Cardiff Oncology shares plunge after Q2 earnings miss
RCM Technologies Inc. reported strong financial performance for the first quarter of 2025, surpassing earnings expectations with an adjusted EPS of $0.63 against a projected $0.56. The company’s revenue also exceeded forecasts, coming in at $84.47 million compared to the anticipated $74.27 million. Following these results, RCM Technologies’ stock price surged by 13.33%, closing at $20.32, marking a significant positive market reaction. According to InvestingPro analysis, the company currently trades at an attractive P/E ratio of 11.5x, suggesting potential value opportunity for investors.
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Key Takeaways
- RCM Technologies reported an 18.9% year-over-year increase in adjusted EPS.
- The company reduced net debt significantly, enhancing financial stability.
- Stock price jumped 13.33% post-earnings, reflecting strong investor confidence.
- Expansion in Life Sciences and Aerospace sectors contributed to growth.
- RCM Technologies anticipates continued EBITDA growth in 2025.
Company Performance
RCM Technologies demonstrated robust performance in Q1 2025, with notable improvements across various financial metrics. The company’s strategic focus on expanding its offshore resources and launching new initiatives in its Life Sciences and Aerospace divisions played a pivotal role in driving growth. The firm has also been effective in reducing net debt and improving cash flow, positioning itself strongly within its industry. InvestingPro data shows the company maintains a healthy current ratio of 1.81, with liquid assets exceeding short-term obligations, while achieving a solid return on equity of 45%.
Financial Highlights
- Revenue: $84.47 million, up from the forecasted $74.27 million.
- Earnings per share: $0.63, exceeding the forecast of $0.56.
- Consolidated gross profit: $22 million, a 7.9% increase year-over-year.
- Adjusted EBITDA: $7.8 million, representing a 14.4% year-over-year growth.
- Net debt reduced to $18.2 million from $30.2 million.
Earnings vs. Forecast
RCM Technologies reported earnings per share of $0.63, surpassing the forecast of $0.56 by 12.5%. The revenue of $84.47 million also exceeded expectations, marking a 13.7% surprise. This performance reflects the company’s effective strategic initiatives and operational efficiencies, contributing to a positive earnings surprise.
Market Reaction
The stock of RCM Technologies surged by 13.33% following the earnings announcement, closing at $20.32. This movement places the stock closer to its 52-week high of $26.37, indicating strong investor confidence in the company’s future prospects. The significant increase in stock price highlights the positive sentiment surrounding the company’s financial performance and strategic direction. InvestingPro analysis suggests the stock remains undervalued despite recent gains, with analysts setting a unanimous target price of $30.
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Outlook & Guidance
Looking ahead, RCM Technologies expects low double-digit growth in adjusted EBITDA for the year 2025. The company is focused on expanding its sales team and building offshore capabilities to support future growth. With a strong presence in K-12 behavioral health services and emerging leadership in sustainable chemical process design, RCM Technologies aims to capitalize on new opportunities in various sectors. The company’s overall financial health score of 2.83 (GOOD) from InvestingPro supports this positive outlook, with revenue growing at 5.75% over the last twelve months.
Executive Commentary
Brad Deazey, Executive Chairman, emphasized the company’s strategic investments, stating, "We believe the company is well positioned based on the thoughtful investment strategy we have deployed." He also noted the growing implementation of AI/ML strategies among clients, reflecting the company’s commitment to innovation. Deazey expressed confidence in the company’s outlook, declaring, "Our outlook for the business has never been stronger."
Risks and Challenges
- Potential political policy uncertainties could impact operations.
- Variations in healthcare gross margins may affect profitability.
- Macroeconomic conditions could pose challenges to growth initiatives.
- Competition in the engineering and recruitment services sector remains intense.
- Supply chain disruptions could affect project timelines and costs.
Q&A
During the earnings call, analysts inquired about the impact of political policy uncertainties and macroeconomic conditions. Executive Chairman Brad Deazey reassured stakeholders that there are no significant macroeconomic concerns affecting the company’s operations. The discussion also covered quarterly variations in healthcare gross margins, with management expressing confidence in addressing these challenges effectively.
Full transcript - RCM Technologies Inc (RCMT) Q1 2025:
Kevin Miller, Chief Financial Officer, RCM Technologies: Good morning, and thank you for joining us. This is Kevin Miller, chief financial officer of RCM Technologies, and I am joined today by Brad Deazey, 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 ks, 10 Q and eight ks 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 Yeezy, Executive Chairman, to provide an overview of RCM’s operating performance during the quarter.
Brad Deazey, Executive Chairman, RCM Technologies: Thanks, Kevin. Good morning, everyone. Consistent with prior remarks, the internals of our business continue to strengthen at an increasing rate. We believe the company is well positioned based on the thoughtful investment strategy we have deployed and significant reductions in our share count should enhance the compounding of returns to benefit the shareholders. With stewardship as a foundational pillar to our zeitgeist, we believe we are positioned for continued outperformance.
