Our last commentary on Resources Connection, Inc. ( RGP ) was in October of last year, when we doubled down on our Hold rating in May of the same year. Although revenue growth remained under pressure in theIndividual investor with a keen interest in deriving income from investment setups. We do this by buying undervalued profitable stocks with strong balance sheets & minimal debt. Furthermore, when the opportunity arises, we like to write calls against our positions to bring in additional income. Risk manag ...

Our last commentary on Resources Connection, Inc. ( RGP ) was in October of last year, when we doubled down on our Hold rating in May of the same year. Although revenue growth remained under pressure in theIndividual investor with a keen interest in deriving income from investment setups. We do this by buying undervalued profitable stocks with strong balance sheets & minimal debt. Furthermore, when the opportunity arises, we like to write calls against our positions to bring in additional income. Risk manag ...

Financial Performance - Revenue for the three months ended November 29, 2025, decreased by $27.9 million, or 19.2%, to $117.7 million compared to $145.6 million for the same period in 2024[159]. - On a same-day constant currency basis, revenue decreased by $26.8 million, or 18.4%[159]. - Total consolidated revenue for the six months ended November 29, 2025, was $237.961 million, down from $282.553 million in the same period of 2024[158]. - Revenue decreased by $44.6 million, or 15.8%, to $238.0 million for the six months ended November 29, 2025, compared to $282.6 million for the same period in 2024[161]. - Consulting segment revenue declined by $18.0 million or 29.7% to $42.6 million in Q2 FY2026 compared to $60.6 million in Q2 FY2025, driven by a 33.8% decrease in billable hours[185]. - For the six months ended November 29, 2025, Consulting segment revenue decreased by $29.4 million or 25.4% to $86.3 million compared to $115.7 million for the same period in the prior year[186]. Cost and Expenses - The company expects an annual reduction in SG&A expenses ranging from $6.0 million to $8.0 million due to workforce reductions[140]. - SG&A expenses increased by $2.1 million to $102.3 million, or 43.0% of revenue, for the six months ended November 29, 2025, compared to 35.5% of revenue for the same period in 2024[168]. - Cost of services for the three months ended November 29, 2025, was $74.026 million, accounting for 62.9% of revenue[158]. - Cost of services decreased by $29.7 million, or 16.8%, to $146.8 million for the six months ended November 29, 2025, compared to $176.5 million for the same period in 2024[165]. Profitability and Loss - The net loss for the three months ended November 29, 2025, was $12.661 million, representing a net loss margin of 10.8%[155]. - The company incurred a net loss of $15.1 million during the six months ended November 29, 2025[217]. - Adjusted EBITDA for the three months ended November 29, 2025, was $4.045 million, with an adjusted EBITDA margin of 3.4%[155]. - Adjusted EBITDA for the On-Demand Talent segment was $4.066 million for the three months ended November 29, 2025, down from $5.605 million for the same period in 2024[181]. - Adjusted EBITDA for the Consulting segment decreased by $5.2 million or 54.2% to $4.5 million in Q2 FY2026 compared to $9.7 million in Q2 FY2025[197]. Operational Metrics - Billable hours decreased by 18.4% year-over-year, indicating a need for improved go-to-market execution[159]. - The number of agile consultants on assignment decreased to 2,288 in the second quarter of fiscal 2026 from 2,758 in the second quarter of fiscal 2025[164]. - The average number of salaried consultants decreased to 400 in the second quarter of fiscal 2026 from 527 in the second quarter of fiscal 2025[164]. - Billable hours decreased by 16.4%, while the average bill rate increased by 0.4% for the six months ended November 29, 2025[161]. Strategic Initiatives - The fiscal 2026 strategic focus includes expanding cross-sell opportunities through diversified services, scaling high-value consulting solutions, and improving cost structure[136]. - The company aims to leverage value-based pricing to enhance profitability, particularly in the consulting business[141]. - Management anticipates that the transformation efforts will continue throughout fiscal 2026, with evolving scope and impact[143]. - The company is focused on integrating Reference Point's consulting capabilities to form a more cohesive consulting segment[143]. - The appointment of Roger Carlile as CEO is part of a leadership transition aimed at ensuring continuity and strategic direction[142]. Cash and Liquidity - The Company had $89.8 million in cash and cash equivalents as of November 29, 2025, including $40.6 million held in international operations[205]. - As of November 29, 2025, the company had approximately $89.8 million of cash and cash equivalents and no borrowings under its 2025 Credit Facility[222]. - Operating activities for the first six months of fiscal 2026 provided cash of $8.1 million, a significant increase from $1.5 million in the same period of fiscal 2025[216]. - The net cash used in investing activities was $0.4 million for the first six months of fiscal 2026, compared to $12.7 million in the same period of fiscal 2025[219]. - Net cash used in financing activities was $3.9 million for the first six months of fiscal 2026, down from $17.4 million in the first six months of fiscal 2025[220]. Market Conditions - Uncertain macroeconomic conditions have created significant volatility, adversely impacting financial results and client spending in professional services[145]. - Approximately 20.5% of the company's revenues for the six months ended November 29, 2025, were generated outside of the U.S., up from 18.2% in the same period of the previous year[224]. - A 10% decline in interest rates would reduce the company's interest income but would not materially impact its consolidated financial position[222]. - Approximately 54.8% of the company's cash and cash equivalents as of November 29, 2025, were denominated in U.S. dollars, down from 59.2% as of May 31, 2025[225].

