Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies. I am joined today by Brad Vizi, 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, and assumptions and information currently available to us. And these matters 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 Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the third quarter.

Thanks, Kevin. Good morning, everyone. RCM delivered continued strong performance in our seasonally weak third quarter. I am proud of the team's execution. Our results demonstrate the credibility of RCM's business model driven by our unwavering commitment to delivering value for our world-class client base. During the quarter, strong performance was demonstrated across each division. Our Life Sciences and IT group bolstered its RPO offering with the addition of TalentHerder, which I will speak about in a moment. Turning to our Engineering team. Each of our business units delivered solid performance, and I'm excited about the traction we are gaining across several new business initiatives. Lastly, our healthcare service expanded its presence across the K-12 end market with the addition of several strategic accounts. Kevin will cover our financial performance in more detail, but I want to share several financial and operational highlights from the quarter. RCM generated third-quarter revenue of $58 million, a 28% increase year-over-year after adjusting for the Power Systems Canada sale. As for profitability, RCM generated adjusted EBITDA of $4.8 million in Q3, representing growth of approximately 162% on a year-over-year basis. On the operational front, there were several highlights worth calling out in more detail. First, as previously mentioned, our Life Sciences and IT Group recently acquired TalentHerder, a leading talent services acquisition company. TalentHerder will bolster RCM's existing RPO capabilities by expanding candidate reach, extending alternative service models to our current base, and providing proven methods to new clients, responding to a changing employment landscape at incredibly competitive rates. TalentHerder's proven recruitment processes can help scale both in-person and remote working environments for companies across the globe. We are excited about the growth opportunities TalentHerder presents to our clients and staff. Over the near term, the focus remains on the seamless integration of the TalentHerder team. We are integrating the recruiting groups in addition to gaining leverage from our acquired offshore sourcing staff, and we have already identified several new opportunities through our joint sales efforts. I look forward to sharing more updates on our progress in future calls. On the unit front, I am excited to announce the grand opening of our Innovation Center of Thermokinetics. The implementation of this state-of-the-art facility complements our team's existing equipment capabilities and enables our engineers to develop new processes alongside our customers. For many process applications, the ability to run a small-scale version of the system yields the required empirical data to design and derisk the process successfully. This go-to-market approach will be essential as we scale up initiatives across select emerging technologies in which we have the necessary expertise, including sustainable aviation fuels with an estimated $40 billion to $50 billion in SAF investment planned through 2025, and a further $1 trillion required by 2040. We believe there will be robust demand for identifying ways to scale supply cost-effectively. Our test center has a strategic role to play, and it will be a powerful tool as we position ourselves to become a go-to partner for clients looking to scale emerging process technologies in the future. Pivoting to our Healthcare Services Group, the team continues to excel amidst the ever-changing healthcare landscape. The industry's issues are structural and will not be solved over the near term. COVID-19 has caused many healthcare professionals in the U.S. to reconsider their plans. For example, in a recent survey by McKenzie, 29% of RNs in the U.S. said they were likely to leave their current role in direct patient care. Many respondents indicated they were considering leaving the workforce entirely. The bottom line, the U.S. health sector is facing a substantial talent shortfall, with several studies estimating that by 2025, there may be a supply-demand imbalance of 200,000 to 450,000 nurses. We have the expertise to help close this gap for our clients, as it will require a combination of innovation and robust execution that comes from decades of service committed to this end market. Thankfully, these are two of RCM's healthcare's greatest attributes. We believe RCM Healthcare will play an important role in addressing the structural deficiency, most prominently in our core education end market where our experience and scale are unrivaled. Our team is leveraging technology to take a more analytical, data-driven approach to resource allocation. This focus has enabled us to engage with our clients more strategically by providing tailored holistic solutions according to their needs as opposed to the non-scalable practices of yesteryear that focused on placement on an ad-hoc basis. We are confident this model will lead to more sustained value creation for our customers and a more defensible economic moat for RCM. Finally, I would like to take a minute to express appreciation to our shareholders on behalf of RCM and its employees. I have spent nearly my entire career helping publicly traded companies realize their potential. I cannot recall a more supportive, constructively engaged group. I know a substantial portion of you are long-term shareholders, more than one-third of which are current and prior RCM employees. Your support is one of many weighted assets at RCM. Your commitment has allowed us to retire over 25% of the company's shares outstanding since the summer of 2020 while investing heavily in the company's future. We are committed to further rewarding your support with a scalable platform and clean balance sheet to compound value for all stakeholders for years to come. In closing, as our clients grapple with the realities of scaling their businesses and talents to our increasingly technology-driven world, our cross-functional capabilities and technical expertise have positioned RCM as the de facto platform of choice when searching for solutions. I remain optimistic about the company's future as we have many exciting initiatives underway. I will now turn the call back to Kevin to discuss the Q3 2022 financial results in more detail.