In fact, we have sharpened our focus in cultivating the next generation of leadership as we look through the end of the decade. Not only do we aim to maintain continuity when passing the baton, but assurance that the next generation is simply better than the one before it. I strongly believe this is not only the capstone of one’s career and a defining component of their legacy, but fundamental to the longevity and continued success of every organization. I am keenly focused on this being one of our hallmarks as a company and a strategic advantage when we look back years from now. With great enthusiasm about the present and well into the future, I will now provide an update on the progress of each of our business units.
HRSA and HealthCare is off to a strong start in 2025. More importantly, as we look forward to next school year, the state is set for continued momentum. Many of our largest school districts are on a robust growth trajectory. Our presence in k through 12, particularly in behavioral health, is stronger than ever as we expand in many existing schools and sign new school contracts for next school year. Also of note, our HIM division is starting to blossom, having cultivated a robust pipeline filled with high potential projects.
With many prospective clients across all our groups and plans to expand our direct sales team, we are poised to seize these opportunities and drive significant growth. As we work towards a strong close of the twenty twenty four, twenty twenty five school year, planning is well underway for a strong start to the fall. Looking forward, the future of our health care setting is bright. In addition to onboarding new school districts, the hand and glove execution of our offshore team has been critical to extending our advantage, allowing us to ensure that children and schools receive the essential care they need. Unlocking efficiencies in our organization has allowed us to double down on our investment in best practices and quality of care, further cementing our position as the go to provider in k for twelve nationwide.
Success in our core k for twelve market has opened other direct adjacencies, fueling investment in our sales team to galvanize growth for years to come. Transition to life sciences, data, and solutions. 2025 has brought significant opportunities for the IT industry in the form of accelerated technological advancements in the areas of artificial intelligence and machine learning. One year ago, only a few clients had an AIML strategy. Today, we are seeing system deployments.
We also see a significant expansion of manufacturing across our life sciences client base. Financial highlights in the quarter include the division posting a 40% gross profit while maintaining a solid 23% NOI contribution. This is attributed to strong end of service contracts, overselling SG and A costs, and consistent delivery management of our projects. Respectively, we are in the early stages of building out our offshore resources based in this division. Continuing momentum with this initiative will be key to helping us maintain and improve our market position for our key practices while being highly competitive in our new BPO payroll offering.
Our focus is revenue expansion and new client payment. So far in 2025, the division has opened six new clients, leveraging new service offerings ranging from asset management to design engineering. At the industry level, we are expecting to see shifts in services demand in the life sciences sector over the coming months. Based on increased lead times, organizations are seeking alternative sources of materials and talent, Using technology for quality improvement, direct cost reduction, and headcount, automating manual or repetitive tasks is key for the remainder of 2025. In conclusion, our q one results demonstrate the strength of our core services.
We have maintained a 90% plus renewal rate while not losing strength in our margins or bottom line. Turning to engineering. Starting with energy services. Since q four, we have made significant strides with a strong focus on market opportunities and partnerships. Several substantive multiyear preferred partner agreements for comprehensive engineering services with increased scope are now in various stages of execution, progressing at an accelerating pace.
We are capitalizing on the momentum we have built over the last several years as RCM quickly becomes a go to partner in the industry. Opportunities for growth are abundant, driven by multi decade themes, including grid modernization, grid interconnect, and the proliferation of data centers. Any one of these variables represents strong secular demands. However, I believe that the confluence of all of them is propelling unprecedented exponential growth and the need for innovative turnkey engineering APC solutions. Operationally, we continue to mature as an organization.
We are quickly graduating from a hard charging entrepreneurial organization with a drive to innovate to one that can effectively channel that innovative spirit to deliver the same distinguished outcomes at scale. Our shared services functions not only facilitate knowledge transfer and best practices across business units, but further enhance operational efficiency and capacity to expand. We are seeing synergies across our core recruitment businesses where we have demonstrated a clear competency to satisfy hard to sell requirements, then rapidly stimulating our new teammates into our can do culture. Furthermore, we are in early stages of scaling up our near shore and offshore capabilities, piggybacking on decades of goodwill built in these geographies, affording us access to high quality candidate pools. In summary, our outlook for the business has never been stronger as we believe we are in the early stages of capitalizing on a foundation that was methodically laid over the last five years.
In process and industrial, last quarter, we announced the launch of the RCM Thermal Kinetics office plant expansion program primarily focused on the ethanol industry. The Teekay office is completing the first next project in early May. The project is an intensive process and equipment engineering effort followed by a six week field coordination and management of installation crews, pipe fitters, and related sub suppliers that will result in a 20% ethanol plant capacity increase. There has been much interest from other ethanol plants in the project. We anticipate our next pipeline to increase significantly once this first project completes.
