RCMT earnings call analysis

NASDAQ:RCMT Q3 2025 Earnings Call Transcript Generated on 6/6/2026 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. 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 the call over to Brad Vizzi, Executive Chairman, to provide an overview of RCM's operating performance during the quarter. Brad Veazey | Executive Chairman, RCM Technologies: Thanks, Kevin. Good morning, everyone. As we exit our seasonal third quarter, we are entering Q4 from a position of strength, demonstrating record 2026 engineering backlog as of the end of October and continued momentum in healthcare. Penetration of existing clients continues to increase, while commercial discussions start to crystallize with future flagship clients. I attribute increased traction to growing brand awareness in our end markets, fortified by our employees' commitment to quality and reliable delivery. Also of note, as our visibility increases, so does the strength of our talent pool. We have seen a noticeable change in the number of highly qualified candidates reaching out to RCM, providing further fuel for the flywheel. We will continue to invest behind the business while many of our peers remain on their heels. Despite excess medical costs to the tune of approximately $1.8 million year to date, with Q3 hit particularly hard, our financial results remain resilient. Devon will provide more granularity into our financial performance later in the call, giving further visibility into our fundamental strength led by healthcare and engineering. I will now provide an update on the progress of each of our business units, starting with healthcare. We entered the 2025-2026 school year with momentum, seeing strong growth across our portfolio, driven by our commitment to quality, innovation, and client satisfaction. 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. Though competition in certain markets has increased, it simply has not mattered. Our share in these same markets increased regardless. A testament to the commitment of our team and the trust we have built as preferred provider in the K through 12 end market. To put it differently, doubling down on caring is good for business. Despite tracking to close 2025 with our strongest financial performance outside of COVID, We already have an eye toward 2026 as we anticipate seeing the benefits of a record foreign recruitment pipeline that we have invested heavily in the last several years. The future of RCM healthcare remains bright. Now I will transition to life sciences data and solutions. In life sciences, the industry is seeing a significant shift as it deals with a variety of changes due to tariffs, favor nation drug pricing, and process automation. Each have caused momentum shifts with many of our clients from negative of workforce reductions to positive of capital investment in manufacturing. Structural industry shifts often present opportunity for RCM. We are capitalizing by partnering with an AI-driven computer software validation and equipment qualification company that has allowed us to streamline compliance protocols and reduce turnaround times across manufacturing sites. The creation of a dedicated life sciences engineering group will further differentiate RCM in the market. As it pertains to data and solutions, meaningful progress has been made in AI and analytics, particularly as applied to life sciences. These efforts continue to unlock actionable insights, from predictive forecasting to real-time monitoring. The updates reflect how technology is being leveraged not just to optimize operation, but to fuel innovation at the core of the business. As we move into Q4, we feel that our efforts are positioning us for growth. Life sciences will benefit from ongoing digital transformation, further integration of AI-driven compliance, and scaling of the new engineering group. These efforts are expected to drive efficiency and enhance our value proposition to farmer partners. Data and solutions will continue to expand our managed service offering. We are building the use of AI analytics into our process with a focus on generating deeper insights and supporting innovation across the enterprise. The emphasis will be on predictive capabilities and real-time data to support operational excellence and strategic decision making. HCM will see growth beyond our foundational managed service efforts in building our direct and BPO business as our pipeline continues to mature. Transition to engineering, starting with energy services. Energy services delivered another strong quarter in Q3, in addition to securing record backlog for 2026, reinforcing RCM's leadership in modern grid infrastructure and advanced energy solutions. Our integrated engineering and EPC model continues to gain momentum as utilities and data center developers seek partners with the technical depth, safety, culture, and scalability to execute complex, multidisciplinary projects and tangible client outcomes. We advanced major programs in substation modernization and energy resilient infrastructure with significant contributions from our civil, structural, mechanical, and protection and control teams. We have made great strides growing within our core utility client base. each project reinforcing our reputation for technical precision and execution reliability, solidifying our position as engineer of choice and tier one preferred partner. The business continues to outpace expectations, reflecting the strength of our integrated strategy and increasing market demand. Our engineering teams are designing and executing major programs across North America and internationally. while deepening strategic partnerships with OEMs to strengthen procurement agility and mitigate equipment lead time constraints. In a market challenged by labor availability and resource bottlenecks, RCN leverages our hybrid resourcing model to mine domestic expertise with global engineering design excellence centers, best-in-class digitalization and 3D BIM to ensure continuity, scalability, and cost-effective execution. This flexible approach enables the company to mobilize skilled manpower quickly for time-sensitive and mission-critical infrastructure projects. RCM's combination of specialized expertise, visual innovation, and operational discipline is positioning the business for sustained growth. Our teams are designing and delivering infrastructure that enhances grid reliability integrates renewables, and builds resilience into the critical systems powering our communities. Our guiding philosophy remains constant, engineering excellence that sets the standard in energy infrastructure. Aerospace and defense continues to gain momentum and existing program support and increased demand across new clients primarily in engineering, manufacturing, and supply chain areas. When compared to Q3 2024 year-to-date, revenue has grown almost 45%, gross profit by approximately 49%, and EBITDA by 110%. The third quarter is historically slower when compared to other quarters due to increased PTO and headcount continue to increase through Q3 2025. As projected, we have realized an increase in gross margin and EBITDA in Q3 2025 and subsequently quarter over quarter throughout the entire year. Our vertical left and technology innovator customers doing business with the U.S. government continue to