RCM Technologies : Announces 3rd Quarter Results (11.6.19)

RCM Technologies, Inc.	Tel: [phone]	Corporate Contacts:
2500 McClellan Avenue	Fax: [phone]	Bradley S. Vizi
Pennsauken, NJ 08109	[e-mail]	Executive Chairman
	www.rcmt.com	Kevin D. Miller
		Chief Financial Officer

P R E S S R E L E A S E

RCM TECHNOLOGIES, INC. ANNOUNCES

THIRD QUARTER RESULTS

Pennsauken, NJ - November 6, 2019 -- RCM Technologies, Inc. (NasdaqGM: RCMT), a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced engineering, specialty health care and information technology services, today announced financial results for the thirteen and thirty-nine week periods ended September 28, 2019.

RCM Technologies reported revenue of $40.2 million for the thirteen week period ended September 28, 2019 (the current period), a 5.4% decrease as compared to $42.6 million for the thirteen week period ended September 29, 2018 (the comparable prior year period). Gross profit was $10.6 million for the current period, a 3.4% decrease as compared to $11.0 million for the comparable prior year period. The Company experienced GAAP operating income of $0.7 million for the current period, as compared to $1.2 million for the comparable prior year period. GAAP net income was $0.3 million, or $0.03 per diluted share, for the current period as compared to $0.7 million, or $0.06 per diluted share, for the comparable prior year period.

RCM Technologies reported revenue of $142.6 million for the thirty-nine week period ended September 28, 2019 (the current period), a 1.7% decrease as compared to $145.1 million for the thirty-nine week period ended September 29, 2018 (the comparable prior year period). Gross profit was $35.9 million for the current period, a 0.9% decrease as compared to $36.3 million for the comparable prior year period. The Company experienced GAAP operating income of $4.6 million for the current period, as compared to $3.8 million for the comparable prior year period. GAAP net income was $3.0 million, or $0.24 per diluted share, for the current period as compared to $2.1 million, or $0.17 per diluted share, for the comparable prior year period.

The Company had adjusted EBITDA (non-GAAP) of $1.1 million for the thirteen weeks ended September 28, 2019, a 29.1% decrease as compared to $1.6 million for the comparable prior year period. The Company had adjusted EBITDA (non-GAAP) of $5.8 million for the thirty-nine weeks ended September 29, 2018, a 9.4% decrease as compared to $6.4 million for the comparable prior year period. A reconciliation of adjusted EBITDA (non-GAAP) to EBITDA (non-GAAP) and net income (GAAP) can be found on the fourth page of this press release.

The Company experienced $1.4 million in severance, professional fees and other charges for the thirty-nine week period ended September 29, 2018. These charges include severance accrued for the Company's former chief executive officer and related payroll taxes, continuation of certain benefits and professional fees, totaling approximately $0.9 million. The additional charges of $0.5 million incurred related to transactional financial advisory fees, legal fees associated with defending a frivolous lawsuit with a competitor of the Company, and search fees associated with hiring a senior executive.

Bradley Vizi, Executive Chairman of RCM Technologies, commented, "We continued to experience strong performance from our Health Care & Information Technology segments. While we're disappointed with the softness in Engineering revenue, we believe we are taking positive steps towards growth in fiscal 2020 and beyond."

Kevin Miller, Chief Financial Officer of RCM Technologies, added, "We expect strong cash flow through the remainder of the year and in fiscal 2020."

Conference Call

On Thursday, November 7, 2019, RCM Technologies will host a conference call to discuss these results. The call will begin at 10:00 a.m. Eastern Time. The dial-in number is [phone].

About RCM

RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced information technology and engineering services. RCM is an innovative leader in the delivery of these solutions to commercial and government sectors. RCM is also a provider of specialty healthcare services to major health care institutions and educational facilities. RCM's offices are located in major metropolitan centers throughout North America. Additional information can be found at www.rcmt.com.

The Statements contained in this release that are not purely historical are forward-looking statements within the Private Securities Litigation Reform Act of 1995 and are subject to various risks, uncertainties and other factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. These statements often include words such as "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," "believe," "plan," "seek," "could," "can," "should," "are confident" or similar expressions. In addition, statements that are not historical should also be considered forward-looking statements. These statements are based on assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. Forward-looking statements include, but are not limited to, those relating to demand for the Company's services, expectations regarding our future revenues and other financial results, our pipeline and potential project wins and our expectations for growth in our business. Such statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors, which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. Risk, uncertainties and other factors may emerge from time to time that could cause the Company's actual results to differ from those indicated by the forward-looking statements. Investors are directed to consider such risks, uncertainties and other factors described in documents filed by the Company with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The Company assumes no obligation (and expressly disclaims any such obligation) to update any forward-looking statements contained in this release as a result of new information or future events or developments, except as may be required by law.

