Financial Performance - For the three months ended February 22, 2025, the company recorded pre-tax goodwill impairment charges of $12.4 million in the On-Demand Talent segment and $29.6 million in the Consulting segment[143]. - Same-day constant currency revenue for the three months ended February 22, 2025, was $134,415 thousand, a decrease from $151,307 thousand for the same period in 2024, reflecting a decline of approximately 11.1%[149]. - Adjusted EBITDA for the three months ended February 22, 2025, was $1,651 thousand, representing 1.3% of revenue, compared to $10,786 thousand or 7.1% of revenue for the same period in 2024[151]. - The net loss for the three months ended February 22, 2025, was $(44,052) thousand, which is a margin of (34.0%), compared to a net income of $2,550 thousand or 1.7% margin for the same period in 2024[151]. - Total consolidated revenue for the nine months ended February 22, 2025, was $413,902 thousand, down from $484,603 thousand for the same period in 2024, indicating a decrease of approximately 14.6%[149]. - Revenue decreased by $21.9 million, or 14.5%, to $129.4 million for the three months ended February 22, 2025, compared to $151.3 million for the same period in 2024[155]. - Revenue decreased by $72.6 million, or 15.0%, to $412.0 million for the nine months ended February 22, 2025, compared to $484.6 million for the same period in 2024[166]. - The company reported a goodwill impairment charge of $42,039 thousand for the three months ended February 22, 2025, which accounted for 32.5% of EBITDA[151]. Business Segments - The company reorganized its business into three engagement models: On-Demand Talent, Consulting, and Outsourced Services, aiming to enhance clarity and service delivery[136]. - The acquisition of Reference Point LLC on July 1, 2024, is expected to enhance tailored technology and data modernization offerings for financial services clients[139]. - The company expects its new organizational structure to provide greater optionality for clients and improve cross-selling opportunities[137]. - The company’s consulting segment reported same-day constant currency revenue of $54,661 thousand for the three months ended February 22, 2025, compared to $55,828 thousand for the same period in 2024[149]. - The company’s on-demand talent segment reported same-day constant currency revenue of $48,956 thousand for the three months ended February 22, 2025, down from $64,162 thousand for the same period in 2024, reflecting a decline of approximately 23.6%[149]. - On-Demand Talent segment revenue decreased by $17.1 million or 26.6%, to $47.1 million in Q3 FY2025 compared to $64.2 million in Q3 FY2024, primarily due to lower demand and a 24.8% decrease in billable hours[184]. - Consulting segment revenue declined by $3.2 million or 5.8%, to $52.6 million in Q3 FY2025, with an 18.8% decrease in billable hours, partially offset by a 12.8% increase in average bill rate[185]. - Europe and Asia Pacific segment revenue decreased by $1.1 million or 5.4%, to $18.6 million in Q3 FY2025, primarily due to a 5.5% decrease in billable hours[186]. - Outsourced Services segment revenue remained flat at $9.4 million in Q3 FY2025, with steady billable hours and average bill rates[187]. - All Other segment revenue declined by $0.5 million or 21.7%, to $1.8 million in Q3 FY2025, with a 31.9% decrease in billable hours[188]. Operational Challenges - The company anticipates continued uncertainty in macroeconomic conditions, which may adversely impact financial results through at least the rest of fiscal 2025[140]. - The company has experienced both voluntary and involuntary attrition, particularly within the sales team, which may affect near-term revenue performance[140]. - The company is focused on driving long-term growth by refining its operating model and enhancing consulting capabilities in digital transformation[135]. - Billable hours decreased by 17.0%, while the average bill rate increased by 3.4% for the three months ended February 22, 2025[155]. - Selling, general and administrative expenses increased to $51.2 million, or 39.5% of revenue, for the three months ended February 22, 2025, compared to $49.6 million, or 32.8% of revenue, for the same period in 2024[160]. Cash Flow and Investments - As of February 22, 2025, the company had $72.5 million in cash and cash equivalents, including $39.2 million held in international operations[197]. - The company has a $175.0 million senior secured revolving credit facility, with no debt outstanding as of February 22, 2025, and up to $173.5 million of potential remaining capacity[200]. - Cash provided by operating activities for the nine months ended February 22, 2025 was $2.1 million, a decrease from $18.8 million for the same period in the previous year, primarily due to a net loss of $118.5 million[212]. - Net cash used in investing activities was $13.1 million for the nine months ended February 22, 2025, primarily related to a $23.0 million acquisition of Reference Point[214]. - Net cash used in financing activities totaled $23.1 million for the nine months ended February 22, 2025, including $13.0 million for stock repurchases and $14.0 million in cash dividends[216]. - The company capitalized $21.6 million related to its technology platform initiative, which went live in most of North America in December 2024[205]. Tax and Dividend - Income tax benefit was $12.3 million, reflecting an effective tax rate of 9.4%, for the nine months ended February 22, 2025[172]. - The company paid a quarterly dividend of $0.14 per share on March 14, 2025, to stockholders of record as of February 14, 2025[206].

