RCM Technologies Inc. (NASDAQ:RCMT) Q1 2020 Earnings Conference Call - Final Transcript
May 12, 2020 • 11:00 am ET
Good morning, everyone. This is Brad Vizi, Executive Chairman of RCM Technologies. Welcome to the RCM Technologies 2020 First Quarter Earnings Call. I'm joined today by Kevin Miller, our Chief Financial Officer. Kevin will begin with a legal disclaimer, and then I will summarize the operating results for each of our business units before opening it up for questions. Kevin?
Good morning, everyone. 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 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 filed with the SEC, as well as our press releases that we issue from time to time.
Thanks, Kevin. We last spoke about two months ago, but the world has obviously changed since. Like most companies, we are heavily impacted by COVID-19. To put the impact in perspective, we need to discuss the implications by segment.
But first, I want to stress several overarching themes. When COVID-19 quickly escalated. our highest priority was the safety of our employees. We very quickly moved most of our billable and non-billable staff to work from home. Though a part of our workforce is accustomed to occasionally working from home, the sheer volume and suddenness of the transition throughout the company required a Herculean effort. We are proud of our entire company for quickly adapting to the new environment.
As it pertains to financial performance. In the short-term, our revenue in all three segments is impacted. Our number one focus right now is maximizing cash flow and shrinking our balance sheet. We are reducing debt by aggressively pursuing the reduction and deferment of costs and vigilantly managing accounts receivable. As far as cost reductions are concerned, we need to consider each segment separately, while aggressively applying the same two principles. First, maximizing utilization; and second, reducing SG&A expense. These two overarching themes must be managed carefully in order to maximize cash flow in the short-term, while not harming the company in the long-term.
COVID-19 has had the most significant impact on our healthcare staffing segment. Before the pandemic, our healthcare staffing segment was well on its way to another record quarter. But as many of you know, most of our school clients, including New York City, Hawaii and Chicago, abruptly closed in the middle of March. The impact on Q1 was twofold. We lost approximately $3 million in revenue from school personnel that we would have otherwise billed in Q1. We also lost over $1 million in gross profit from this lost revenue in Q1. In addition to our normal margins, we incurred certain payroll costs for the full month of March.To help offset the short-term revenue reduction, our