RCMT

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, 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 Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the quarter.

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 health care. 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 is 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. Kevin 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 a preferred provider in the K-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, favored nation drug pricing and process automation. Each have caused momentum shifts with many of our clients from the negative of workforce reductions to the 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 pharma 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. Transitioning 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 1 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, RCM leverages our hybrid resourcing model, combining 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, digital 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 build 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 in 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%. Though the third quarter is historically slower when compared to other quarters due to increased PTO and headcount continued 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 lift 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 2 existing customers at the start of 2025 continue to contribute to our success in delivering to our aftermarket clients. RCM Aerospace and Defense attributes our latest award as Bell Flight's 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 buying 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.

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 '25 was 30.0% as compared to 31.2% for Q3 2024. School revenue for Q3 '25 was $24.4 million compared to $20.2 million for Q3 '24, growing 20.7%. Non-school revenue for Q3 '25 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 4 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 '25 was $6.9 million compared to $5.9 million for Q3 '24, growing 17.3% and our best engineering gross profit in 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 '24, decreasing by 4.2%. Gross margin for Q3 '25 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 '25. We again experienced administrative collection issues with 2 of our large school clients. We are optimistic we will see good cash flow in Q4 and expect the 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 Instructions] And first up, we do have Bill Sutherland of The Benchmark Company.

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?

Well, we certainly can't predict the timing, Bill. It's all dependent on visa retrogression. There have -- according to some things that we've heard, we believe the dates are going to be moved sometime in the fourth quarter. Even if they move a couple of months, we probably have 50 to 60 nurses we can bring over if they move, let's say, 3 or 4 months. That may or may not happen, right? But we have at least 300 nurses in our pipeline that have passed all exams and are ready to come over if we can get them visas, right? And we have a lot more than that in our pipeline that are in the process of passing various exams to be able to come over. It's something that 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 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.

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?

Yes, probably because I don't expect anything radically different in Q4. We have taken some measures long term to try to reduce those costs a little bit, but that's probably not going to impact us too much until 2026, hopefully. It's just been -- it's been a crazy year for medical costs. We had 3 or 4 great years in a row and then '24 and '25 was just terrible.

You can't predict it, I know, it's...

It's hard to predict. And there's obviously a lot of headwinds with what's going on with a lot of inflationary pressures and hospitals and insurance companies driving up costs. Our insurance for -- all of our insurance is up a lot in '25 versus '24. But at least you know where that is heading into the year and you can budget for it, right? But in the medical claims, you really -- you budget for it, you make your best budget and then it can get wiped out pretty quickly, unfortunately.

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.

Yes. Part of Industrial Process continues to motor along pretty strong. We're hiring. Demand is robust. And the second unit, it's work in progress. Some changes are being made to strategy, personnel. And the good news is it's our smallest unit, right? There's potential upside there for sure. But whether it's a pretty good year or a very mediocre year, it's unlikely to move the needle. Either way, it has our attention. And I'd say out of all of our businesses, it's the one that it just needs to -- it needs to be on a different trajectory, right now, but it has -- it is stable.

Yes, it's pretty small, as you know, Bill. But I will say this, I believe we have some pretty exciting projects in our pipeline that we're pretty bullish on, particularly along our next campaign. And we just got to close them. And we think that group will have a good 2026, but we don't have the backlog that we have at our 2 other engineering businesses. And I'm talking relative to the size, but it has good potential, and we're excited to realize some of this pipeline. So hopefully, on our next call, we'll have some good news for you around our P&I business.

Next up, we have William Duberstein of Stone Oak Capital.

I wanted to touch on Energy Services. It seems like it's growing the fastest, probably the largest growth opportunity. Everything we're reading is just pointing to increased utility growth, power -- independent power producer growth. There's 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.