spearhead our progress thus far in 2025 with multiple opportunities on the horizon in 2026 and beyond. As anticipated, success in our new service areas and expertise in supply chain manufacturing and quality engineering with current and new clients has impacted 2025 with a positive outlook for 2026. The awards in our aftermarket arena with two existing customers at the start of 2025 continue to contribute to our success in delivering to our aftermarket clients. RCN Aerospace and Defense attributes our latest award as Bell Flights, best new supplier in 2025 to our sales and recruitment team, which continues to build trusted, valued relationships throughout the client and candidate base. Our investment in new schools and technologies continues to keep our team at the forefront as the go-to stated publicly by many of our clients when they are having challenges with quality resources. Credit to our operations team for helping build a client We added to the portfolio in 2024 into one of our largest clients in 2025. This is just one example of our ability to land and expand quickly, leveraging our core capabilities within RCM. We anticipate growth to continue as we close 2025 and more opportunities are realized with the aerospace and defense environment vying for American companies who can hold clearances up to the secret and top secret level. Where we sit today, we believe many of the aerospace and defense programs are in their infancy, and we look forward to setting a new baseline in 2026. Now, I will return the call to Kevin to discuss the Q3 2025 financial results in more detail. Kevin Miller | Chief Financial Officer, RCM Technologies: Thanks, Brad. Regarding our consolidated results, consolidated gross profit for the third quarter of 2025 was $19.4 million, which grew 8.8% over Q3 2024. Adjusted EBITDA for Q3-25 was $5.5 million as compared to $5.6 million for Q3-24 for a slight decline of 1.4%. Adjusted EPS was $0.42 for both comparable quarters. As for our segment performance in the third quarter of 2025 in healthcare, gross profit for Q3-25 was $9.0 million compared to $8.3 million for Q3 2024, growing 8.5%. Gross margin for Q3 2025 was 30.0% as compared to 31.2% for Q3 2024. School revenue for Q3 2025 was $24.4 million compared to $20.2 million for Q3 2024, growing 20.7%. Non-school revenue for Q3 2025 was $5.6 million compared to $6.4 million for Q3-24, declining 11.3%. Our healthcare group experienced a slow start to Q3 due to lower summer session revenue than we normally see. However, our September gross profit for all of healthcare grew over 20% September versus September 2025 versus 2024. Furthermore, Billable hours for the first four weeks of October 2025 increased by 18% as compared to the same period in 2024. So we're off to a nice start in Q4, and we're excited to see how those results come in. In engineering, gross profit for Q3 2025 was $6.9 million compared to $5.9 million for Q3 2024, growing 17.3%. and our best engineering gross profit quarter in our history. Gross margin for Q3 25 was 22.0% compared to 24.4% for Q3 24. We are very excited about where our energy services backlog stands. At this time, last year in 2024, our backlog for 2025 was 21 million. Our backlog today for 2026 is just over 70 million. While we are still growing our 2026 backlog, we are now very focused on 2027 and beyond. In our IT life sciences and data solutions group, gross profit for Q3 2025 was 3.5 million compared to 3.7 million for Q3 2024, decreasing by 4.2%. Gross margin for Q3 2025 was 39.5% compared to 38.0% for Q3 2024. It is worth noting that our SG&A expense includes $800,000 of costs for medical claims over budget in the third quarter alone and $1.8 million year-to-date. Regarding our balance sheet, frankly, we were disappointed with cash flow from operations in Q3 2025, We again experienced administrative collection issues with two of our large school clients. We are optimistic we will see good cash flow in Q4 and expected cash flow from operations for fiscal 25 will approximate net income. We reiterate that we expect Q4 to yield our highest quarterly gross profit and our highest adjusted EBITDA in fiscal 2025. We believe we have strong momentum heading into 2026. This concludes our prepared remarks. At this time, we will open the call for questions. Operator | Conference Operator: And with that, ladies and gentlemen, you may press star 1 on your telephone keypad if you would like to ask a question. That is star 1 on your telephone keypad to join the question queue. And first up, we do have Bill Sutherland of the Benchmark Company. Bill Sutherland | Analyst, The Benchmark Company: Thanks. Hey, guys, thanks for taking the questions. I'm curious about the candidates, the foreign candidates that are building in the healthcare group. What, can you just kind of give us an order of magnitude and maybe timing on that, on their impact? Kevin Miller | Chief Financial Officer, RCM Technologies: Well, we certainly can't predict the timing, Bill. you know, it's all dependent on visa retrogression. You know, there have, according to some things that we've heard, you know, we believe the dates are going to be moved, you know, sometime in the fourth quarter. Even if they move a couple of months, we probably have 50 to 60 nurses we can bring over. You know, if they move, let's say, three or four months, that may or may not happen, right? But we have at least, you know, 300 nurses in our pipeline that have, you know, passed all exams and are ready to come over if we can get them, you know, if we can get them visas, right? And we have a lot more than that in our pipeline that are in the process of, you know, passing various exams to be able to come over. Something that, you know, we make a pretty heavy investment in, We know a lot of our competitors have kind of scaled back in that area a little bit because of the difficulty with getting, you know, nurses into this country right now. But we believe that the pendulum will swing the other way at some point, and we'll be ready for it. Bill Sutherland | Analyst, The Benchmark Company: Okay. I guess there's no way to predict excess medical costs. Do you feel like this is kind of a level that we should just pencil in for 4Q? Kevin Miller | Chief Financial Officer, RCM Technologies: Yes, probably, because I don't expect anything radically different in Q4. We have taken some measures, you know, long-term to try to, you know, reduce those costs a little bit, but that's probably not going to impact us too much until 2026, hopefully. It's just been a crazy year for medical costs. You know, we had three or four great years in a row, and then 24 and 25 were just terrible. Bill Sutherland | Analyst, The Benchmark Company: You can't predict it, I know. Kevin Miller | Chief Financial Officer, RCM Technologies: It's hard to predict. And, you know, there's obviously a lot of headwinds with what's going on with, you know, a lot of inflationary pressures and, you know, in hospitals and insurance companies driving up costs. You know, our insurance for all of our insurance is up a lot in 25 versus 24. But at least you know what that is heading into the year and you can budget for it, right? Bill Sutherland | Analyst, The Benchmark Company: Yeah. Kevin Miller | Chief Financial Officer, RCM Technologies: But in the medical claims, you