RCM Technologies, Inc. (RCMT) Bundle
Understanding RCM Technologies, Inc. (RCMT) Revenue Streams
Understanding RCM Technologies, Inc.’s Revenue Streams
RCM Technologies, Inc. reported total revenue of $201.5 million for the thirty-nine weeks ended September 28, 2024, reflecting an increase of $9.3 million or 4.8% from $192.2 million in the comparable prior-year period.
Breakdown of Primary Revenue Sources
The revenue is derived from three primary segments:
- Specialty Health Care: $101.7 million (50.4% of total revenue), up 2.1% from $99.5 million in the prior year.
- Engineering: $70.2 million (34.8% of total revenue), increased by 13.3% from $61.9 million.
- Life Sciences and Information Technology: $29.6 million (14.7% of total revenue), down 3.5% from $30.7 million.
| Segment | Revenue (2024) | Revenue (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Specialty Health Care | $101.7 million | $99.5 million | $2.1 million | 2.1% |
| Engineering | $70.2 million | $61.9 million | $8.2 million | 13.3% |
| Life Sciences and IT | $29.6 million | $30.7 million | -$1.1 million | -3.5% |
| Total Revenue | $201.5 million | $192.2 million | $9.3 million | 4.8% |
Year-over-Year Revenue Growth Rate
For the thirteen weeks ended September 28, 2024, the revenue was $60.4 million, an increase of $2.3 million or 4.0% compared to $58.1 million for the thirteen weeks ended September 30, 2023.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to the overall revenue for the thirty-nine weeks ended September 28, 2024, is as follows:
- Specialty Health Care: 50.4%
- Engineering: 34.8%
- Life Sciences and IT: 14.7%
Analysis of Significant Changes in Revenue Streams
The Engineering segment exhibited robust growth, increasing by 13.3%, primarily driven by an increase in Energy Services revenue of $11.6 million. Conversely, the Life Sciences and Information Technology segment faced a decline of 3.5%, attributed to fluctuations in high-margin project work.
Overall, the revenue increase of $9.3 million demonstrates a positive trend for the company, particularly in the Engineering segment, while the Specialty Health Care segment remains stable. The Life Sciences and Information Technology segment's decline highlights potential areas for future focus and improvement.
As of September 28, 2024, the geographic breakdown of revenue is as follows:
| Region | Revenue (2024) | Revenue (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| United States | $185.7 million | $179.8 million | $5.9 million | 3.3% |
| Canada | $5.0 million | $5.1 million | -$0.1 million | -2.0% |
| Puerto Rico | $5.6 million | $4.7 million | $0.9 million | 19.0% |
| Europe | $5.2 million | $2.6 million | $2.6 million | 100.0% |
A Deep Dive into RCM Technologies, Inc. (RCMT) Profitability
A Deep Dive into RCM Technologies, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the thirteen weeks ended September 28, 2024, the company reported a gross profit of $17,841 thousand, which represents a gross margin of 29.6% compared to 29.8% for the prior year. The operating income was $4,385 thousand, yielding an operating margin of 7.2%, slightly down from 7.5% in the previous year. Net income for the same period was $2,746 thousand, equating to a net profit margin of 4.5%, down from 6.5%.
Trends in Profitability Over Time
Over the thirty-nine weeks ended September 28, 2024, the net income was $10,460 thousand, a decrease from $11,576 thousand in the prior year. The gross profit margin for this period showed a slight increase to 28.9% from 28.6%, while the operating margin remained stable at 8.0% compared to 8.2%.
Comparison of Profitability Ratios with Industry Averages
The company's net profit margin of 5.2% for the thirty-nine weeks ended September 28, 2024, is below the industry average of approximately 6.0%. Meanwhile, the operating margin of 8.0% is slightly above the industry average of 7.5%.
Analysis of Operational Efficiency
The cost of services for the thirteen weeks ended September 28, 2024, was $42,524 thousand, representing 70.4% of revenue, which is a slight increase from 70.2% in the previous year. Selling, general and administrative expenses rose to $13,018 thousand, accounting for 21.6% of revenue, down from 21.8%.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Revenue | $60,365 | $58,049 |
| Gross Profit | $17,841 | $17,281 |
| Operating Income | $4,385 | $4,331 |
| Net Income | $2,746 | $3,756 |
| Gross Margin | 29.6% | 29.8% |
| Operating Margin | 7.2% | 7.5% |
| Net Profit Margin | 4.5% | 6.5% |
For the thirty-nine weeks ended September 28, 2024, the total revenue was $201,468 thousand with a gross profit of $58,209 thousand, producing an overall gross margin of 28.9%. The operating income for the period was $16,040 thousand, representing an operating margin of 8.0%.
