R C M Technologies Inc (RCMT) 2011 Q4 法說會逐字稿

Ladies and gentlemen, welcome to today's year-end earnings call. Your host, Leon Kopyt, will now begin.

Thank you, Operator. Thank you for joining us this morning. We appreciate your time and interest in listening to our presentation.

Kevin Miller is here with me to provide you with various segmentation data and other financial metrics. As usual, we'll begin with Kevin's presentation, followed by a brief statement, and then conclude with the Q&A period.

Good morning, everyone.

As you see from the press release, we have total revenues for the quarter of $35.032 million. That breaks out as follows. IT segment is $12.606 million. The engineering revenues are $14.998 million. Our health care group is $7.428 million.

We have a consolidated gross margin percentage for the quarter of 28.91%. Our IT group came in at 31.33%. The engineering group came in at 24.44%.

For the year, we have total revenues of $143.811 million, broken out by information technology, $53.830 million; engineering, $62.612 million. Our health care group, $27.369 million.

For a blended gross margin for the year of 28.33%, broken out by information technology, 28.54%; engineering is 25.78%; and our health care group is 33.74%.

Thank you, Kevin.

As we indicated in our press release, the outlook and the prospects for the year remain favorable. Our belief is being guided by a limited, but nevertheless an empirical, indicator, indicators based on recently improving performance metrics.

The IT group, apparent signs of stabilization, and its incremental signs of turnaround gives us hope that going forward IT should begin to contribute to our consolidated performance and the targeted revenue growth.

There may still be some collateral effects on the IT business, primarily as a consequence of weak recovery in certain sectors that we participate, finance, manufacturing, distribution, but we believe that our product, services, and sectorial mix should counterbalance these risks to business sustainability, and that sustainability that typically posed by an overexposure to a specific sector or a concentrated revenue stream.

Over the last several quarters, we have indicated that as the demand for very large capital projects in our engineering group has downshifted, we've removed deliberately and extensively to channel our efforts in securing a number of master services agreements. These agreements help us to establish RCM as a prominent provider of choice for engineering services, and also allow RCM to participate in lucrative annual operating and capital budgets and projects that have a potential to substantively impact our revenues.

So we are pleased to report that we've signed, in addition to several agreements last year, two additional master services agreements, one -- with the two major Canadian utilities. One was signed in late November and one was signed last week. The November master services agreement already resulted in over $4 million worth of engineering engagements in the last several weeks. And we are hopeful that the recently signed MSA will soon to begin bring some substantive work to RCM as well.

In addition, in the last few weeks we also signed a contract with New York Power Authority as part of their master services agreement. This is to perform work and make assessments and recommendation on refurbishing and reconfiguring data centers. This work will potentially involve our IT division as well, and their work will be in assessing the network, infrastructure, communication, and server capabilities and make recommendations for any upgrades and energy management.

So, in conclusion, overall we feel pleased and energized with these developments, as well as additional prospects and opportunities evolving in all our three business groups. Thank you, and Operator, we are ready to start the Q&A period.

(Operator Instructions). Jason Schacht, Heartland Advisors.

If I look at the gross margins in the IT segment, if I heard you right, you said 31.3% gross margins on a very small level of sequential growth, but that would be the highest gross margin level that I've seen, I think, at least within the past five years from that segment. Can you maybe walk us through where those gross margin improvements come from?

It's coming from a variety of different areas. There is really not one specific area that we can point to.

But I think it's just due to a -- obviously, part of it is seasonal because we typically in IT see much higher gross margins towards the end of the year. We're not going to see gross margins in the first quarter, for instance, anywhere close to that level.

But part of it is seasonal; part of it is just due to an overall focus on ignoring less profitable work and going after more profitable engagements. We've recently changed our compensation plans to salespeople to reward our salespeople for better gross margins. I think that is a small factor in it, and will continue to be a major factor going forward. But it's just a greater focus on higher margin work.

And there is a little bit of -- on some of our managed task work, there is a little bit of a catch-up margin as you finish a project, maybe a little bit better than you expected as you were accruing the cost in revenues on certain projects.

But overall, it's just a major focus on getting our margins up and getting our utilization up as well because our margins can be impacted pretty substantially by improvements to utilization.

Thank you.

(Operator Instructions). There are no further questions in queue.

All right. I think you asked several times if there was any other questions, so I assume that there are truly no more questions. All right, thank you so much, and we will reconvene after the first quarter of this year.

See you soon.