really, you know, you budget for it. You make your best budget. And then it can get wiped out pretty quickly, unfortunately. Bill Sutherland | Analyst, The Benchmark Company: So last one for me, Brad. When you were going through the engineering groups on industrial process, I wasn't clear kind of how that's doing and kind of how that's booking for next year. Thanks. Brad Veazey | Executive Chairman, RCM Technologies: Yeah, you know, part of industrial process, you know, continues to, you know, motor along pretty strong um you know we're hiring um you know demand is robust um you know and the second unit though is it's a work in progress you know some changes are being made to strategy personnel um you know and the good news is it's it's it's our smallest unit right um you know there's there's potential upside there for sure um you know but whether it's a pretty good year or a very mediocre year, it's unlikely to move the needle. Either way, it has, you know, our attention and, you know, I'd say out of all of our businesses, it's the one that it just needs to be on a different trajectory right now, but it is stable. Kevin Miller | Chief Financial Officer, RCM Technologies: Okay. Great. Yeah, it's pretty small, as you know, Bill, but I will say this. I believe we have some pretty exciting projects on our pipeline that we're pretty bullish on, you know, particularly along our next campaign. And, you know, we just got to close them. And, you know, we think that group will have a good 2026, but, you know, we don't have the backlog that we have at our two other engineering businesses. You know, and I'm talking relative to the size. But it has good potential, and, you know, we're excited to realize some of this pipeline. So hopefully, you know, on our next call, we'll have some, you know, some good news for you around RPI business. Bill Sutherland | Analyst, The Benchmark Company: Okay. Got it. Thanks, man. Operator | Conference Operator: All right. Next up, we have William Duberstein of Stone Oak Capital. William Duberstein | Analyst, Stone Oak Capital: Okay. let's see hey how's it going um large touch on uh energy services seems like it's um growing the fastest probably the largest growth opportunity everything we're reading is just pointing to increased uh utility growth power independent power producer growth um There's, you know, behind-the-meter deals happening with data centers. Just wondering if you could touch on how you see the market evolving for you guys if you're sticking with traditional utility partners, if you're seeing any new entries into the business or if you're exploring new partnerships. And I think you talked about some of your digital capabilities, which if you could just elaborate on what you're seeing there, I guess, in general, that would be great. Brad Veazey | Executive Chairman, RCM Technologies: Yeah. Our strategy in that business has been to really kind of focus and go all in on our strengths or we can establish a point of differentiation and a reputation with really the very tier one clients. In other words, you know, the largest utilities in the country. And so, you know, though there are certainly a broad list of, you know, vendors out there, right? In terms of that tier one list, it's relatively narrow. Those go-to players that, you know, kind of get to the front of the line pretty quickly and are in contention for being a preferred choice. And, you know, it's, the investments we've made in the last several years, they're starting to pay off. You know, we're dialing that in, you know, in terms of being able to, you know, really roll out our success to the market broadly. And we're very pleased with the direction that we're headed. Look, you know, that being said, you know, we want to continue to be thoughtful. There is no shortage of activity out there. You know, we are very cognizant about getting caught up in sticking on those roads, which shouldn't be, you know, and risk management. But, you know, we are at a point where we feel like, you know, the group is we're taking that to the next level. Inevitably, you know, there are investments you make along the way. You know, it's a different set of infrastructure as you go through that process. You dial in personnel, right? You know, but I'd say, you know, it's a very positive story there going forward. With respect to data center activity, you know, when you look at that, at the investment in the grid right now, right, you know, kind of our stronghold is the utility market. So as far as direct data center activity, that's really kind of incremental to us. You know, just there is no shortage of opportunity with our core client base. So we continue to remain focused on that. And, you know, as you know, it's a very stable, you know, client base to serve. And we are protecting that and we're growing within it. um you know and you know we're riding the wave in that regard um you know but also we see opportunities to you know get more involved on the data center front front selectively um you know and i think probably most obvious opportunity is the inter interconnect aspect of it um you know because the reality is is how each of these you know, major data centers you see, they require substations, right, to be built. And that's obviously directly in our wheelhouse. So, you know, the way I would describe it to you in general, Bill, is, you know, it continues to maintain the quality and build on our reputation. And, you know, it really gets to the point where, you know, you're following your client, you're following that demand, right? So in terms of adding, like, you know, even just adding, one or two incremental, you know, core clients a year, it can really move the needle from our vantage point. Because, again, you know, you can take any major utility, have a look at it, right? I mean, you know, historically their CapEx spend might have been $2 or $3 billion. You know, now it's at, you know, maybe $5 or $6. And then, you know, some of them are, you know, $8 to $10 billion are moving up another level to call it $8 to $10 billion a year. You know, and the Brian's share of that is going towards hardening the grit. So it's an exciting time for sure. But, you know, at the same time, you know, it's also a time where you don't want to get too far over your skis. So we're being thoughtful about it. But, you know, suffice to say, you know, we're pretty excited about what we're ahead of them. William Duberstein | Analyst, Stone Oak Capital: That's great. And you mentioned you're attracting... sort of a new level of talent or you're liking what you're seeing in terms of pulling talent or talent coming to you, I guess, not pulling talent. Would that, would these, is that in this energy services area and is it, are these people in your points of differentiation or are they more of an opportunity to expand, I would say, maybe horizontally or with complementary services, if that makes sense. Brad Veazey | Executive Chairman, RCM Technologies: Yeah, that's a good question. You know, like, look, I mean, one of the nice things about services is, you know, to the extent that you meet, it can even be one person, but, you know, you come across a set of very talented folks that you can bolt on. right, to your platform, you know, the opportunity to grow within adjacencies, it's pretty clear. So