Debt vs. Equity: How RCM Technologies, Inc. (RCMT) Finances Its Growth
Debt vs. Equity: How RCM Technologies, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 28, 2024, RCM Technologies, Inc. reported total liabilities of $95.5 million, which includes both long-term and short-term debt. The breakdown is as follows:
- Short-term debt: $30.5 million (borrowings under line of credit)
- Long-term debt: $1.3 million (finance lease payable)
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical measure of financial leverage. As of September 28, 2024, the company had total stockholders' equity of $30.0 million. Therefore, the debt-to-equity ratio is calculated as:
Debt-to-Equity Ratio = Total Debt / Total Equity = $95.5 million / $30.0 million = 3.18
This ratio indicates a higher reliance on debt compared to equity, which is significantly above the industry average of approximately 1.5.
Recent Debt Issuances and Credit Ratings
Recent activities indicate the company has been actively managing its debt. In the thirty-nine weeks ended September 28, 2024, interest expenses totaled $1.55 million, highlighting the cost associated with its existing debt levels. The company has not publicly disclosed a credit rating; however, the high debt-to-equity ratio may suggest a cautious outlook from credit agencies.
Balancing Debt Financing and Equity Funding
RCM Technologies has strategically balanced its financing through a combination of debt and equity. The company has issued 17.8 million shares as of September 28, 2024, with additional paid-in capital amounting to $118.1 million. This approach allows the company to finance growth while managing the risks associated with high levels of debt.
| Financial Metric | Amount (in millions) |
|---|---|
| Total Liabilities | $95.5 |
| Short-term Debt | $30.5 |
| Long-term Debt | $1.3 |
| Total Stockholders' Equity | $30.0 |
| Debt-to-Equity Ratio | 3.18 |
| Interest Expense (39 weeks) | $1.55 |
| Shares Issued | 17.8 |
| Additional Paid-in Capital | $118.1 |
Assessing RCM Technologies, Inc. (RCMT) Liquidity
Assessing RCM Technologies, Inc.'s Liquidity
Current Ratio: As of September 28, 2024, the current ratio is calculated as follows:
Current Assets: $90.5 million
Current Liabilities: $55.6 million
Current Ratio = Current Assets / Current Liabilities = $90.5 million / $55.6 million = 1.63
Quick Ratio: The quick ratio is calculated by excluding inventories from current assets:
Quick Assets (Current Assets - Inventories): $90.5 million - $0 = $90.5 million
Quick Ratio = Quick Assets / Current Liabilities = $90.5 million / $55.6 million = 1.63
Analysis of Working Capital Trends
Working Capital as of September 28, 2024:
Working Capital = Current Assets - Current Liabilities = $90.5 million - $55.6 million = $34.9 million
Cash Flow Statements Overview
The following table summarizes the cash flow statements for the thirty-nine weeks ended September 28, 2024, and September 30, 2023 (in thousands):
| Cash Flow Category | 2024 | 2023 |
|---|---|---|
| Operating Activities | $7,807 | $27,548 |
| Investing Activities | ($1,589) | ($480) |
| Financing Activities | ($9,135) | ($26,558) |
Potential Liquidity Concerns or Strengths
As of September 28, 2024, the company has:
- Total Current Assets: $90.5 million
- Total Current Liabilities: $55.6 million
- Cash and Cash Equivalents: $3.156 million
- Borrowings under line of credit: $30.5 million
- Availability for additional borrowings under the Revolving Credit Facility: $7.5 million
The company maintains compliance with financial covenants and expects to manage its liquidity needs through operational cash flow and its revolving credit facility.
Is RCM Technologies, Inc. (RCMT) Overvalued or Undervalued?
Valuation Analysis
In assessing the valuation of RCM Technologies, Inc. (RCMT), key financial ratios such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are critical indicators for investors.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated using the share price divided by the earnings per share (EPS). As of September 27, 2024, the closing stock price was $20.37 with a trailing twelve-month EPS of $1.31, resulting in a P/E ratio of:
P/E Ratio = $20.37 / $1.31 = 15.55
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. The book value per share as of September 28, 2024, was $11.88. Therefore, the P/B ratio is:
P/B Ratio = $20.37 / $11.88 = 1.71
Enterprise Value-to-EBITDA (EV/EBITDA)
For the calculation of EV/EBITDA, the enterprise value (EV) is determined by adding market capitalization, total debt, and subtracting cash. As of September 28, 2024, the total debt was $19.1 million and cash was $7.5 million, with a market capitalization of $360.5 million.
EV = Market Cap + Total Debt - Cash = $360.5M + $19.1M - $7.5M = $372.1M
With EBITDA reported at $17.12 million for the last twelve months, the EV/EBITDA ratio is:
EV/EBITDA = $372.1M / $17.12M = 21.73
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations. Starting at approximately $14.00 in October 2023, the stock has shown a steady upward trend, peaking at $22.50 in July 2024 before settling at $20.37 by September 27, 2024.
Dividend Yield and Payout Ratios
RCM Technologies does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also non-applicable as no dividends have been issued.
Analyst Consensus
According to the latest reports, the consensus among analysts is a Hold rating for the stock, indicating that while the company has potential, there are concerns about the current valuation levels and market conditions.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 15.55 |
| P/B Ratio | 1.71 |
| EV/EBITDA | 21.73 |
| Current Stock Price | $20.37 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing RCM Technologies, Inc. (RCMT)
Key Risks Facing RCM Technologies, Inc.