He also emphasized that artificial intelligence and automation are changing client needs and the services clients procure. Carlisle said the company is working to understand how clients’ AI strategies are affecting demand and is implementing additional AI and automation tools internally to improve delivery and support functions.Carlisle said the company’s strategy going forward centers on three themes:CEO Roger Carlisle, newly appointed in November, opened the call by thanking employees for supporting the l ...

Financial Data and Key Metrics Changes - Consolidated revenue for the second quarter was approximately $117.7 million, reflecting an 18.4% decline year-over-year on a constant currency basis [19][20] - Adjusted EBITDA was $4 million, resulting in a 3.4% adjusted EBITDA margin, despite revenue coming in below consensus [11][19] - Gross margin was 37.1%, down from 38.5% in the prior year quarter, impacted by higher healthcare costs and holiday pay [20][26] Business Line Data and Key Metrics Changes - On-demand segment revenue was $43 million, a decline of 18.4% year-over-year, with segment-adjusted EBITDA at $4.1 million, or a 9.5% margin [25] - Consulting segment revenue decreased by 28.8% year-over-year to $42.6 million, with segment-adjusted EBITDA at $4.5 million, or a 10.4% margin [25] - Europe and Asia Pac segment revenue grew by 0.6% year-over-year to $20.1 million, maintaining stable gross margins [25][17] - Outsourced services segment revenue was $9.4 million, up 0.8% compared to the prior year quarter, with segment-adjusted EBITDA at $1.7 million, or an 18.4% margin [25] Market Data and Key Metrics Changes - North America saw improved pipeline activity due to expanded go-to-market initiatives, while Europe and Asia Pac segments delivered both year-over-year and sequential growth [12][17] - Several North American markets showed sequential revenue growth, while lagging markets are undergoing leadership changes [16] Company Strategy and Development Direction - The company aims to align its cost structure with current revenue levels, refocus on-demand offerings, and scale its consulting business to deliver high-value solutions [7][11] - The strategy includes integrating Reference Point's capabilities to enhance collaboration and strengthen focus on CFO Advisory and Digital Transformation [14] - The company is committed to understanding how AI and automation impact client needs and is implementing these technologies to improve service delivery [10][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging market for services but believes there is a sufficiently large market for client needs that can drive growth [6] - The company expects revenue for the third quarter to be in the range of $105 million to $110 million, with gross margins anticipated to be between 35% and 36% [27][28] - Management emphasizes the importance of improving sales execution and optimizing talent to meet client needs [29] Other Important Information - The company incurred $11.9 million in one-time expenses related to the CEO transition and a reduction in force, contributing to a GAAP net loss of $12.7 million [19] - The reduction in force impacted 5% of management and administrative headcount, expected to yield annual savings of $6 million to $8 million [22] Q&A Session Summary Question: Can you elaborate on AI's impact on finance and accounting roles? - Management noted that operational accounting roles are most impacted by AI and automation, with clients experimenting with AI to enhance efficiency [31][33] Question: Is AI causing clients to delay decisions? - Management indicated that while there is uncertainty in the market, AI is not significantly causing decision delays; rather, clients are exploring how to leverage AI effectively [57][59] Question: What is the expected impact of healthcare costs on gross margins? - Management stated that healthcare costs had a significant impact, approximately $1 million+, and normalized gross margins could have reached around 38% without these costs [62] Question: What is the vision for the next 12 to 24 months? - The focus will remain on aligning cost structures with revenue, enhancing on-demand services, and growing the consulting segment to drive value for clients [51][53]