the answer to your question is really both. And I attribute that to is, you know, we made a very conscious effort to get behind, you know, just investing in our brand in general. I mean, you know, starting at the most fundamental level, whether it be the website, our digital presence, LinkedIn, et cetera, it's a night and day difference if you look at 18, 24 months ago. And, you know, one of the nice things about the times we live in right now is, you know, the ability to reach, like, folks in a relatively targeted manner. It's very cost effective. You know, if you have somebody that's very talented about the techniques associated with that, I mean, the costs are relatively de minimis. So it's really, again, some of the investments we've made over the last several years with respect to that technical foundation, really building a substantial reputation in the market, not just as an emerging player. I think it's very fair to say at this point we're firmly in that tier one bucket and just making sure you're front and center you know, with respect to that coverage of Canada pool and the digital presence in particular. William Duberstein | Analyst, Stone Oak Capital: Great. That's all good stuff. And then just a couple small housekeeping items. I guess you mentioned the summer was a little slow for healthcare. You always see the seasonality down with school. So with the slow seasonality, which is since recovered, would that be in the non-healthcare portion of the business, or was it schools sort of taking their time, ramping up to seeing what they need for the new year? Kevin Miller | Chief Financial Officer, RCM Technologies: Bill, it has more to do with, so when schools go into summer session, right, they have kids in the schools, right? obviously at a much, much lower rate than, you know, the primary, you know, school year. So our business doesn't go to zero in, you know, in July, which all of our schools are closed. And then, you know, some start to open up in early to mid-August and some close in early May all the way through, you know, late June, right? So you see softness in June, July, and August. relative to the other nine months. But the schools still use our services. But it just depends on how many of our kids are doing summer session. And it's pretty hard to predict. We see a lot of randomness in it from year to year. And for the level that we're at today, you know, in terms of the number of people and the number of contracts and all that, we expected to see more revenue coming from our school clients in July and August than we actually got. And I don't attribute that to anything but sort of randomness, right? Because once the school year started to kick in in mid-August and really kick in in September, you know, we saw great results. So, you know, so... The results for Q3 for healthcare overall are a little bit lower than what we expected to see because we did expect to see some nice growth in September, which we got. We just expected revenue to be a little bit higher in July and August than it actually was. Does that make sense? William Duberstein | Analyst, Stone Oak Capital: Yeah, I got it. So there are basically fewer students than you thought in your client schools over the summer. Kevin Miller | Chief Financial Officer, RCM Technologies: Fewer of our students... and our schools just needed less people than we thought. It's a combination of fewer of our students that, you know, we had the previous year, and maybe, you know, fewer people taking off in the summer at the schools, you know, but it just wasn't as great as we thought it would be. William Duberstein | Analyst, Stone Oak Capital: Got it. That makes sense. And then a final thing, just back to the health care costs. Are you guys self-insuring now, and if just given the last two years, would you think of maybe changing strategies, just given the size of the company? You said you were looking to maybe change something with the strategy there, so I just wasn't sure. Kevin Miller | Chief Financial Officer, RCM Technologies: We're always looking to tweak our medical plans, you know, to bring those overall costs down, not only because we want lower costs for the company, but we, you know, more importantly, we want lower costs for lower costs for our employees, and we can attract more people when we have, you know, lower cost options available. But to answer your question, yes, we are self-insured, and I think you were asking me if we would consider going fully insured, and the answer to that question is no. Because as bad as our medical costs were the last two years, they would be even higher if we went fully insured. Because when you go fully insured, Fully insured is, there aren't many companies. We're not a big company, obviously, Bill, but we're plenty big enough to where the decision is pretty easy, self-insured versus insured. And as you can probably imagine, when you go self-insured, you know, insurance companies, they're building all that risk into that premium and all that profit. So it doesn't make any sense to go self-insured at our size. If you have, like, maybe, like, 100 covered lives, then the fully insured model makes a lot of sense if you're a smaller company, right? But when you have, like, 800 or more, which is what we have, it's really a no-brainer to go with a self-insured plan. William Duberstein | Analyst, Stone Oak Capital: Got it. Makes sense. Okay, thanks, guys. I think I've taken up enough time. Great results, and thanks for having me on. Operator | Conference Operator: All right. Next up, we have Liam Burke of B Reilly Securities. Liam Burke | Analyst, B Reilly Securities: Hi, Brad. Hi, Kevin. How are you doing? Kevin Miller | Chief Financial Officer, RCM Technologies: Good. Liam Burke | Analyst, B Reilly Securities: Good. Hi, Liam. On engineering, the gross margins were well within, you know, your stated range, but down lower year to year. Is that just a larger contribution of engineering where you have lower gross margin, but you make it up on the SG&A line? Or is there anything else in there? Kevin Miller | Chief Financial Officer, RCM Technologies: Well, you know, like we discussed on previous calls, you're going to see a fair amount of, you know, variation to our gross margin in our engineering group, and it has to do with revenue mix, and it has to do with how much of our activity is conducted by ourselves in a given quarter, right? So, you know, we don't make the same gross profit margin on our subs that we do on our salaried employees. And then, you know, our hour space is a little bit lower gross margin than, say, R&D services or industrial processing. And then industrial processing has had some randomness to their revenue, which impacts the gross margin as well because, We have a sort of a fixed direct cost base there. So, you know, there's just a bunch of factors that contribute to the randomness, which is why, at the end of the day, we focus on gross profit dollars. I mean, obviously, there's a correlation, and obviously, we want to maximize gross margin, but for us, it's focusing on driving and growing gross profit dollars for our engineering group. Liam Burke | Analyst, B Reilly Securities: Thank you. And on... on specialty health care, you're getting further penetration with your existing schools. You're acquiring new customers. Are there