Thank you, Brad. Regarding our consolidated results, revenue for the third quarter was $58.2 million, growing by $12.7 million on a year-over-year basis. Adjusted EBITDA in Q3 2022 was $4.8 million, representing an approximately $3 million increase on a year-over-year basis. RCM generated gross profit of $17.4 million during the quarter, a 42.1% year-over-year increase. Turning to our Healthcare segment. The group generated revenue of $28 million in Q3 2022, which represents a 43% increase year-over-year. The team continues to make great progress within the K-12 market and has expanded its footprint with the onboarding of several new accounts across behavioral health, which remains robust, and the team is positioned to take advantage. Turning to our Life Sciences and Information Technology segment. As Brad mentioned, the team's integration efforts regarding the TalentHerder acquisition are going very well, and the execution across each of the remaining practice groups has not missed a beat. In terms of revenue, we generated $9.2 million in Q2 2022, which is essentially flat with Q3 '21. From a profitability standpoint, the group's gross margin profile increased by 200 basis points as the team transitioned the business model to a more leveraged and well-managed service contract profile. Finally, regarding our Engineering segment. After adjusting for the sale of our Canada Power Systems office in Q3 '21, our Engineering Q3 '22 revenues of $9 million grew by 31% as compared to adjusted Q3 '21 Engineering revenue of $16 million. The performance was broad-based across each of the divisions, and the team is doing an excellent job of expanding into adjacent service offerings that leverage each skill set. As we migrate through the fourth quarter, we remain confident that we will finish the year strong and enter 2023 in stride. We are in a strong position financially to be opportunistic across each of our segments, and we are excited about 2023 as our teams continue to execute throughout the organization. This concludes our prepared remarks. At this time, we will open the call for questions.

And first off, it looks like we had Bill Sutherland of Benchmark Company. Your line is now open.

Good morning, everyone. I have a couple of questions about healthcare. Kevin, what was the mix between education and...

Let's see. I should have that in front of me, but I don't. So I want to get it for you.

While you're looking, for Brad, I was thinking about your comment about healthcare and leveraging technology for the clients. Can you give us a little color on what's involved there?

Yeah. So the first wave of our investment is going to be focused on driving connectivity of our recruitment resources. As you've probably read, though, I know you follow the industry pretty closely. There's no shortage of needs out there, really. It's just a matter of making sure you're able to connect the dots between the resources that are out there and the needs that exist. So inevitably, we think that driving productivity of our recruitment resources could potentially unlock quite a bit of upside for us.

So Bill, just to answer your first question, our school revenue was $16.6 million, and our non-school revenue was $10.4 million.

And the seasonality played out about as you expected, Kevin?

Pretty much, yes.

Okay. The gross margin, was that a mix benefit? It was strong in Healthcare.

Yeah. It's a couple of things. It's a mix. It's a robust market, robust demand. If you sort of look out to the future, I would tell you that Q3 is probably a little bit higher than what we probably expect long-term, but not substantially higher than what we expect.

Okay. And then I guess, last. Brad, as you look at your opportunities for capital deployment, do you rank order? Or just tell me how you're thinking about that?