Yes. 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 Tier 1 clients. In other words, the largest utilities in the country. And so there are certainly a broad list of vendors out there, right? In terms of that Tier 1 list, it's relatively narrow. Those go-to players that kind of get to the final line pretty quickly and are in contention for being the preferred choice. And it's -- the investments we've made in the last several years, they're starting to pay off. We're dialing that in, in terms of being able to really roll out our success and to the market broadly. And we're very pleased with the direction that we're headed. Look, that being said, we want to continue to be thoughtful. There is no shortage of activity out there. We are very cognizant about getting caught up and sticking our nose where we shouldn't be and risk management. But we are at a point where we feel like the group is -- we're taking that to the next level. Inevitably, there are investments you make along the way. It's a different set of infrastructure as you go through that process, you dial in personnel, right? But I'd say it's a very positive story there going forward. With respect to data center activity, when you look at that the investment in the grid right now, right, kind of our stronghold is the utility market. So as far as direct data center activity, that's really kind of incremental to us. Just there is no shortage of opportunity with our core client base. So we continue to remain focused on that. And as you know, it's a very stable client base to serve, and we are protecting that and we're growing within it. And we're riding the wave in that regard. But also we see opportunities to get more involved on the data center front selectively. And I think probably the most obvious opportunity is the interconnect aspect of it because the reality is each of these major data centers you see, they require substations, right, to be built, and that's obviously directly in our wheelhouse. So the way I would describe it to you in general, Bill, is it continue to maintain the quality and build on our reputation. And it really gets to the point where you're following your client, you're following that demand, right? So in terms of adding like even just adding 1 or 2 incremental core clients a year, it can really move the needle from our vantage point because, again, you can take any major utility, have a look at it, right? I mean, historically, their CapEx spend might be -- have been $2 billion or $3 billion. Now it's at maybe $5 billion or $6 billion. And then some of them are $8 billion to $10 billion are moving up another level to, call it, $8 billion to $10 billion a year. And the lion's share of that is going towards hardening the grid. So it's an exciting time for sure. But at the same time, it's also a time you don't want to get too far over your skis. So we're being thoughtful about it, but suffice to say, we're pretty excited about where we're headed there.

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?

Yes, that's a good question. Like, look, I mean, one of the nice things about services is to the extent that you meet -- it could even be one person, but you come across a set of very talented folks that you can bolt on, right, to your platform, the opportunity to grow within adjacencies is it's pretty clear. So the answer to your question is it's really both. And I attribute that to is we made a very conscious effort to get behind just investing in our brand in general. I mean, starting at the most fundamental level, it would be the website, our digital presence, LinkedIn, et cetera. I mean, it's a night and day difference if you look, call it, 18, 24 months ago. And one of the nice things about the times we live in right now is the ability to reach like folks in a relatively targeted manner, it's very cost effective. 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 1 bucket and just making sure you're front and center with respect to that target candidate pool and that digital presence in particular.

Great. That's all good stuff. And then just a couple of 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 start, which has since recovered, would that be in -- was that 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?

Bill, it has more to do with -- so when schools go into the summer session, right, they have kids in the schools, right, obviously, at a much, much lower rate than the primary school year. So our business doesn't go to 0 in July, which all of our schools are closed. And then some start to open up in early to mid-August and some closed in early May all the way through late June, right? So you see softness in June, July and August relative to the other 9 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 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, we saw great results. So the results for Q3 for healthcare a little -- 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?

Yes. Got it. So there are basically fewer students than you thought in your client schools over the summer.

Fewer of our students and our schools just needed less people than we thought. It's a combination of fewer of our students that we had the previous year and maybe fewer people taking off of the summer at the schools, but it just wasn't as great as we thought it would be.

Got it. That makes sense. And then final thing, just back to the healthcare costs. Are you guys self-insuring now? And just given the last 2 years, would you think of maybe changing strategies just given the size of the company? I think you're looking to maybe change something with the strategy there. So I just wasn't sure.

Yes, we're always looking to tweak our medical plans to bring those overall costs down, not only because we want lower cost for the company, but we -- more importantly, we want lower cost for our employees. And we can attract more people when we have 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 2 years, they would be even higher if we went fully insured. Because when you go 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, insurance companies, they're building all that risk into that premium and all that profit. So it just -- 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.

All right. Next up, we have Liam Burke of B. Riley Securities.

On engineering, the gross margins were well within your stated range, but down lower year-over-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?

Well, like we discussed on previous calls, you're going to see a fair amount of 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 our subs in a given quarter, right? So we don't make the same profit margin -- the same gross profit margin on our subs that we do on our salaried employees. And then our Aerospace is a little bit lower gross margin than, say, Energy 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 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.

And on Specialty Healthcare, you're getting further penetration with your existing schools. You're acquiring new customers. Is that -- 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?