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 was approximately $117.7 million, reflecting an 18.4% decline year-over-year on a constant currency basis [19][20] - Adjusted EBITDA was $4 million, resulting in a 3.4% adjusted EBITDA margin, despite a GAAP net loss of $12.7 million due to one-time expenses [19][20] - Gross margin decreased to 37.1% from 38.5% in the prior year, impacted by healthcare costs and holiday pay [20][21] Business Line Data and Key Metrics Changes - On-demand segment revenue was $43 million, down 18.4% year-over-year, with segment-adjusted EBITDA at $4.1 million, a margin of 9.5% [25] - Consulting segment revenue declined 28.8% to $42.6 million, with segment-adjusted EBITDA at $4.5 million, a margin of 10.4% [25] - Europe and Asia Pac segment revenue grew 0.6% to $20.1 million, maintaining stable gross margins [25][26] Market Data and Key Metrics Changes - North America saw improved pipeline activity due to expanded go-to-market initiatives, while Europe and Asia Pac segments delivered growth [12][17] - Outsourced services revenue remained steady year-over-year at $9.4 million, with improved gross margins [26] Company Strategy and Development Direction - The company aims to align its cost structure with current revenue levels, refocus on-demand offerings, and scale its consulting business [6][7] - Emphasis on providing relevant skills and solutions to clients at competitive prices to enhance value [6][9] - The integration of Reference Point is expected to enhance collaboration and strengthen focus on CFO Advisory and Digital Transformation [13][14] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a challenging market but believes in the potential for growth due to a large market of client needs [6][11] - Future strategies will focus on improving sales execution and optimizing talent to meet client demands [51][52] - The company expects Q3 revenue to be between $105-$110 million, with gross margins projected at 35%-36% [27][28] Other Important Information - The company has a strong balance sheet with $89.8 million in cash and no outstanding debt, allowing for balanced capital allocation [26] - A reduction in force was executed, impacting 5% of management and administrative headcount, expected to yield annual savings of $6-$8 million [22][23] Q&A Session Summary Question: Areas where AI is impacting finance and accounting roles - Management noted that operational accounting roles are most affected by AI and automation, with ongoing experimentation by clients [31][33] Question: Impact of AI on decision-making - Management clarified that while AI is causing clients to reassess roles, it is not significantly delaying decisions [57][59] Question: Clarification on SG&A expenses - SG&A expenses for Q3 are expected to be $40-$42 million, excluding $6-$7 million in non-cash and restructuring costs [47][49] Question: Impact of healthcare costs on margins - Healthcare costs had a significant impact, estimated at over $1 million, affecting both SG&A and gross margins [48][62] Question: Broader strategic focus for the next 12-24 months - The company will focus on aligning cost structures, enhancing on-demand services, and growing the consulting segment [51][52]