other areas you can replicate that business model, or does it look like schools seem to be to fit your skill set here? Kevin Miller | Chief Financial Officer, RCM Technologies: The answer to that question is yes, there are other areas that we can replicate that model, and that's something we spend a lot of time thinking about. Obviously, you know, at our core, we're a school business, right? And we're really, really good at it. We think we're as good as any company, if not better. So we don't want to lose the focus that we have on schools because, you know, we're driving nice growth there. And what's great about the school business is it tends to be pretty repetitive, right? We very rarely lose clients, you know, school clients. So we're going to continue that focus. But there are other areas, you know, that we're looking at. And, you know, Bill Sullivan earlier asked about some of our foreign nurses that are coming over. You know, when they eventually get here, most of them are not going to go to schools. They're going to go to hospitals. Some will go to the schools, but a lot will go to hospitals because there's such a screaming need for them. And that's an area where we have a little bit of advantage over the competition because we've been, you know, we've been recruiting overseas for 25 years. I mean, we're experts at it, right? And we have a great reputation and we have a great following in some of these countries that we recruit in. So, you know, to answer your question, we're always going to be focused on schools. We are looking at adjacencies. You know, one of the things we've been kicking around and, you know, this is just in a discussion level is possibly, you know, supplying substitute teachers to schools, even though that's not healthcare, but it's obviously not that big of a leap, you know, and the model, you know, isn't that different. You know, we look at things like substitute teaching. We're in the Philippines, you know, we have a significant presence in the Philippines right now, and we're looking at, and that's largely driven by our healthcare group, although our other groups are in the Philippines as well. We are looking at doing some potential outsourcing in the Philippines, for clients in the US for healthcare positions and other positions. So, you know, we're always looking for other avenues of growth. You know, when one of them becomes meaningful, we will certainly let you know about it. Liam Burke | Analyst, B Reilly Securities: Great. Thank you, Kevin. And just really quickly on capital allocation, you've got the revolver in place. You've got plenty of capacity. It provides you great financial flexibility. How do you balance available debt with your buyback program? Brad Veazey | Executive Chairman, RCM Technologies: Yeah, no, it's something, you know, it's fun. We talk about it a lot. I mean, as you see the last few years, I mean, we weren't at all shy about repurchasing shares. And, you know, with respect to valuation of our stock price, I mean, I don't have any probably hard to make the argument that we're anything but undervalued materially, and that will take care of itself. I think, you know, just we're in a really good position right now where, you know, when you've taken out 45% of your outstanding, you have like 7.4 million shares outstanding, you know, there's an argument for a baseline level of shares, especially when you have strong insider ownership, float, you know, to be able to, you know, be, you know, freely traded and where the institutions can get in and out and so on. And we're thoughtful about that, you know, so it's just another dimension, you know, you weigh against just simply the valuation of your shares. So, I mean, it's kind of a high-class situation, you know, when you take out 45% of your shares and the average cost is like around $850,000. And, you know, when you're sitting around and you're sure you have a little bit of debt, right, from a capital allocation perspective. But, you know, you have the ability to deliver relatively quickly and have no debt and maybe some cash. So, I mean, I think really one of the best positions you can be from a capital allocation perspective is where, you know, you're always looking, right, but you really don't have to do anything. So, you know, open-minded with respect to a dividend. You know, I've spent a very long time dealing with small cap companies and micro cap companies. You know, I think there are good arguments against the dividend in certain segments of the market that might not exist in a much larger company. You know, so it's something we think about. We haven't shut the door on it at all. You know, but in the meantime, you know, we can deliver. And, again, like, you know, like we think about every aspect of that business is, you know, make sure we're prudent about our decision-making process. Liam Burke | Analyst, B Reilly Securities: Great. Thank you, Brad. Thank you, Kevin. Operator | Conference Operator: All right. At this time, there are no further questions. Thank you. Brad Veazey | Executive Chairman, RCM Technologies: Thank you for attending our Q3 conference call. We look forward to our next update in March. Operator | Conference Operator: And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you again for joining us today. jsPDF 3.0.3 D:20260606090404-00'00'

NASDAQ:RCMT Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Kevin Miller | Chief Financial Officer: 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. Brad Veazey | Executive Chairman: 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. Kevin Miller | Chief Financial Officer: 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. Operator | Conference Call Operator: And with that, ladies and gentlemen, if you do have a question, please press the star 1 on your telephone keypad. Again, that's star one to join the question queue. And first up, I see Liam Burke of B Reilly Securities. Liam Burke | Analyst, B. Riley Securities: Thank you. Good morning, Vic. Good morning, Kevin. Good morning. Hi, Liam. We've talked, you talked about the data center infrastructure and the grid monetization and how that's accelerating. Could you give us some color on you have some multi-year preferred partner agreements, how that's working and how that's helping you accelerate into that sector? Brad Veazey | Executive Chairman: Yeah, absolutely. You know, Liam, I think it starts with some of the initiatives that we've had in place for a number of years that are starting to come to fruition. um you know first and foremost i'd point to you know some of the projects michael markey projects that um you know are attracting a good bit of attention within the industry so naturally you know goes to become associated with your firm and there's brand equity that grows with it and word spreads and the phone starts to ring a little bit more uh in addition to that i think historically when you look at rcm You know, it has had a set of really good capabilities. Did not do a good job as far as coordinating and integrating the operations. That is something that we have put an increased focus on and really doubled down on, and call it the last 12 to 18 months, and ultimately rolling that out to the marketplace. So I think some of it is RCM specific, but also some of it is certainly industry specific. just at