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, our -- 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 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, school clients. So we're going to continue that focus. But there are other areas that we're looking at. And Bill Sullivan earlier asked about some of our foreign nurses that are coming over. 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 screening need for them. And that's an area where we have a little bit of advantage over the competition because 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 to answer your question, we're always going to be focused on schools. We are looking at adjacencies. One of the things we've been kicking around, and this is just in a discussion level is possibly supplying substitute teachers to schools, even though that's not healthcare, but it's obviously not that big of a leap and the model isn't that different. We look at things like substitute teaching. We're in the -- 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 U.S. for healthcare positions and other positions. So we're always looking for other avenues of growth when one of them becomes meaningful, we will certainly let you know about it.

Great. 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?

Yes. No, it's something -- it's front and center 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 with respect to valuation of our stock price, I mean, I think it's probably hard to make the argument that we're anything but undervalued materially, and that will take care of itself. I think just -- we're in a really good position right now where when you've taken out 45% of your outstanding, you have like 7.4 million shares outstanding. There's an argument for a baseline level of shares, especially when you have strong insider ownership float to be able to be freely traded and where institutions can get in and out and so on. And we're thoughtful about that. So it's just another dimension you weigh against just simply the valuation of your shares. So I mean, it's kind of a hindsight situation when you take out 45% of your shares and average cost of around $850. And when you're sitting around and sure you have a little bit of debt, right, from a capital allocation perspective. But you have the ability to delever relatively quickly and have no debt and maybe some cash. So I mean, I think really, we're in one of the best positions you can be from a capital allocation perspective is where you're always looking, right, but you really don't have to do anything. So open-minded with respect to a dividend. I've spent a very long time dealing with small cap companies and microcap companies I think there are good arguments against the dividend in certain segments of the market that might not exist in a much larger company. So it's something we think about. We haven't shut the door on it at all. But in the meantime, we can delever. And again, like we think about every aspect of that business is make sure we're prudent about our decision-making process.

All right. At this time, there are no further questions in queue.

Thank you for attending our Q3 conference call. We look forward to our next update in March.

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.

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 during 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 Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the second quarter.

Thanks, Kevin. Good morning, everyone. As we alluded to on 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 the 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 Health Care Services Group closed out the 2024/2025 school year with a [ strong ] momentum. We saw strong growth across our portfolio driven by our commitment to quality, innovation and client satisfaction. As we look 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 [ fill its ] 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. Transitioning 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 expansion 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 the 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 the 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. Continued technical contributions to the IEEE Power & 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. Headcount 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 a sequential increase of 11% and 8% in gross margin and EBITDA, respectively. Our vertical lift in technology innovator customers doing business with the U.S. 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 2 existing customers on 2 large multiyear 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 has kept our team in the forefront of providing enhanced speed- to-market capabilities. We continue to add new clients in Q2 of 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.

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 '24 and yielded our highest gross profit over the past 13 quarters. 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 $0.69, as compared to $0.57 for Q2 '24, growth of 21.1%. As for our segment performance in the second quarter of 2025, in Health Care, 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%. Nonschool 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 Q2 '25 -- excuse me, gross margin for Q2 '25 was 24.5%, compared to 26.5% for Q2 '24. 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 full year free cash flow to align with our net income. Specific to Q2, we had over $10 million from 2 major school clients delay due to school year 2024/2025. But we 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 the fourth quarter jump we saw in fiscal 2023, we do expect Q4 '25 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 Instructions] And first up, I see Liam Burke of B. Riley Securities.

You talked about the data center infrastructure and the grid modernization and how that's accelerating. Could you give us some color on, you have some multiyear preferred partner agreements, how that's working and how that's helping you accelerate into that sector?

Yes, absolutely. 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. First and foremost, I'd point to some of the projects, and I call marquee projects, that are attracting a good bit of attention within the industry. So naturally, those 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. In addition to that, I think historically when you look at RCM, 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 in, 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 we're all kind of reading the same things in the newspapers and through different media outlets, but I think the surge in spend that is, frankly, it's here, it's pretty overwhelming. I mean it's historic without a question. And it's really hard to find an argument that we're anything but in the early innings of it. So if anything, I think you -- 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 all else being equal, that would lengthen the cycle regardless. But from our perspective, I mean, the industry is so large and we're certainly starting to hit our stride at a good time that it's hard not to see it be a big positive for the business.

You seem to be adding contracts in the health care space on the educational side. Are most of those still K-12? Or are you able to leverage your brand into other areas of education, like community college or other municipal health programs?