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 was approximately $117.7 million, reflecting an 18.4% decline year-over-year on a constant currency basis [16][17] - Gross margin was 37.1%, down from 38.5% in the prior year quarter, with a significant impact from healthcare costs and holiday pay [17][22] - Adjusted EBITDA was $4 million, representing a 3.4% margin, despite revenue falling below consensus [10][16] Business Line Data and Key Metrics Changes - On-demand segment revenue was $43 million, a decline of 18.4% year-over-year, with segment-adjusted EBITDA at $4.1 million, or a 9.5% margin [20] - Consulting segment revenue decreased by 28.8% to $42.6 million, with segment-adjusted EBITDA at $4.5 million, or a 10.4% margin [20] - Europe and Asia Pac segment revenue grew by 0.6% to $20.1 million, maintaining stable gross margins [21] Market Data and Key Metrics Changes - North America saw improved pipeline activity due to expanded go-to-market initiatives, while Europe and Asia Pac segments delivered year-over-year and sequential growth [10][11] - Outsourced services revenue remained steady at $9.4 million, with improved gross margins compared to the prior year [21] Company Strategy and Development Direction - The company aims to align its cost structure with current revenue levels, refocus on-demand offerings, and scale its consulting business to deliver high-value solutions [6][10] - Emphasis on providing relevant skills and solutions to clients at competitive prices to enhance market positioning [5][8] - The integration of Reference Point is expected to enhance collaboration and strengthen focus on CFO Advisory and Digital Transformation [12] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a challenging market environment but believes in the potential for growth due to a large market of client needs [5][6] - Future strategies will focus on improving sales execution, optimizing talent, and enhancing consulting solutions to meet client demands [45][46] - The company expects to see incremental improvements over the next quarters, although significant results may take time [48] Other Important Information - The company has a strong balance sheet with $89.8 million in cash and no outstanding debt, allowing for balanced capital allocation between growth investments and shareholder returns [22] - A reduction in force was executed, impacting 5% of management and administrative headcount, expected to yield annual savings of $6-$8 million [19] Q&A Session Summary Question: Areas of AI impact on finance and accounting roles - Management noted that operational accounting roles are most impacted by AI and automation, with ongoing experimentation in client organizations [26][27] Question: Client decision delays due to AI implementation - Management indicated that while there is uncertainty in the market, it is not significantly causing decision delays; clients are exploring how to leverage AI effectively [52][54] Question: Impact of healthcare costs on gross margins - Healthcare costs had a significant impact, estimated at over $1 million, affecting both gross margin and SG&A [43][57] Question: Future focus areas in consulting - The company will focus on high-demand areas such as financial transformation, technology, and data analytics to enhance consulting capabilities [41][46]

