacturing and quality engineering with continued requirements for software and systems expertise. We anticipate our growth to continue throughout 2025 as more of the opportunities in hand are realized with the aerospace and defense environment, seeking American companies who can hold clearances up to secret and top secret levels. We anticipate a record year for the Aerospace and Defense Group in 2025. Now, I will return the call to Kevin to discuss the Q2 2025 financial results in more detail.

Thank you, Brad. Regarding our consolidated results, consolidated gross profit for the second quarter of 2025 was 22.3 million, which grew 11.4% over Q2 2024, and yielded our highest gross profit over the past 13 course. Adjusted EBITDA for Q2 25 was 8.1 million as compared to 7.2 million for the Q2 24, growth of 12.9%. Adjusted EPS for Q2 25 was 69 cents as compared to 57 cents for Q2 24, growth of 21.1%. As for our segment performance in the second quarter of 2025, in healthcare, Gross profit for Q2-25 was $12.3 million compared to $10.6 million for Q2-24, growing 15.4%. Gross margin for Q2-25 was 28.7% as compared to 28.8% for Q2-24. School revenue for Q2-25 was $37.2 million compared to $30.7 million for Q2-24, growing 21.1%. Non-school revenue for Q2 25 was 5.6 million compared to 6.2 million for Q2 24. In engineering, gross profit for Q2 25 was 6.5 million compared to 6.0 million for Q2 24, growing 8.8% on our best engineering gross profit quarter in our entire history. Gross profit for Q225, excuse me, gross margin for Q225 was 24.5% compared to 26.5% for Q224. As a reminder, our engineering gross margins can be volatile, but we generally expect normalized gross margins between 22 and 26%. In IT, life sciences, and data solutions, Gross profit for Q2-25 was $3.5 million compared to $3.4 million for Q2-24, increasing by 3.4%. Gross margin for Q2-25 was 39.8% compared to 34.9% for Q2-24. Regarding our balance sheet, though operating cash flow was weak for the quarter coming off a strong Q1, we anticipate fully debt-free cash flow to align with our net income. Specific to Q2, We had over $10 million from two major school clients delayed due to school year 2024-2025. But we've collected over 80% of that money and expect the rest to come in this quarter. As a reminder, we have significant seasonality in Q3 with summer school closings and heavy vacation months for our billable workforce, which makes Q3 challenging to forecast. We do expect to continue to deliver at least low double-digit growth in adjusted EBITDA for the second half of fiscal 2025. And while we don't expect fourth quarter jump we saw in fiscal 2023, we do expect Q4 2025 will produce our highest adjusted EBITDA quarter for the year. This concludes our prepared remarks. At this time, we will open the call for questions.