No. They're primarily K-12. We're very, very excited about this coming school year. We've added another dozen or so new contracts, half of which we believe can be of a decent -- a meaningful impact to the revenue for the 2025/2026 school year. So we're having a lot of success in the K-12. That doesn't mean we're not looking at other areas, but we're pretty focused on K-12.

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?

We better. Yes. No, we certainly expect that. And just 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 we look to do both, obviously.

Yes. The other thing, Liam, 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 relatively nascent markets that are highly fragmented, there's really a lack of, call it, institutionalization, for a better term, best practices, et cetera. So kind of as a leader in that space, there's a big opportunity for us to step in and really demonstrate our knowledge base and ultimately win against some of the more local and regional competitors. And naturally, when you think about the different segments of the health care market, I mean, there are the things that make that market special, right? I mean the inability to replace that human touch, right? I mean you magnify that when you start to deal with kids. And so there's a significant opportunity from our perspective that, certainly from our vantage point and our size and given the market opportunity, there's a way to go there.

Next up, we have Bill Sutherland of Benchmark.

On Health Care, Kevin, did you give the breakout of school and other?

Yes, we did. Hold on, let me just...

I can get that later then.

Well, [ I can give you ] real fast. It's 30 -- we were at $37.2 million for schools and $5.6 million for nonschools for the quarter.

Okay. Interested in that internal training program you mentioned. Can you give us some color on that, in health care?

In terms of our internal training program? Yes. I mean we go out, we find people that we think would make good candidates for our schools and we train them up ourselves. And we have training centers in several different locations. It's not something I want to speak a lot about just for competitive reasons. But yes, we...

Are these paras or is this -- I mean, because you're doing a lot of behavioral health now.

It can be paras or RBTs as well, but mainly paras. But there are other types of people that we engage in training as well.

Okay. And what about the international nurse side? I know you've been [indiscernible].

Yes. Well, they just moved up visa retrogressions for a couple of countries. And 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, we could have who knows how many. We have probably 500 nurses in our pipeline that are interested in coming to the U.S. If you have any inroads with this administration, please write a letter.

Yes. 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?

I think it's a good indication of where the business is. But 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 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 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.

Next up, we have William Duberstein, Stone Oak Capital.

Nice to talk to you guys again. Great quarter. A couple of 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...

You're talking about Engineering?

Engineering specifically.

We don't really look at it that way. I mean certainly, if we really want to get into a client and we need to bid something in the 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 I don't think that it's, frankly, it's a super price-sensitive market. I mean it's price sensitive, of course, you're dealing with utilities. But they're much more interested in quality than they are on a couple of points or a couple of bucks. And obviously, they don't know what your margins are. But 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. The biggest reason why you potentially see lower margins in our Engineering Group is when we have our fixed-price contracts that in any given quarter are heavy on the subs, and we have the subs costs running through our income statement, we're going to see -- we don't make the same margin on our subs, obviously, than we do on our internal salaried engineers. So that's typically why you're going to see a little bit -- where you might see it drop a little bit. And there are other factors involved. But when we start talking about Engineering and we look at the 3 pillars, Aerospace is a little bit more competitive, so those margins tend to be a little bit lower, but the other 2 groups in terms of 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 our subs. Does that make sense?

Yes, absolutely. It was nice to see the improvement there from last quarter. And then just...

Yes, we're generally trying to drive margins in the Engineering above where we were in the second quarter. But it just -- again, it just depends on the mix shift.

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 2 schools you mentioned?

Well, it's really both. The 2 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. Look, we crushed it with those 2 schools, so they ran out of money to pay us, which happens in the school systems. But that's okay. I'll wait. We'll wait for the money and drive the revenue because we always get paid by the schools, like we'd never have write-offs, and -- or virtually never. And 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 yes, I mean, 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. But if it's up, it will be a good thing.

Got it. That makes a lot of sense. And then finally, on a previous question, I think you touched on 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 factor.

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 this school year compared to last school year. If immigration cooperates, it could make a difference between a good year -- like a good 2026 and an incredible 2026, right? So we'll see what happens. We just -- we can't obviously predict what's going to happen with immigration. We may not get any meaningful number of nurses in, in 2026. We may get 100 or more. It's really hard to say. But what we believe is that over time, immigration, usually comes around to the conclusion that, if you want nurses in this country, you better go get them from somewhere else, because they're just -- 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.

