R C M Technologies Inc (RCMT) 2005 Q2 法說會逐字稿

Good morning. My name is Tammy (ph) and I will be your conference facilitator today. At this time, I would like to welcome everyone to the second quarter earnings conference call. [OPERATOR INSTRUCTIONS] Mr. Kopyt, you may begin your conference.

Thank you, Tammy (ph). Good morning and welcome to the second quarter conference call. As usual, I'm joined by 2 of my colleagues, Stanton Remer and Kevin Miller, who will give you a little bit more detailed presentation on financial segmentation data, and then we'll open up for questions.

Thanks and I'll turn this over to Stanton Remer.

Thank you, ladies and gentlemen, for joining us on this call. I'll read our script.

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. The forward-looking statements relate to matters such as estimates used for developing pro forma financial information, the general health and direction of the market for IT and engineering services, our intentions as to changes to our private offerings, our concentration on higher-margin service areas, our pursuit of strategic alliances, partnerships, clients and acquisitions, the increased propensity of existing and potential clients to outsource IT and engineering functions and anticipated operating performance and financial condition.

These statements reflect our current views with respect to future events and are subject to a variety of risks, uncertainties and assumptions relating to operations and results of operations, competitive factors and shifts in market demand. If any of these risks or uncertainties materialize or if our underlying assumptions are incorrect, actual results may vary significantly from expected results.

The following factors will specifically affect our ability to achieve expected results -- unemployment and general economic conditions associated with the provision of information technology and engineering services and solutions and placement of temporary staffing personnel, our ability to attract, train and retain qualified personnel who possess the skills and experience necessary to meet the staffing requirements of our customers and future customers, our ability to achieve and manage growth and selecting suitable acquisition candidates, analyzing their businesses accurately and integrating acquired businesses into our company and other risks of our acquisition strategy. Many other factors also affect our ability to achieve expected results.

The other factors we considered most pertinent are referred to in the periodic reports on Form 10-K, 10-Q and 8-K that we file with the Securities and Exchange Commission. We will be happy to send copies of these documents to you at your request. Otherwise, we encourage you to review the documents as they appear at the RCM Technologies website under the tab, “Investor Relations.”

Thank you.

I'd like to give you some salient aspects of our financial position and our results of operations for the 6 months ended July 2. The working capital at July 2nd was $31,700,000. It was a $2,167,000 increase for the 6 months. For the 4 months, it was a $1,321,000 increase.

Our senior debt at July 2nd was $5.9 million. Our senior debt as of today is $4.9 million. Our senior debt at the end of April was $6.4 million. That was a $500,000 reduction. Our net debt at the end of June, July 2nd if you will, was $75,000.

Our cash flow from operations for the 6 months was $287,000, which was an increase of $1,873,000 in the 3 month period, which was an excellent result. Our net worth at the end of June was $71,900,000-- $72 million, which was an increase of $2 million. Our tangible net worth at July 2nd was $36 million, which also was a $2 million increase.

Our days outstanding on AR was 84. Our EBITDA, as defined, at July 2nd was $2,127,000. Our CapEx as of July 2nd, cumulatively, was $391,000.

I'll turn it over to Kevin Miller, who will give you some sectorial information. Kevin?

OK. Good morning, everyone. As you know, total sales for Q2 were $46,324,000. That is comprised of our information technology group, $24,898,000; our engineering group, $12,378,000; and our commercial services group, $9,049,000.

For year to date for the 2 quarters combined, sales were $90,406,000 comprised of $49,549,000 for our information technology group, $24,141,000 for engineering; and $16,715,000 for commercial services.

The blended gross margin for Q2 was 23.87%. The gross margin for the information technology group was 27.31%, engineering was 18.61% and commercial services was 21.58%. The blended gross margins for the 6 months, Q1 and Q2, was 23.41%. That's 27.01% for information technology, 17.71% for engineering and 21%, even, for commercial services.

As you analyze Q1 and Q2 in 2005 as compared to 2004, I just feel it's important to continue to remind people that you're not exactly comparing apples to apples since we had an extra week in the second quarter of 2004. That was a 14-week quarter and combined for the 2 quarters last year it was 26 weeks. So if you-- if you adjust the numbers on a sales basis for the extra billing days, if you compare Q2 of this year to Q2 of last year, we had sales growth of a little over 10%. And if you compare for the year, the 26 weeks to the 27 weeks, you're looking at sales growth of about 8.5%.

And that's all I have prepared in terms of the sectorial analysis.

Thank you, Kevin. Tammy (ph), we can open the question-and-answer period.

[OPERATOR INSTRUCTIONS] Richard Bardy (ph).

I'm sitting in for Bill Sutherland from Boenning & Scattergood. Just a couple of quick questions for you.

In regard to new business trends in your different segments, could you-- could you tell me-- shed a little color on what you see there?

Yes. I think we've been through a period of time where many companies have been going through an extended period of optimizing their past technology investments at the expense of the new investments. What we have seen in the last 6 months is a strong indication that that trend is reversing. There are a number of sectors that are exhibiting upward momentum in demand, such sectors like life sciences, energy, health care, banking and finance and there are other sectors that continue to be schizophrenic -- manufacturing, telecommunication and automotive.

We see a number of growth opportunities in the aerospace, utility, pharma and financial sectors, as well as some of the government initiatives, as well as some of the growth coming from new practices that we have initiated over the last several months relating to the budget life cycle management, lean manufacturing and so on.

OK. Another question for you. How about pricing pressures? Do you see them staying the same or maybe improving?

I have not seen any significant change in the pricing pressure.

OK.

You have to continue to differentiate yourself in many of the offerings and I think that's been our focus, but I have not seen.

OK. Last question for you. Any possibility of acquisitions?

Yes. We have a fairly favorable pipeline on the acquisitions and we continue to pursue it. There are the different-- different stages of discussions and evaluations, but it is our expectation that we'll probably close some transactions this year.

[OPERATOR INSTRUCTIONS] At this time, sir, there are no further questions.

All right. Then thank you very much for participating in the conference call and we'll reconnect with each other at the end of the third quarter. Thanks very much.

Thank you. This concludes today's second quarter earnings conference call. You may now disconnect.