Tables to Follow

RCM Technologies, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(In Thousands, Except Per Share Amounts)

		Thirteen Week Periods Ended
		September 28,		September 29,
Revenue	2019			2018
		$40,250			$42,559
Cost of services			29,635		31,571
Gross profit			10,615			10,988
Selling, general and administrative			9,498		9,412
Depreciation and amortization of property and equipment			304		337
Amortization of acquired intangible assets			82		7
Operating income			731			1,232
Other expense, net			(326)	(295)
Income before income taxes			405			937
Income tax expense			70		253
Net income			$335			$684
Diluted net earnings per share data			$0.03		$0.06
		Thirty-Nine Week Periods Ended
		September 28,		September 29,
Revenue	2019			2018
	$142,550			$145,081
Cost of services			106,615		108,803
Gross profit			35,935			36,278
Selling, general and administrative			30,165		29,909
Depreciation and amortization of property and equipment			944		1,116
Severance, professional fees and other charges			-		1,371
Amortization of acquired intangible assets			247		40
Operating income			4,579			3,842
Other expense, net			(1,275)	(990)
Income before income taxes			3,304			2,852
Income tax expense			255		736
Net income			$3,049				$2,116
Diluted net earnings per share data			$0.24		$0.17
RCM Technologies, Inc.
Summary Consolidated Selected Balance Sheet Data
(In Thousands)
	September 28,		December 29,
	2019				2018
	(Unaudited)
Cash and cash equivalents	$393				$482
Accounts receivable, net	$57,470				$52,335
Total current assets	$64,928				$58,811
Total assets	$91,740				$81,510
Total current liabilities	$21,421				$23,188
Borrowing under line of credit	$31,735				$27,540
Net debt (borrowings less cash)	$31,342				$27,058
Total liabilities	$60,689				$54,311
Stockholders' equity	$31,051				$27,199

RCM Technologies, Inc.

Supplemental Operating Results on a Non-GAAP Basis

(Unaudited) (In Thousands)

The following non-GAAP data, which adjusts for the categories of expenses described below, is a non-GAAP financial measure. Our management believes that this non-GAAP financial measure is useful information for investors, shareholders and other stakeholders of our Company in gauging our results of operations on an ongoing basis. We believe that EBITDA and Adjusted EBITDA are performance measures and have provided a reconciliation between net income and EBITDA and Adjusted EBITDA. Neither EBITDA nor Adjusted EBITDA should be considered as an alternative to net income as an indicator of performance. In addition, neither EBITDA nor Adjusted EBITDA takes into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

The following unaudited table presents the Company's GAAP net income measure and the corresponding adjustments used to calculate "EBITDA" and "Adjusted EBITDA" for the thirteen and thirty-nine week periods ended September 28, 2019 and September 29, 2018.

	Thirteen	Thirty-Nine
	Week Periods Ended	Week Periods Ended
	September 28,	September 29,	September 28,	September 29,
	2019	2018	2019	2018
GAAP net income	$335	$684	$3,049	$2,116
Income tax expense	70	253	255	736
Interest expense	390	305	1,276	971
Imputed interest on contingent consideration	(56 )	-	40	-
Depreciation of property and equipment	304	337	944	1,116
Amortization of acquired intangible assets	82	7	247	40
EBITDA (non-GAAP)	$1,125	$1,586	$5,811	$4,979
Adjustments
Severance, professional fees and other charges	-	-	-	1,371
(Loss) gain on foreign currency transactions	(8 )	(10 )	(41 )	19
Adjusted EBITDA (non-GAAP)	$1,117	$1,576	$5,770	$6,369

RCM Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

		Thirteen Week Periods Ended
		September 28,	September 29,
Net income	2019			2018
$335			$684
Adjustments to reconcile net income to cash
used in operating activities	442			1,125
Changes in operating assets and liabilities:
Accounts receivable	727			4,496
Prepaid expenses and other current assets	(175 )		(867 )
Net of transit accounts receivable and payable	(39 )		(466 )
Accounts payable and accrued expenses	(1,901)		1,206
Accrued payroll and related costs	(769 )		(760 )
Right of use assets and liabilities	(14 )		-
Income taxes payable	1			256
Total adjustments	(1,728	)		4,990
Cash (used in) provided by operating activities	($1,393	)		$5,674
Net cash used in investing activities	(58 )		(810 )
Net cash provided by (used in) financing activities	1,020			(4,552)
Effect of exchange rate changes	(44 )		(33 )
(Decrease) increase in cash and cash equivalents		($475	)		$279

		Thirty-Nine Week Periods Ended
		September 28,	September 29,
Net income	2019			2018
$3,049			$2,116
Adjustments to reconcile net income to cash
used in operating activities	1,936			2,527
Changes in operating assets and liabilities:
Accounts receivable	(5,184)		(1,664)
Prepaid expenses and other current assets	483			(593 )
Net of transit accounts receivable and payable	923			(1,560)
Accounts payable and accrued expenses	(3,366)		(219 )
Accrued payroll and related costs	(1,986)		905
Right of use assets and liabilities	245			-
Income taxes payable	30			552
Total adjustments	(6,919	)		(52	)
Cash (used in) provided by operating activities	($3,870	)		$2,064
Net cash used in investing activities	(296 )		(1,423)
Net cash provided by (used in) financing activities	4,160			(2,735)
Effect of exchange rate changes	(83 )		(47 )
Decrease in cash and cash equivalents		($89	)		($2,141)