Got it. Great. Hopefully, that does open up.

[Operator Instructions] Next up, we have Ben Andrews.

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 the bigger trends out there, and I think you've positioned the company in 2 areas where the wind seems pretty strong at your back, which is the education and the Engineering/T&D, and those trends seem to -- looks to me at least to be multi-years going forward. And during the last 3 or so years, our stock has pretty much gone sideways. And I think you guys have done an excellent job 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 over my career a management doing that. And so if I look at those 2 divisions where I think there's solid wind at your back, it seems that even though RCM's businesses can be volatile, it seems that like roughly $2 in EPS going forward per year seems achievable. It doesn't seem like you're going to do $1 or $0.50 or anything like that. It seems like you're going to be somewhere in a solid area like that. So 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 just total AI. And so my thoughts are, if we instated dividend, say, an $0.80 dividend, which should easily be covered if you're making a couple of bucks a year in EPS, open the world up to a little different shareholder base, and the people that own your shares and have been loyal to you for many years get a little bit of a boost. And I just think kind of where you're positioned now after these hard work to maneuver some of these divisions and 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 -- I'm trying to -- I just think it's a much better case to implement a dividend.

Yes, 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, depending on the facts and circumstances of the moment, you might come out on a different side of the ledger, right? So what I'll say where we sit today is the company is in a really good spot. And I think that the ability to put a dividend in place with a completely debt-free balance sheet, having reduced, call it, 45% of the share count, maybe you have a small net cash position, it probably makes as much sense as ever. And it's something that we'll continue to evaluate. And as that day gets closer, it could become more of a reality. That being said, there are 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 when you have a lot less shares outstanding and a relatively limited supply of high-quality companies in this segment of the market, you could be the prettiest girl or guy at the dance, right, and having a clean balance sheet as growth accelerates with a lot less shares. As you know, this is something that hasn't changed in the last 20 or 30 years. These things can happen overnight in terms of stock appreciation. So in the meantime, appreciate the patience. We're in the trenches every single day working towards building the business and making it stronger. But the good news is we're not just getting stronger on an absolute basis; we're doing stronger on a relative basis and increasingly attractive. Also 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 -- I almost think of it as a little big company, right? 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 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. We very much think of the company as a growth company, especially when you start to think about our performance relative to our peer base, of all sizes really. We've significantly outperformed on a relative basis and we anticipate an attractive performance on an absolute basis. So the valuation will take care of itself. I mean just to sum it up.

Yes, I agree. I agree. And I agree with your assessment that usually you can put in work for years and then, all of a sudden, your valuation comes all within 30 days, even though you're sitting around 36 months waiting for it. It 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 overreach when you put in a dividend. If you put in a $0.80 dividend, then you still got money to still pay down debt, you still got money to do some IP acquisitions. I think where we were aligned in conversations from the past is I think it's wise to spend money to buy IP and so it can be assimilated in your company, rather than doing some huge acquisition that often ends up blowing up in your face 24 months later. So that was the thought, where money is spent more evenly across a couple of areas rather than just one area. But I appreciate your thoughts and I appreciate how you guys have built this company. So thank you.

One more thing I'd just insert in there, Ben, right? And just to emphasize, working towards a clean balance sheet, we think our balance sheet is well within the range. We're very comfortable in our target range, I'll call it, loosely defined. As you think about the potential outcomes that exist for a company our size, particularly to the upside, right, in this dynamic of an environment, right? So having a clean balance sheet is really -- it's almost a strategic asset in a lot of ways, because 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 they oftentimes, they start off on solid footing and then they grow every single year, and 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. We've got -- we've positioned ourselves really well. We've got some really talented folks, we have discussions, right? And ultimately, how those mature, right, there's unknown aspects of that. But we want to position the company so we can maximize the value of those discussions, right, when that moment comes. So in other words, those opportunities for step-function growth, we're not constrained in any manner, frankly.

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.

All right. This does conclude today's Q&A session. Speakers, I'll turn it over to you for concluding remarks.

Thank you for attending our Q2 conference call. We look forward to our next update in November.

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.

Good morning, and thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies, and 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, 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 Vizi, Executive Chairman, to provide an overview of RCM's operating performance during the quarter.