a very high level. I think, you know, we're all kind of reading the same things in the newspapers and, you know, through different media outlets. But, you know, I think the surge in spend, you know, that is, frankly, it's here. It is, you know, it's pretty overwhelming. I mean, it's historic without a question. And, you know, it's really hard to find an argument that we're anything but in the early innings of it. So if anything, I think when you look at the landscape of the industry, I think that we're facing a protracted secular bull market. And in many ways, it's almost guaranteed in my mind because you simply have a number of bottlenecks within the supply chain that just simply take years to unlock. So, you know, all else being equal, that would lengthen the cycle regardless. But, you know, from our perspective, I mean, the industry is so large and, you know, we're certainly, you know, starting to hit our stride at a good time that, you know, it's hard not to see it be a big positive for the business. Liam Burke | Analyst, B. Riley Securities: Great. Thank you. You seem to be adding contracts in the healthcare space on the educational side. Are most of those still K through 12, or are you able to leverage your brand into other areas of education like community college or other municipal health programs? Kevin Miller | Chief Financial Officer: No, they're primarily K through 12. You know, we're very, very excited about this coming school year. You know, we've added another, you know, dozen or so new contracts, you know, half of which we believe can be of a decent, you know, a meaningful impact to the revenue for the, you know, 2025-2026 school year. So, you know, we're having a lot of success in the K-12 area. That doesn't mean we're not looking at other areas, but we're pretty focused on K-12. Liam Burke | Analyst, B. Riley Securities: Just to follow on to that, you mentioned that you've gone in and you're taking new business at the expense of competitors. Is that a trend we can expect to continue to see as you continue to add districts? Kevin Miller | Chief Financial Officer: We better. Yeah, no, we certainly expect that. And just to put a, you know, To put a little bit more on that, while we are certainly grabbing market share from competitors, it is a high-growth market, right? So you don't necessarily need to grab market share from competitors to grow. But, you know, we look to do both, obviously. Brad Veazey | Executive Chairman: Yeah, the other thing, William, I'd add to that is if you step back and look at the K-12 market as leaders, right, I mean, like a lot of, you know, relatively nascent markets that are highly fragmented, there's really a lack of, you know, institutionalization for a better term, you know, best practices, et cetera. So, kind of as a leader in that space is a big opportunity for us to step in and really demonstrate, you know, our knowledge base and ultimately win against some of the more local and regional competitors. And, you know, naturally, when you think about the different segments of the healthcare market, I mean, you know, the things that make the market special, right? I mean, the inability to replace that human touch, right? I mean, you know, you magnify that when you start to deal with kids. And so there's a significant opportunity from our perspective that, you know, certainly from our vantage point and our size and given the market opportunity, there's a way to go there. Liam Burke | Analyst, B. Riley Securities: Great. Thank you, Vic. Thank you, Kevin. Operator | Conference Call Operator: All right, next up we have Bill Sutherland of Benchmark. Bill Sutherland | Analyst, Benchmark: Hey, Bill. Thanks. Hey, good morning, guys. Hey, on health care, Kevin, did you give the breakout of school and other? Kevin Miller | Chief Financial Officer: Yeah, we did. Hold on, let me just grab that number. Bill Sutherland | Analyst, Benchmark: Okay, then I'll just – I can get that later then. Kevin Miller | Chief Financial Officer: I wanted to – Let me see real fast. It's 30 – we were at 37.2 for schools and – 5.6 for non-schools for the quarter. Okay. Bill Sutherland | Analyst, Benchmark: Okay. Interested in that internal training program you mentioned. Can you give us some color on that in healthcare? Kevin Miller | Chief Financial Officer: In terms of our internal training program? Bill Sutherland | Analyst, Benchmark: Yeah. Kevin Miller | Chief Financial Officer: I mean, we go out, we find people that we think would make, you know, good candidates for our schools, and we train them up ourselves. And we have training centers – you know, in several different locations. You know, it's not something I want to speak a lot about just for competitive reasons, but, yeah. Bill Sutherland | Analyst, Benchmark: Are these paras or is this, I mean, because you're doing a lot of behavioral health now. Kevin Miller | Chief Financial Officer: It can be paras or RBTs as well, but mainly paras. But, you know, there are other types of people that we engage in training as well. Bill Sutherland | Analyst, Benchmark: Okay. And what about the international nurse side? I know you've been confirming that. Kevin Miller | Chief Financial Officer: Yeah, well, they just moved up visa retrogression for a couple of countries, and, you know, we think we're probably going to have about, I don't know, 15 to 20 nurses coming in either this year or early next year. But if the visa retrogression gets moved, which we think it will at some point, you know, we could have who knows how many. We have probably 500 nurses in our pipeline that are interested in coming to the U.S. You know, if you have any inroads with this administration, please write a letter. Bill Sutherland | Analyst, Benchmark: Yeah, I wish I did. The Engineering GM bounced back very nicely, as you guys noted. Is this kind of a level we should think about as kind of where the business is at this point? Kevin Miller | Chief Financial Officer: I think it's a good indication of where the business is. But, you know, like I said earlier, it's volatile, right? You're going to see quarters where it spikes up, and you're going to see quarters where it spikes down, depending on what the mix shift is. And, you know, as we said on our last call, we're very, very focused on gross profit dollars and then managing the cash flow around those gross profit dollars. So, you know, if we drop under 20% and we have strong gross profit, that's great. If we push it up and we have strong gross profit, that's great, too. We're just really, really focused on gross profit dollars. Bill Sutherland | Analyst, Benchmark: Okay. That's great. Thanks, guys. Good quarter. Thanks. Operator | Conference Call Operator: Thanks, Joel. Next up, we have William Duberstein of Stone Oak Capital. William Duberstein | Analyst, Stone Oak Capital: Hi, guys. Hey, morning. Nice to talk to you guys again. Great quarter. A couple details coming through. Nice sequential improvement in the engineering gross margins, but just Double-clicking on that, you guys are, I think, winning a lot of new customers. Could we expect new contracts to sort of – with new clients to sort of start at a lower gross margin and then potentially expand over time as you prove yourselves out? Or is it just sort of standard between – I don't know if you want to get