The plant restarts in early May. Other project activity includes the initiation of a pilot campaign at the Teekay Test Center as a follow-up to an engineering design purchase order related to lithium extraction and recovery from brine from brine extracted from a US based project. Equipment for this facility is scheduled for purchase in late twenty twenty five. As anticipated, the pilot test has yielded data valuable to scale up on the project. An engineering order for a distillation solvent recovery has been received this week.
This order was also a result of six weeks of lab testing to derisk the project. The equipment order is scheduled to immediately follow the eight week engineering order. There has been a significant uptick in RFQ activity at the Teekay office. Improving this makes the digital presence of the organization as a strong contributing factor to their pick. The team remains focused on the continuation of their emergence as a market leader in responsible and sustainable chemical process design.
Activity in our aerospace group has increased materially due to the awards on new and existing programs with historical and new clients in q three and q four twenty twenty four. The Aerospace and Defense Group has exceeded our business plan objectives for q one twenty twenty five by over 20% on revenue and almost 19% on EBITDA contribution. Headcount continued to increase through q one twenty twenty five by an additional 20% with 50 new hires compared to q four twenty twenty four. As projected, we have realized a significant increase in revenue, gross profit and EBITDA in q one twenty twenty five with a weekly revenue run rate of about $1,000,000, a 47% increase in revenue compared to q one twenty twenty four, a 45% increase in gross profit compared to q one twenty twenty four, and an increase of 247% in EBITDA contribution compared to 2024, primarily due to the overall increase in new business, ramp up in our historic and ramp up in our historical client base, and aftermarket recovery contributing to the success. Our vertical lift and technology innovator clients doing business with the US government have led our growth thus far in 2025.
However, we anticipate our continued success in our new service and expertise in supply chain manufacturing and quality engineering with new clients will impact 2025 and beyond. We also continue to experience growth throughout new design programs and engineering with significant growth in the manufacturing environment on long term support products throughout the enterprise. Our recent wins with two existing customers on two large multiyear projects for s 1,000 d conversion have solidified workloads for a large portion of our aftermarket team for years to come. The recruitment team continues to build trusted relationships throughout the client and candidate base, which has allowed this team to continue to exceed all hiring expectations throughout the quarter. In q one twenty twenty five, we began integrating new tools and technologies to enhance our differentiating factor of intellect and speed to market amongst our competitors.
We expect the new multiyear contracts executed in 2024 to help drive and expand our model based expertise, software, systems, logistics, avionics, and aftermarket expertise throughout 2025 and 2026. We have also added three new clients in q one twenty twenty five with customers requiring our expertise in the supply chain manufacturing and quality engineering realm and with manufacturing engineering support. In summary, we anticipate the anticipated growth with our existing and new aerospace and defense clients in 2025 has begun to be realized. Most of our clients continue to need the support of a cost effective, high quality, flexible workforce in this current environment because of shorter term contracts with budgetary constraints. We look forward to continuing to build on our momentum throughout 2025.
Before turning the call over to Kevin, it is worth noting that we have retired a little over 300,000 shares year to date, bringing combined repurchase over the last five years to just under half of shares outstanding while maintaining a clean balance sheet with significant financial flexibility and resilient organic growth. Though the disconnect in our share price remains a head scratcher, we will continue to act with alacrity when mister Market offers to swap his dollar bills for our quarters. With an abundance of ambivalence and increasing enthusiasm about the future, I will return the call to Kevin to discuss the q one twenty twenty five financial results in more detail.
Kevin Miller, Chief Financial Officer, RCM Technologies: Thank you, Brad. Regarding our consolidated results, consolidated gross profit for the first quarter of twenty twenty five was $22,000,000 which grew 7.9% over Q1 twenty twenty four and yielded our highest gross profit over the past twelve quarters. Adjusted EBITDA for Q1 twenty twenty five was $7,800,000 as compared to $6,200,000 for Q1 twenty twenty four, growth of 14.4%. Adjusted EPS for Q1 twenty twenty five was $0.63 as compared to $0.53 for Q1 twenty twenty four, growth of 18.9%. As for our segment performance, the first quarter of twenty twenty five, in health care, gross profit for q one twenty twenty five was $12,200,000 compared to $11,100,000 for q one twenty twenty four, growing 10.2%.
Gross margin for q one twenty twenty five was 28.2% as compared to 29% for q one twenty twenty four. School revenue for q one twenty twenty five was 37,300,000.0 compared to 31,900,000.0 for q one twenty twenty four, growth of 16.7%. Nonschool revenue for q one twenty twenty five was 6,000,000 compared to 6,300,000.0 for q one twenty twenty four. However, if we remove a large long term care group where we deliberately reduce services, revenue would be 5,500,000.0 versus 5,100,000.0. In engineering, gross profit for q one twenty twenty five was 6,200,000.0 compared to 5,500,000.0 for q one twenty twenty four, growing 12.4% and our best engineering gross profit quarter in our history.