Thanks, Kevin. Good morning, everyone. Consistent with prior remarks, the internals of our business continue to strengthen at an increasing rate. We believe the company is well positioned based on the thoughtful investment strategy we have deployed and significant reductions in our share count should enhance the compounding of returns to the benefit of shareholders. With stewardship as a foundational pillar to our [indiscernible], we believe we are positioned for continued outperformance. In fact, we have sharpened our focus on cultivating the next generation of leadership, as we look through the end of the decade. Not only do we aim to maintain continuity when passing the baton, but assurance that the next generation is simply better than the one before it. I strongly believe this is not only the capstone of one's career and a defining component of their legacy, but fundamental to the longevity and continued success of every organization. I am keenly focused on this being one of our hallmarks as a company and a strategic advantage when we look back years from now. With great enthusiasm about the present and well into the future, I will now provide an update on the progress of each of our business units. RCM health care is off to a strong start in 2025. More importantly, as we look forward to next school year, the stage is set for continued momentum. Many of our largest school districts are on a robust growth trajectory. Our presence in K-12, particularly in behavioral health, is stronger than ever as we expand in many existing schools and sign new school contracts for next school year. Also of note, our HIM division is starting to blossom, having cultivated a robust pipeline filled, with high potential projects. With many prospective clients across all our groups and plans to expand our direct sales team, we are poised to seize these opportunities and drive significant growth. As we work towards a strong close of the 2024, 2025 school year, planning is well underway for a strong start to the fall. Looking forward, the future of our Health Care segment is bright. In addition to onboarding new school districts, the hand-in-glove execution of our offshore team has been critical to extending our advantage, allowing us to ensure that children and schools receive the essential care they need. Unlocking efficiencies in our organization has allowed us to double down on our investment in best practices and quality of care, further cementing our position as the go-to provider in K-12 nationwide. Success in our core K-12 market has opened other direct adjacencies, fueling investment in our sales team to galvanize growth for years to come. Transitioning to Life Sciences and Data and Solutions. 2025 has brought significant opportunity for the IT industry in the form of accelerated technological advancements in the areas of artificial intelligence and machine learning. One year ago, only a few clients had an AI/ML strategy. Today, we are seeing system deployments. We also see a significant expansion of manufacturing across our life sciences client base. Financial highlights in the quarter include the division posting a 40% gross profit, while maintaining a solid 23% NOI contribution. This is attributed to strong managed service contracts, overselling SG&A costs and consistent delivery management of our projects. Respectively, we are in the early stages of building out our offshore resources base in this division. Continuing momentum with this initiative will be key to helping us maintain and improve our market position for our key practices while being highly competitive in our new BPO payroll offering. Our focus is revenue expansion and new client attainment. So far in 2025, the division has opened 6 new clients, leveraging new service offerings ranging from asset management to design engineering. At the industry level, we are expecting to see shifts in services, demand in the life sciences sector over the coming months. Facing increased lead times, organizations are seeking alternative sources of materials and talent. Using technology for quality improvement, direct cost reduction in headcount, automating manual or repetitive tasks is key for the remainder of 2025. In conclusion, our Q1 results demonstrate the strength of our core services. We have maintained a 90% plus renewal rate, while not losing strength in our margins or bottom line. Turning to Engineering. Starting with Energy Services. Since Q4, we have made significant strides with a strong focus on market opportunities and partnerships. Several substantive multiyear preferred partner agreements for comprehensive engineering services with increased scope are now in various stages of execution, progressing at an accelerating pace. We are capitalizing on the momentum we have built over the last several years, as RCM quickly becomes a go-to partner in the industry. Opportunities for growth are abundant, driven by multi-decade themes, including grid modernization, grid interconnect and the proliferation of data centers. Any one of these variables represent strong secular demand. However, I believe that the confluence of all of them is propelling unprecedented exponential growth and the need for innovative turnkey engineering and EPC solutions. Operationally, we continue to mature as an organization. We are quickly graduating from a hard-charging entrepreneurial organization with a drive to innovate to one that can effectively channel that innovative spirit to deliver the same distinguished outcomes at scale. Our shared services functions not only facilitate knowledge transfer and best practices across business units, but further enhance operational efficiency and capacity to expand. We are seeing synergies across our core recruitment businesses, where we have demonstrated a clear competency to satisfy hard-to-fill requirements, then rapidly assimilating our new teammates into our can-do culture. Furthermore, we are in the early stages of scaling up our nearshore and offshore capabilities, piggybacking on decades of goodwill built in these geographies affording us access to high-quality candidate pools. In summary, our outlook for the business has never been stronger, as we believe we are in the early stages of capitalizing on a foundation that was methodically late over the last 5 years. In Process and Industrial, last quarter, we announced the launch of the RCM Thermal Kinetics office plant expansion program, primarily focused on the ethanol industry. The Teekay Office is completing the first next product in early May. The project is an intensive process and equipment engineering effort followed by a 6-week field coordination and management of installation crews, pipe fitters and related sub-suppliers that will result in a 20% ethanol plant capacity increase. There has been much interest from other ethanol plants in the project. We anticipate our next pipeline to increase significantly once this first project completes, the plant restart in early May. Other project activity includes the initiation of a pilot campaign at the Teekay Test Center as a follow-up to an engineering design purchase order related to lithium extraction and recovery from brine extracted from a U.S.-based project. Equipment for this facility is scheduled before purchase in late 2025. As anticipated, the pilot test has yielded data valuable to scale up on the project. In engineering order for a distillation solvent recovery has been received this week. This order was also a result of 6 weeks of lab testing to derisk the project. The equipment order is scheduled to immediately follow the 8-week engineering order. There has been a significant uptick in RFQ activity at the Teekay Office. Improvements made to the digital presence of the organization as a strong contributing factor to the uptick. The team remains focused on the continuation of their emergence as a market leader in responsible and sustainable chemical process design. Activity in our Aerospace Group has increased materially. Due to the awards on new and existing programs with historical and new clients in Q3 and Q4 2024. The Aerospace and Defense Group has exceeded our business plan objectives for Q1 2025 by over 20% on revenue and almost 19% on EBITDA contribution. Head count continued to increase through Q1 2025 by an additional 20%, with 50 new hires compared to Q4 2024. As projected, we have realized a significant increase in revenue, gross profit and EBITDA in Q1 2025, with a weekly revenue run rate of about $1 million. A 47% increase in revenue compared to Q1 2024, a 45% increase in gross profit compared to Q1 2024, and an increase of 247% EBITDA contribution compared to 2024, primarily due to the overall increase in new business ramp up in our -- and ramp up in our historical client base and aftermarket recovery contributing to the success. Our vertical lift and technology innovator clients doing business with the U.S. government have led our growth thus far in 2025. However, we anticipate our continuing success in our new service and expertise in supply chain manufacturing and quality engineering with new clients will impact 2025 and beyond. We also continue to experience growth throughout new design programs and engineering with significant growth in the manufacturing environment on long-term supported products throughout the enterprise. Our recent wins with 2 existing customers on 2 large multiyear projects for S1000D conversion have solidified workload for a large portion of our aftermarket team for years to come. The recruitment team continues to build trusted relationships throughout the client and candidate base, which has allowed this team to continue to exceed all hiring expectations throughout the quarter. In Q1 2025, we began integrating new tools and technologies to enhance our differentiating factor of intellect and speed-to-market amongst our end competitors. We expect the new multiyear contracts executed in 2024 to help drive and expand our model-based expertise, software, systems, logistics, avionics and aftermarket expertise throughout 2025 and 2026. We have also added 3 new clients in Q1 2025 with customers requiring our expertise in supply chain manufacturing and quality engineering realm, and with manufacturing engineering support. In summary, we anticipate -- the anticipated growth with our existing and new aerospace and defense clients in 2025 has begun to be realized. Most of our clients continue to need the support of a cost-effective, high-quality, flexible workforce in this current environment because of shorter-term contracts with budgetary constraints. We look forward to continuing to build on our momentum throughout 2025. Before turning the call over to Kevin, it is worth noting that we have retired a little over 300,000 shares year-to-date, bringing combined repurchases over the last 5 years to just under half of shares outstanding, while maintaining a clean balance sheet with significant financial flexibility and resilient organic growth. Though the disconnect in our share price remains a head scratcher. We will continue to act with alacrity when Mr. Market offers to swap his dollar bills for our quarters. With an abundance of ambivalence and increasing enthusiasm about the future. I will return the call to Kevin to discuss the Q1 2025 financial results in more detail.