into your contract. Kevin Miller | Chief Financial Officer: Yeah, are you talking about engineering? William Duberstein | Analyst, Stone Oak Capital: engineering specifically? Kevin Miller | Chief Financial Officer: You know, we don't really look at it that way. I mean, certainly, you know, if we really want to get into a client and we need to bid something at a lower margin than we normally would, we certainly will consider doing that and would do that for the right client. But for the most part, we're looking to get our margin that we think is fair and competitive. And, you know, I don't think that it's a Frankly, it's a super price-sensitive market. I mean, it's price-sensitive, of course. You're dealing with utilities. But, you know, they're much more interested in quality than there are a couple of points, you know, or a couple of bucks, you know, and obviously they don't know what your margins are. But, you know, there's a lot of work out there, right? And quality work gets more work at good margins. And that's the way that we kind of see it. You know, the biggest reason why you potentially see you know, lower margins in our, you know, in our engineering group is when we have, you know, our fixed price contracts that in any given quarter are heavy on the subs, you know, and we have the subs, you know, costs running through our income statement, you know, we're going to see, you know, we don't make the same margin on our subs, obviously, than we do on our internal, you know, salaried engineers. So that's typically why you're going to see a little bit, you know, where you might see it drop a little bit. And there are other factors involved. But, you know, when we start talking about, you know, engineering and we look at the three pillars, you know, aerospace is a little bit more competitive, so those margins tend to be, you know, a little bit lower. But the other two groups in terms of, you know, energy services and our industrial processing, those margins are generally pretty good. But, again, they will come down depending on what's running through the projects in any given quarter, as I talked about, in terms of how much of our revenue is driven by ourselves. William Duberstein | Analyst, Stone Oak Capital: Does that make sense? Got it. Yeah, yeah, absolutely. Thanks for that, Collar. It was nice to see the improvement there from last quarter. Kevin Miller | Chief Financial Officer: And we're generally trying to drive margins in the engineering above where we were in the second quarter. But, you know, again, it just depends on the mix shift. William Duberstein | Analyst, Stone Oak Capital: Got it. Got it. That's helpful. And then just bringing back up the cash collections, I know you mentioned it in your opening remarks. Should we expect receivables to go up? at the end of Q2 because it's the end of the school year, or was this quarter sort of – were there idiosyncratic factors between those two schools you mentioned? Kevin Miller | Chief Financial Officer: Well, it's really both. The two schools that we mentioned just frankly ran out of money on their POs, and they couldn't pay us until they got new POs. And that happens, you know. Look, we crushed it with those two schools, so they ran out of money to pay us. which happens in the school systems. But that's okay. You know, I'll wait. We'll wait for the money and drive the revenue because, you know, we always get paid by the schools. Like, we never have write-offs and, you know, or virtually never. And, you know, they got the POs in place, and we've actually been paid about 80% of the money today, and I just got a notice yesterday we're going to get the rest of it next week. So, yeah, I mean, it's... It's unfortunate that our receivables don't look great at the end of Q2, but it's a temporary situation. It's cyclical, and we should see those receivables come down in Q3 most likely, although depending on how much we're pushing the envelope with some of these new schools, maybe it will be up. And if it's up, it will be a good thing. William Duberstein | Analyst, Stone Oak Capital: Got it. That makes a lot of sense. And then finally, In a previous question, I think you touched on the immigration and that you have a lot of nurses interested in coming to the U.S. Is immigration and supply a gating factor at all right now? I mean, you guys posted great numbers there, so probably not. But I was just wondering if it was possible you could have done even more if the supply side opened up more or if that's just sort of a future. Yeah. Kevin Miller | Chief Financial Officer: Let me tell you how we look at it, which is pretty simple. We're going to grow 25-26 school year, whether immigration opens up or not. We're very confident in our ability to grow our school business, you know, this school year compared to last school year. If immigration cooperates, it can make the difference between a good year, like a good 2026 and an incredible 2026, right? So, you know, we'll see what happens. We just, we can't obviously predict what's going to happen with immigration. You know, we may not get any meaningful number of nurses in in 2026. We may get, you know, 100 or more. It's just, it's really hard, you know, to say, but what we believe is that over time, immigration always, you know, usually comes around to the conclusion that if you want nurses in this country, you better go get them from somewhere else because we're not making enough nurses in this country to satisfy demand. It's just that simple. And I don't see that changing anytime soon. William Duberstein | Analyst, Stone Oak Capital: Got it. Great. Hopefully that does open up. And that was all I had. Great job, guys. Thanks. Operator | Conference Call Operator: All right. Seeing no further questions in queue, I'll remind everyone you can press star 1 on your telephone keypad if you would like to ask a question. That is star 1 on your telephone keypad. All right. Next up we have Ben Andrews. Ben Andrews | Analyst: Good morning, Ben. Hey, guys. How are you? Great. I enjoyed the quarter. Thank you very much. I'd like to just make a couple of statements and then just give me feedback on what you can and your thoughts. If I look at RCM and kind of, you know, the bigger trends out there, and I think you've positioned the company in two areas where, the wind seems pretty strong at your back, which is the education and the engineering slash T&D. And those trends seem to, you know, looks to me at least to be multi-years going forward. And, you know, during, you know, the last three or so years, you know, our stock has pretty much gone sideways. And I think you guys have done an excellent job. you know, before the stock took off and after the stock took off and has essentially gone sideways and fallen out of bed a lot of times to reduce the share float. I think that was incredibly wise and some of the best I've seen, you know, over my career management doing that. But And so if I look at those two divisions where I think there's a solid win that you're back, it seems that, you know, even though RCM's businesses can be volatile, it seems that like, you know, roughly two bucks in EPS, you know, going forward per year seems achievable. You know, it doesn't seem like you're going to do a dollar or 50 cents or anything like that. It seems like you're going to be