I would typically refer to our stock response. However, considering the earnings potential of the business and its current stock price, you might infer what ranks highest in priority. We've been very careful in our decision-making. Fortunately, we have several teams and a strong confidence in our ability to allocate capital, meaning we have plenty of opportunities to invest. Ultimately, the final decisions on whether to focus on organic investments, acquisitions, or share buybacks are evaluated regularly and can change rapidly. Still, we feel confident with our solid earnings potential, a strong balance sheet, and a talented team to back us.

Actually, I meant to ask, did you guys provide any detail on TalentHerder in terms of the financial impact?

We have not. There is an 8-K filing on it.

Yeah. All right. Thanks, guys. Appreciate it.

All right. Next up, we have Alex Rygiel of B. Riley. Your line is now open.

Hey Alex.

Good morning, guys. Very nice quarter. Following up on that TalentHerder question, I did notice in the 8-K that you paid, I think, around $4 million in cash for that acquisition. Can you talk a little bit about maybe what the revenue contribution could be? If not, maybe talk about what your traditional acquisition purchase multiples generally are targeted in a range of?

So if you want to talk about multiples, I would say somewhere between 4 times and 8 times is a typical range for us. When we do deals, if someone is getting to 8x, it's probably because they're performing really well during the earnout period, so we're happy to pay 8x if we can deliver outstanding performance. We focus on having a low floor in terms of performance post closing, but also potentially having some good synergies, and we can really drive a lot of growth. In the case of TalentHerder, it's a really good fit for us in terms of what we're seeing in the market and mapping that against the outstanding team that we acquired.

Could you discuss the revenue growth expectations and opportunities for TalentHerder over the next few years? Additionally, how does the margin profile of that business compare to yours?

The margin profile is quite high, likely around 30% operating margin for that business, which is fairly typical in the RPO space. This will definitely enhance our margins. While we are currently small players in the RPO business, we have significant aspirations to become a major player in that area. We believe that the team we have brought on board has the potential to effectively integrate with RCM resources and our sales team. With everything we have to offer, we are confident that we can establish ourselves as a prominent player in this space over time.

That's great. And then, Brad, you mentioned in the Healthcare space and several new strategic accounts. Can you expand upon that a bit?

Yeah, so I would think of them as being in our core education end market, really, as we continue to diversify that base. And importantly, there are accounts that we think that in aggregate are certainly accretive over the near term but have opportunities to grow materially from where they are today. So really, our K-12 initiative is really starting to gain its footing, and we're really starting to build our presence throughout the country.

If you compare our school business to three or four years ago, we have easily tripled the number of clients today. We feel like we have a lot of momentum to add even more. Alongside traditional schools, we're also making significant progress with large virtual school systems, which is exciting because we can support those schools from anywhere in the country. We're not limited to hiring regional talent; someone in Idaho can provide services for a virtual school. So, we're really enthusiastic about that expansion. We believe this segment of the business is still relatively small, but it has great potential for rapid growth.

And then lastly, the revenue in the healthcare business was up 42% year-over-year. What dynamics are at play that would either increase or decrease that number in the fourth quarter?

In terms of the fourth quarter versus the third quarter?

Fourth quarter this year versus fourth quarter of last year.

Sure. The main factor is that demand remains exceptionally high. The interest in our services is remarkable. This year, we have significantly more school clients than last year, and we've also expanded our presence with existing clients while bringing on new ones. Of course, the shift from COVID being a pandemic to an endemic might create some challenges for the fourth quarter compared to the same period last year. However, our performance in healthcare is outstanding. The only challenge to sustaining growth in healthcare, which we are looking at beyond just the fourth quarter and into 2023 and 2024, is finding qualified people. It’s a highly competitive market for talent. Nonetheless, our healthcare team is doing a fantastic job of securing talent for our clients. We may never find enough qualified providers because we can place virtually every qualified candidate we encounter, but they are excelling in their efforts.

Very helpful. Thanks very much.

All right. Next up in queue, we have Frank Kelly, a private investor. Your line is now open.

Good morning, everyone. Congratulations on a great quarter, and I want to recognize the entire team for their efforts. I have a couple of questions. First, thank you, Brad, for acknowledging the long-term significant shareholders who have been patient with the company. Second, Brad, you mentioned capital expenditures and the capital program, discussing organic investments and buybacks. However, it seems there was a lack of discussion regarding how you plan to reward those shareholders with a return. Is that something being considered? It was noticeably absent from your earlier response.