Thank you, Brad. Regarding our consolidated results, consolidated gross profit for the first quarter of 2025 was $22.0 million, which grew 7.9% over Q1 2024, and yielded our highest gross profit over the past 12 quarters. Adjusted EBITDA for Q1 2025 was $7.8 million, as compared to $6.2 million for Q1 2024, growth of 14.4%. Adjusted EPS for Q1 2025 was $0.63, as compared to $0.53 for Q1 2024, growth of 18.9%. As for our segment performance, the first quarter of 2025. In health care, gross profit for Q1 2025 was $12.2 million compared to $11.1 million for Q1 2024, growing 10.2%. Gross margin for Q1 2025 was 28.2%, as compared to 29.0% for Q1 2024. School revenue for Q1 2025 was $37.3 million compared to $31.9 million for Q1 2024, growth of 16.7%. Nonschool revenue for Q1 2025 was $6.0 million compared to $6.3 million for Q1 2024. However, if we remove a large long-term Care Group, where we deliberately reduced services, revenue would be $5.5 million versus $5.1 million. In Engineering, gross profit for Q1 2025 was $6.2 million compared to $5.5 million for Q1 2024, growing 12.4%, and our best engineering gross profit quarter in our history. Gross margin for Q1 2025 was 19.2% compared to 23.4% for Q1 2024. Gross margin in the first quarter of 2025 was lower than normal, primarily for 2 reasons. We had significant pass-through construction revenue from our EPC contracts in our Energy Services group. If we normalize gross margin for construction labor pass-through revenue only, gross margin was approximately 22.7% versus 25.8%. We also experienced significant growth from our Aerospace group, which has lower gross margin, but a very reasonable operating margin. As a reminder, our engineering gross margin can be volatile, but we generally expect normalized gross margins between 22% and 26%. In IT, Life Sciences and Data Solutions, gross profit for Q1 2025 was $3.6 million compared to $3.8 million for Q1 2024, declining by 5.3%. Gross margin for Q1 '25 was 39.7% compared to 37.0% for Q1 2024. Regarding our balance sheet, we made good progress on our accounts receivable DSOs in Q1 2025, with about 74 days compared to about 92 days for Q4 2024. Our accounts receivable reduction helped us generate $16.7 million in cash flow from operations. We also reduced our net debt by $12.0 million to $18.2 million for Q1 2025 as compared to $30.2 million for Q4 2024. We are optimistic we can keep our DSOs under 80 days going forward. We expect to continue to deliver at least low double-digit growth in adjusted EBITDA throughout fiscal 2025. Also, while we don't expect -- don't necessarily expect the fourth quarter jump in adjusted EBITDA that we saw in fiscal 2023, we believe 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 Instructions] First up, we have Liam Burke.