somewhere in a solid area like that. So, yeah. My thoughts are, and I mean, if we look at the stock trading action and stuff in these small cap stocks as well as some of the large cap stocks, I don't even think there's humans trading them anymore. I just think it's this total AI. And so my thoughts are if we instate a dividend, say an 80 cent dividend, which should easily be covered if you're making money, making a couple of bucks a year in EPS, you know, open the world up to, you know, a little different shareholder base. And the people that own your shares and have been loyal to you for many years, you know, get a little bit of a boost. And I just think kind of where you're positioned now after these, you know, work, hard work to maneuver some of these divisions and in what the divisions can throw off in EPS and kind of where the stock is to where you've been buying it back historically. I just think it's a much better case to implement a dividend. Brad Veazey | Executive Chairman: Yeah, Ben. Look, that's a fair question. That's something, as you know, I think about often. We dialogue about it frequently as well. And look, you know, depending on the facts and circumstances at the moment, you know, you might come out on a different side of the ledger, right? So what I'll say, you know, where we sit today is, you know, the company is in a really good spot. And I think that the ability to put a dividend in place with a, you know, completely debt-free balance sheet having reduced close to 45% of the share count, maybe have a small met cash position, you know, it probably makes as much sense as ever. So and, you know, it's something that we'll continue to evaluate and, you know, as that day gets closer, you know, it could become more of a reality. That being said, you know, there's some great things going on in the business right now. I agree with your assessment with respect to the transformation of the capital markets, particularly in our segment of the marketplace. The flip side of that is, you know, when you have a lot less shares outstanding and, you know, a relatively limited supply of high-quality companies in this segment of the market, you know, you could be, you know, the prettiest girl or guy at the dance, right? And, you know, having a clean balance sheet as growth accelerates with a lot less shares, you know, as you know, this is something that hasn't changed in the last, you know, 20 or 30 years. These things can happen overnight in terms of stock appreciation. So... In the meantime, appreciate the patience. You know, we're in the trenches every single day, you know, working towards building the business and making it stronger. You know, but the good news is we're not just getting stronger on an absolute basis. We're getting stronger on a relative basis and increasingly attractive. Also, you know, when you think about the funnel of opportunities, right, I think this is an area where our size is an advantage. As you continue to distinguish yourself, right, as a little, you know, I almost think of it as a little big company, right? You know, we're a company that has a lot of big things, big attributes, but the reality is our size is relatively small from a valuation perspective. As bigger outcomes start to come to fruition, right, they have a disproportionate impact on the P&L. Like, for example, I appreciate, you know, your $2 earnings figure, but I got to tell you, I'm going to be pretty disappointed if we're only at $2 of earnings 24 months from now. You know, we very much think of the company as a growth company, you know, especially when you start to think about our performance relative to our pure base of all sizes, really. you know, we've significantly outperformed on a relative basis, and we anticipate attractive performance on an absolute basis. So, you know, the valuation will take care of itself. I mean, just to sum it up. Ben Andrews | Analyst: Yeah, yes, I agree. I agree, and I agree with your assessment that, you know, usually you can put in work for years, and then all of a sudden your valuation comes all within 30 days, you know, even though you're sitting around 36 months waiting for it. That usually is what happens, especially with these smaller cap stocks. The reason I kind of threw that $2 out there, because I think it's a pretty solid number by me just looking at your divisions, and you certainly don't want to, you know, overreach when you put in a dividend. And if you put in a, you know, 80-cent dividend, then you've still got money to still pay down debt. You've still got money to do some IP acquisitions. I think where we're aligned in conversations in the past is I think it's wise to, you know, spend money to buy IP and so it can be assimilated into your company rather than doing some huge acquisition that often, you know, ends up blowing up in your face 24 months later. So that was the thought where money is spent, you know, more evenly across a couple of areas rather than, you know, just one area. But I appreciate your thoughts, and I appreciate how you guys have built this company. So thank you. Brad Veazey | Executive Chairman: Yeah, and don't be too bad. One more thing I just inserted in there, Ben, right, and just to emphasize, you know, working towards a clean balance sheet, though we think our balance sheet is well within the range of very comfortable in our target range, we'll call it loosely defined, is, you know, as you think about, you know, the potential outcomes that exist, you know, if we're a company our size, particularly to the upside, right, in this dynamic of an environment, right? So, you know, having a clean balance sheet is really – it's almost a strategic asset in a lot of ways because, you know, some of these partnership dialogues, right, I mean, they could be obviously material, and ultimately that's why we refer to them and we move them forward, and oftentimes they start off – on solid footing and then they grow every single year and, you know, you wake up a few years down the road and they're very sizable. But look, I mean, sometimes they can go very, very rapidly too. Again, we're in dynamic markets. You know, we've got – we've positioned ourselves really well. We've got some really talented folks. We have discussions, right, and ultimately – you know, how those mature, right? There's unknown aspects of that. But, you know, we want to position the company so we can, you know, maximize the value of those discussions, right, you know, when that moment comes. So, in other words, those opportunities for step function growth, we're not constrained in any manner, frankly. Okay. Ben Andrews | Analyst: Understood, Brad, and you're a people business, and I think levering up people businesses is not a great move. You can get lucky, but if you don't get lucky, then you're in a world of hurt. So I'd rather see a clean balance sheet. I agree with you. Operator | Conference Call Operator: All right. This does conclude today's Q&A session. Speakers, I'll turn it over to you for concluding remarks. Brad Veazey | Executive Chairman: Thank you for attending our Q2 conference call. We look forward to our next update in November. Operator | Conference Call Operator: Bye, everyone. All right, ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you again for joining us today. jsPDF 3.0.3 D:20260606090406-00'00'