Yeah. No. Thank you for the question, Frank. Look, having bought back 25% of the company at this point, I think to the extent that we do introduce a dividend one day, it's recurring, and we're able to continue to grow EBITDA and shrink share count. The good news is the dividend is likely to be much bigger when you get it. So as long as we continue to see a profile that we see and we continue to generate extraordinary returns on capital, I think I mentioned earlier, I think we're in that 50% range at this point. Frank, historically, in my investment career, anytime I found teams that were able to put up numbers like that, I wanted them to keep the capital and potentially add to it. So though we are pretty active with respect to retiring shares, a dividend in the very near future isn't really on the dashboard. But look, that could always change. And again, we talk about it regularly.

Great. I noticed that by December, it will have been five years since there has been any direct return to shareholders. While buybacks do impact the stock price, I’m referring to direct returns. It would be helpful to keep this in mind in the future. Kevin, regarding SG&A, I see a 21% increase quarter-over-quarter, which is not much different year-over-year, compared to a 27% revenue increase. It seems that SG&A is growing at a rate that is significantly higher as a percentage than what would be expected given that level of revenue growth. Could you address this?

You left out the EBITDA growth. Don't we have to show that into the mix?

No, I think we're just looking at pure SG&A. I know there's a lot included there. Additionally, there were some higher interest payments that also factor into this, which are not necessarily aligned with the figures from the current quarter.

Sure. The interest has decreased because the debt has decreased, but interest is not part of SG&A. Regardless, our main focus is that we are extremely careful with every dollar we allocate to SG&A. However, when we look at our various businesses, we identify significant opportunities. Every business is in a rapidly growing market. Therefore, we are prepared to invest in SG&A wisely, knowing that not every decision will yield the expected outcome, but many do. We need to continue growing the company. We don’t want to be a $30 million EBITDA company for long; Bradley and I aim to reach $100 million in EBITDA, which requires increasing SG&A. To generate more EBITDA and enhance our stock price, we must increase SG&A, though it must be done thoughtfully. Historically, we have made mistakes by hesitating to invest in this area, and our past performance is partly linked to investing in SG&A. For instance, we would hire every single qualified recruiter we can find. If you brought me 50 candidates willing to start tomorrow, I would hire them, without worrying about the increase in SG&A, because from having 50 recruiters, we expect that several will succeed and provide an excellent return on our investment. Furthermore, we are always exploring ways to improve efficiency through technology, which requires short-term investment for long-term gains. We will continue to pursue this while being very mindful of our spending.

It's definitely reassuring to hear that. One concern I had was the growth rate of SG&A this past quarter compared to the revenue growth rate. While we're making investments, the increase in SG&A seems significant at 21 versus nearly 28 in revenue growth.

You should really consider evaluating it on a year-to-date basis. This is because Q3 SG&A includes many fixed costs and there is considerable seasonal variability in both revenue and gross profit during this quarter. If you are going to analyze it, compare the growth in SG&A with the growth in revenue.

I might have a different opinion than both of you. Kevin, what was the year-over-year increase in operating margin? Was it 600 basis points or 700 basis points?

Yeah.

So Frank, as long as we increase operating margin at a clip anywhere near that, like we are going to core on SG&A. And I think you're all going to like the outcome.

Okay. We are seeing a 54% increase in revenue year-over-year and a 33% increase in SG&A. I think it's important to examine the specifics of SG&A, but as long as we keep it monitored, it's something we need to consider historically.

Definitely appreciate the feedback, and you've always been a great thought partner on a couple of topics. This being one of them, Frank. Thank you.

Great quarter. Without the seasonal issues we typically see in the third quarter, we are looking forward to an outstanding fourth quarter.

At this time, I'm seeing no further questions in queue.

Thank you for attending RCM's third quarter conference call. We look forward to our next update in 2023.

All right. Ladies and gentlemen, it looks like that concludes your call. You may now disconnect your lines, and thank you again for joining us today.