Brad, I know you're primarily services, but there's a lot of political policy uncertainty out there. Is any of that moving into your business or any of that are concerned for you in any of your business lines?

No, Liam, thanks for the question. Fortunately, Kevin or I have yet to come across Smooth or Holly. Generally speaking, a macroeconomic environment, we try and think about setting the business up as -- to the extent that it does impact us, we can navigate around it. But generally, lever ourselves the secular themes for which we can take advantage of. So I'll tell you, it's my job every night before I go to bed, they have 5 things on my mind. The macroeconomic environment has never been one of them. So I haven't seen any issues so far.

Great. That's good to hear. And Kevin, you talked about gross margins on engineering and walk through the delta. Looking at health care, it looks like you're growing your more profitable business, and the legacy business is being worn off. You had a slightly lower year-over-year gross margin. Is that just working through the old legacy business?

Well, it's more of a just sort of quarterly noise that you're going to see. There is a little bit of a mix shift there in terms of some of our nursing contracts that are maybe a little bit lower gross margin than some other contracts in behavioral health, for instance. But it's just kind of the normal noise that you would expect to see from quarter-to-quarter. Nothing really specific other than maybe a little bit of a bump in some new nursing contracts or existing nursing contracts, even that have a little bit lower gross margin than the behavioral health. But we -- there's no like trend there where we expect any significant erosion in margin as we're sitting here today. And I would expect that Q2 will be a little bit better than Q1.

Okay. So let's think of it more as operating in a range similar to your other businesses?

Exactly. Exactly. And we usually -- and we gave some guidance on general ranges on our last call and health care certainly fell within that range.

[Operator Instructions] And at this time, I'm not seeing any further questions in queue. [Operator Instructions] All right, gentlemen, I'm still seeing no questions in queue.

All right. Thank you, everyone, for attending RCM's first quarter conference call. We look forward to our next update in August.

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.