Financial Performance - Revenue for Q2 fiscal 2026 was $117.7 million, a decrease of 18.4% from $145.6 million in Q2 fiscal 2025[4] - Gross margin decreased to 37.1% in Q2 fiscal 2026 from 38.5% in Q2 fiscal 2025[5] - Net loss for Q2 fiscal 2026 was $12.7 million, with a net loss margin of 10.8%, compared to a net loss of $68.7 million and a margin of 47.2% in the prior year[9] - Adjusted EBITDA for Q2 fiscal 2026 was $4.0 million, with an Adjusted EBITDA margin of 3.4%, down from $9.7 million and a margin of 6.6% in the prior year[7] - Total consolidated revenue for the three months ended November 29, 2025, was $117,732,000, down from $145,618,000 in the same period last year, representing a year-over-year decline of approximately 19%[28] - Total consolidated revenue for the six months ended November 29, 2025, was $237,961,000, compared to $282,553,000 in the same period last year, a decline of about 16%[28] - Adjusted EBITDA for the three months ended November 29, 2025, was $4,045, representing 3.4% of revenue, compared to $9,656 or 6.6% for the same period in 2024[32] - The net loss for the six months ended November 29, 2025, was $15,066, which is 6.3% of revenue, compared to a net loss of $74,422 or 26.3% for the same period in 2024[33] - The net loss for the three months ended November 29, 2025, was $12,661, representing 10.8% of revenue, compared to a net loss of $68,715 or 47.2% for the same period in 2024[32] Segment Performance - Revenue in the On-Demand Talent segment was $43.0 million, a decline of 18.4% year-over-year[10] - Consulting segment revenue decreased to $42.6 million, down 28.8% year-over-year due to a 33.8% decrease in billable hours[11] - Revenue in the Europe & Asia Pacific segment grew to $20.1 million, an increase of 0.6% year-over-year, driven by higher average bill rates[12] - Consulting segment revenue for the three months ended November 29, 2025, was $42,613,000, down from $60,643,000 in the prior year, indicating a decrease of approximately 30%[28] Expenses and Costs - SG&A expenses increased to $54.4 million, or 46.2% of revenue, compared to $51.3 million, or 35.2% of revenue in the prior year[6] - Stock-based compensation expense for the three months ended November 29, 2025, was $1,625, accounting for 1.4% of revenue, compared to $1,948 or 1.3% for the same period in 2024[32] - CEO transition costs for the three months ended November 29, 2025, amounted to $9,029, which is 7.7% of revenue[32] - Restructuring costs for the three months ended November 29, 2025, were $2,894, accounting for 2.5% of revenue[32] - SG&A expenses for the three months ended November 29, 2025, were $54,394,000, an increase from $51,305,000 for the same period in 2024, representing a growth of 4.1%[34] - Adjusted SG&A expenses decreased to $39,670,000 for the three months ended November 29, 2025, compared to $46,500,000 for the same period in 2024, a reduction of 14.0%[34] Cash Flow and Assets - Cash flow from operating activities increased significantly to $8,059,000 for the three months ended November 29, 2025, compared to $1,490,000 for the same period in 2024, marking a growth of 440.5%[39] - Cash flow from investing activities was $(442,000) for the three months ended November 29, 2025, a significant improvement compared to $(12,662,000) for the same period in 2024[39] - The total assets decreased to $289,273,000 as of November 29, 2025, from $304,688,000 as of May 31, 2025, a decline of 5.1%[39] - The total stockholders' equity decreased to $194,587,000 as of November 29, 2025, down from $207,081,000 as of May 31, 2025, a decrease of 6.0%[39] Strategic Focus and Risks - The company plans to refocus its On-Demand offerings and scale its Consulting business to align with evolving client needs[3] - The company is focusing on digital expansion and technology transformation efforts, which are critical for future growth[23] - Risks include potential adverse effects from economic downturns and the competitive nature of the professional services market, which could impact financial performance[23] - The company emphasizes the importance of non-GAAP financial measures to provide clarity on core performance, which may differ from GAAP measures[25] Other Financial Metrics - The average bill rate for the consolidated segment was $122 for the three months ended November 29, 2025, slightly down from $123 for the same period in 2024[38] - The average pay rate for consultants was $58 for the three months ended November 29, 2025, down from $59 for the same period in 2024[39] - The agile consultant headcount on assignment decreased to 2,288 as of November 29, 2025, compared to 2,758 for the same period in 2024, a reduction of 17.0%[39] - Goodwill impairment for the three months ended November 23, 2024, was $79,482, representing 54.6% of revenue[32] - Amortization expense for the six months ended November 29, 2025, was $2,336, accounting for 1.0% of revenue, compared to $3,054 or 1.1% for the same period in 2024[33] - Interest income, net for the six months ended November 29, 2025, was $(170), which is (0.1%) of revenue, compared to $(363) or (0.1%) for the same period in 2024[33]

Resources Connection, Inc. (NASDAQ: RGP ) is a professional services firm that provides on-demand consultants and project teams when companies need specialized expertise but don’t want to hire full-time staff. The last time II focus on producing objective, data-driven research, mostly about small- to mid-cap companies, as these tend to be overlooked by many investors. From time to time, though, I also look at large-cap names, just to give a fuller sense of the broader equity markets.Analyst’s Disclosure:I/w ...

Core Viewpoint - Resources Connection, Inc. (RGP) will announce its second quarter results for fiscal 2026 on January 7, 2026, after market close [1] Company Overview - RGP is a global professional services firm with three decades of experience, providing On-Demand Talent, Consulting, and Outsourced Services to help organizations navigate change [3] - The company engages with over 1,600 clients globally from 41 physical and multiple virtual offices, serving 88 percent of the Fortune 100 as of May 2025 [4] - RGP has received recognition from U.S. News & World Report and Forbes for its workplace and consulting services [4] Market Engagement - A conference call to discuss the results will take place at 5:00 p.m. ET on January 7, 2026, with a live webcast available on the company's website [2] - Participants are encouraged to join the call 15 minutes early to avoid delays, and a replay will be accessible for a limited time [2] Listing Information - RGP is listed on the Nasdaq Global Select Market, which is the highest tier by listing standards [5]