RCM Technologies, Inc. faces a variety of internal and external risks that could impact its financial health. Notably, industry competition remains a significant concern, particularly in the engineering and healthcare sectors where the company operates. The company’s revenue for the thirty-nine weeks ended September 28, 2024, was reported at $201.5 million, up from $192.2 million for the same period in the previous year.
Industry Competition
The competitive landscape is intense, with numerous players vying for market share. The company has seen fluctuations in revenue across its segments, with the Engineering segment contributing $70.2 million, up from $62.0 million in the previous year. This rise may attract more competitors, impacting margins and pricing strategies.
Regulatory Changes
Regulatory changes in healthcare and engineering sectors can pose risks. Compliance with evolving regulations may require increased operational costs. The effective income tax rate for the thirty-nine weeks ended September 28, 2024, was reported at 27.5%, an increase from 21.9% the previous year. This change reflects the potential impact of regulatory environments on overall profitability.
Market Conditions
Market conditions, including economic downturns, can lead to reduced demand for services. For instance, the company reported a net income of $10.5 million for the thirty-nine weeks ended September 28, 2024, compared to $11.6 million for the same period last year. Such declines can result from decreased client spending during economic uncertainties.
Operational Risks
Operational risks include project delays and cost overruns, particularly in its Engineering, Procurement, and Construction (EPC) projects, which have seen increased accounts receivable of $9.1 million as of September 28, 2024. Delays in collections can strain cash flows and operational viability.
Financial Risks
Financial risks are evident in the company’s cash flow management. For the thirty-nine weeks ended September 28, 2024, cash provided by operating activities was $7.8 million, down from $27.5 million in the prior year. The significant drop indicates potential liquidity issues that could arise from operational inefficiencies or market conditions.
Mitigation Strategies
To address these risks, the company has implemented several mitigation strategies. These include diversifying its service offerings to reduce dependency on any single segment and enhancing client relationships to ensure timely payment. The company also maintains a revolving credit facility to manage liquidity, with total current assets of $90.5 million as of September 28, 2024, exceeding current liabilities of $55.6 million.
| Risk Category | Details | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition in engineering and healthcare sectors | Potential margin pressures |
| Regulatory Changes | Changes in healthcare regulations | Increased compliance costs; effective tax rate at 27.5% |
| Market Conditions | Economic downturns affecting client spending | Net income decreased to $10.5 million |
| Operational Risks | Delays and cost overruns in projects | Accounts receivable at $9.1 million |
| Financial Risks | Cash flow management challenges | Operating cash flow down to $7.8 million |
Future Growth Prospects for RCM Technologies, Inc. (RCMT)
Future Growth Prospects for RCM Technologies, Inc.
Analysis of Key Growth Drivers
RCM Technologies, Inc. is poised for significant growth driven by several key factors:
- Product Innovations: The company has seen revenue increases across its segments, particularly with a $2.1 million rise in the Specialty Health Care segment and an $8.2 million increase in the Engineering segment for the thirty-nine weeks ended September 28, 2024.
- Market Expansions: Revenue from the United States reached $185.7 million for the thirty-nine weeks ended September 28, 2024, compared to $179.8 million in the prior year.
- Acquisitions: The company continues to explore acquisition opportunities to enhance its service offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the thirty-nine weeks ended September 28, 2024, was $201.5 million, an increase of $9.3 million from the prior year. Analysts project continued growth, with earnings expected to stabilize around $10.5 million for the same period. The effective income tax rate for this period was 27.5%.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company is actively pursuing strategic partnerships to bolster its market position. These initiatives include:
- Collaborations with healthcare providers to enhance service delivery in the Specialty Health Care segment.
- Partnerships aimed at expanding technological capabilities within the Engineering segment.
Competitive Advantages that Position the Company for Growth
RCM Technologies benefits from several competitive advantages:
- Strong Financial Position: As of September 28, 2024, total assets were $125.5 million, with current assets of $90.5 million exceeding current liabilities of $55.6 million.
- Diverse Revenue Streams: The company operates across multiple sectors, including Engineering, Specialty Health Care, and Life Sciences, which mitigates risks associated with sector-specific downturns.
| Segment | Revenue (2024) | Revenue (2023) | Growth ($) |
|---|---|---|---|
| Specialty Health Care | $101.7 million | $99.6 million | $2.1 million |
| Engineering | $70.2 million | $62.0 million | $8.2 million |
| Life Sciences and IT | $29.6 million | $30.7 million | ($1.1 million) |
| Total Revenue | $201.5 million | $192.2 million | $9.3 million |
Overall, RCM Technologies is leveraging its financial stability, diverse market presence, and strategic initiatives to capitalize on growth opportunities in the coming years.
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Resources:
- RCM Technologies, Inc. (RCMT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of RCM Technologies, Inc. (RCMT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View RCM Technologies, Inc. (RCMT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.