Gross margin for q one twenty twenty five was 19.2% compared to 23.4% for q one twenty twenty four. Gross margin in the first quarter of twenty twenty five was lower than normal, primarily for two reasons. We had significant past due construction revenue from our EPC contracts and our energy services group. If we normalize gross margin for construction labor past due revenue only, gross margin was approximately twenty twenty 22.7% versus 25.8%. We also experienced significant growth from our aerospace groups, which has lower gross margin, but a very reasonable operating margin.
As a reminder, our engineering gross margin can be volatile, but we generally expect normalized gross margins between 2226%. In IT, life sciences and data solutions, gross profit for q one twenty twenty five was 3,600,000.0 compared to 3,800,000.0 for q one twenty twenty four, declining by 5.3. Gross margin for Q1 twenty five was 39.7% compared to 37% for Q1 twenty twenty four. Regarding our balance sheet, we made good progress on our accounts receivable DSOs in Q1 twenty twenty five with about seventy four days compared to about ninety two days for Q4 twenty twenty four. Our accounts receivable reduction helped us generate 16,700,000.0 in cash flow from operations.
We also reduced our net debt by 12,000,000 to 18,200,000.0 for q one twenty twenty five as compared to 30,200,000.0 for q four twenty twenty four. We are optimistic we can keep our DSOs under eighty days going forward. We expect to continue to deliver at least low double digit growth in adjusted EBITDA throughout fiscal twenty twenty five. Also, while we don’t expect don’t necessarily expect the fourth quarter jump in adjusted EBITDA that we saw in fiscal twenty twenty three, we believe Q4 twenty twenty five 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. First up, we have Liam Burke. Liam, your line is now open.
Liam Burke, Analyst: Thank you. Good morning, Brad. Good morning, Kevin.
Kevin Miller, Chief Financial Officer, RCM Technologies: Good morning.
Liam Burke, Analyst: Brad, I know you I know you’re primarily services, but there’s a lot of political policy uncertainty out there. Is any of that moving into your business or any of the concerns for you in any of business lines?
Brad Deazey, Executive Chairman, RCM Technologies: No, William. Thanks for the question. Unfortunately, Kevin or I have have yet to come across Smooth or Holly. Generally speaking, you know, macroeconomic environment, we try and think about setting the business up as, you know, to the extent that it does impact us. We can navigate around it, but generally, you know, lever ourselves to secular themes for which we can take advantage of.
So, you know, I’ll tell you, you know, it’s my job every night before I go to bed, have five things on my mind. The macroeconomic environment has never been one of them. So haven’t seen any issues so far.
Liam Burke, Analyst: Great. That’s great to hear. And Kevin, you talked about gross margins on engineering and walked through the delta. Looking at Healthcare, it looks like you’re growing your more profitable business and the legacy business is being worn off. You had a slightly lower year over year gross margin.
Is that just working through the old legacy business?
Kevin Miller, Chief Financial Officer, RCM Technologies: No. It’s more of a just sort of quarterly noise that you’re going to see. There is a little bit of a mix shift there in terms of, you know, some of our nursing contracts that are maybe a little bit lower gross margin, you know, than some other contracts, know, behavioral health, for instance. But, you know, it’s kind of the normal noise that you would expect to see from from quarter to quarter. Nothing really specific other than maybe a little bit of a bump in in some, you know, new nursing contracts or or existing nursing contracts even that have a little bit lower gross margin than than than the behavioral health.
But, you know, we we we there’s no, like, you know, trend there where we expect any significant erosion in in margin as we’re sitting here today. And and I would expect that, you know, q two will be a a little bit better than q one.
Liam Burke, Analyst: Okay. So we’ll think of it more as operating in a range similar to your other businesses?
Kevin Miller, Chief Financial Officer, RCM Technologies: Exactly. Exactly. And we usually, you know, and and, you know, we gave some guidance on general ranges on our last call, and health care certainly fell within that range.
Liam Burke, Analyst: Super. Thank you, Brad. Thank you, Kevin.
Kevin Miller, Chief Financial Officer, RCM Technologies: Alright. Once again, ladies and gentlemen, that is star one to join the question queue. Star one to join the question queue. And at this time, I’m not seeing any further questions in queue. So just as a reminder, that’s star one on your telephone keypad.
Alright, gentlemen. I’m still seeing no questions in queue.
Brad Deazey, Executive Chairman, RCM Technologies: Alright. Alright. Thank you everyone for attending RSIM’s first quarter conference call. We look forward to our next update in August.
Kevin Miller, Chief Financial Officer, RCM Technologies: And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you again for joining
Brad Deazey, Executive Chairman, RCM Technologies: us today.
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