Financial Data and Key Metrics Changes - Total revenue for Q3 was $129.4 million, consistent with client budget constraints and slower project ramp-ups [5][42] - Adjusted EBITDA was $1.7 million, reflecting a 1.3% adjusted EBITDA margin [42] - Year-over-year revenue gap moderated to 11% on a same-day constant currency basis, an improvement from 13% in the previous quarter [43] - Gross margin for the quarter was 35.1%, better than expected but down 190 basis points from the prior year [44] Business Line Data and Key Metrics Changes - Consulting segment revenue was $52.6 million, a decline of 2% from the prior year, with adjusted EBITDA of $5.9 million or an 11% margin [51] - On-demand segment revenue was $47.1 million, a decline of 24% versus the prior year, with adjusted EBITDA of $2.6 million or a 5% margin [52] - Outsourced services segment revenue was $9.4 million, similar to the prior year quarter, with a 3% implied growth on an adjusted basis [55] Market Data and Key Metrics Changes - Europe and Asia Pacific segment revenue was $18.6 million, a decline of 2% [53] - Average bill rate improved to $124 from $119 a year ago, led by a 13% increase in the consulting segment [45] - Average bill rates in Europe and Asia Pacific increased by 5% over the prior year [46] Company Strategy and Development Direction - The company is focusing on enhancing client offerings and building a diversified services platform [10][12] - A strategic shift towards on-demand consulting and outsourced services is being implemented to create a more resilient business model [28][30] - The company aims to leverage technology and automation to improve operational efficiency and reduce costs [16][18] Management's Comments on Operating Environment and Future Outlook - The operating environment remains uncertain, particularly in the US, affecting client decision-making [24][66] - Management is optimistic about the potential for growth as the market stabilizes and client budgets strengthen [24][60] - The company anticipates a revenue range of $132 million to $137 million for Q4, with a focus on maintaining improved gross margins [58][59] Other Important Information - A non-cash goodwill impairment charge of $42 million was recorded in Q3 due to sluggish demand [55] - The company maintains a strong balance sheet with $73 million in cash and no outstanding debt [56] Q&A Session Summary Question: How high priority are the clients' transformational activities? - Management noted that while there are delays, pent-up demand in Europe is starting to open up, leading to project advancements [66] Question: What is being done to retain consultants during challenging times? - The company is focusing on engaging consultants with prior clients and maintaining strong relationships to keep them active [70] Question: How much more cost-cutting can be done before impacting the business? - Management is exploring various areas for cost reduction while also leveraging new technology for efficiency [73] Question: Are there cancellations or delays in projects? - Management confirmed that while there are delays, project extensions are growing, particularly in Europe [80] Question: What is the revenue guide for Q4? - The revenue guide for Q4 is expected to show a decline of about 14% year-over-year, with variability primarily from North America [92] Question: What are the implications for dividends and cash flow sustainability? - The company intends to maintain dividends while balancing capital allocation for growth and shareholder returns [96]

Core Viewpoint - The article emphasizes the attractiveness of Resources Connection (RGP) as a strong value stock based on various valuation metrics and its earnings outlook [4][8]. Valuation Metrics - RGP has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for value investors [4]. - The stock's P/E ratio is 9.77, significantly lower than the industry average of 16.34 [4]. - RGP's PEG ratio stands at 0.65, compared to the industry average of 1.22, suggesting it is undervalued relative to its expected earnings growth [5]. - The P/B ratio for RGP is 0.87, which is attractive compared to the industry's average P/B of 2.05 [6]. - RGP's P/CF ratio is 9.44, lower than the industry average of 13.90, indicating a favorable cash flow outlook [7]. Investment Outlook - The combination of RGP's strong valuation metrics and positive earnings outlook positions it as one of the market's strongest value stocks [8].

Company Overview - Resources Connection Inc (RGP) provides consulting services to companies that prefer not to hire full-time experts, offering on-demand expertise instead of long-term staffing solutions [2] Industry Focus - The research focuses on small- to mid-cap companies, providing insights into often overlooked investment opportunities [2] - Periodic identification of potential opportunities in large- and mega-cap companies is conducted to offer comprehensive coverage of equity markets [2] Research Methodology - The research approach emphasizes objectivity, unbiased analysis, and data-driven insights, free from emotional influences or company preferences [2]

Financial Data and Key Metrics - The company will be commenting on results for the second quarter ended November 23rd, 2024, and will refer to certain non-GAAP financial measures [2] - An explanation and reconciliation of these non-GAAP measures to the most comparable GAAP financial measures are included in the press release issued today [2] Business Line Data and Key Metrics - No specific data or metrics related to individual business lines were provided in the content Market Data and Key Metrics - No specific data or metrics related to individual markets were provided in the content Company Strategy and Industry Competition - Management may make forward-looking statements regarding plans, initiatives, strategies, and the anticipated financial performance of the company [3] - Such statements are predictions, and actual events or results may differ materially due to risks, uncertainties, and other factors discussed in the company's Form 10-K for the year ended May 25th, 2024 [3] Management Commentary on Operating Environment and Future Outlook - No specific commentary on the operating environment or future outlook was provided in the content Other Important Information - The press release with detailed financial information can be viewed in the Investor Relations section of RGP's website and was filed with the SEC [2] Q&A Session Summary - No Q&A session content was provided in the content

Revenue Performance by Segment - Revenue in the On-Demand Talent segment declined by $17.5 million or 24.7% to $53.5 million in Q2 FY2025 compared to $70.9 million in Q2 FY2024, primarily due to lower demand and a 2.8% decline in average bill rate[288] - Revenue in the Outsourced Services segment increased by $0.4 million or 4.0% to $9.4 million in Q2 FY2025 compared to $9.1 million in Q2 FY2024, driven by a 2.2% increase in average bill rate and a 1.7% increase in billable hours[289] - Revenue in the Europe and Asia Pacific segment declined by $2.1 million or 9.6% to $19.7 million in Q2 FY2025 compared to $21.8 million in Q2 FY2024, with a 3.3% decline in average bill rate and a 5.3% decrease in billable hours[308] - Consulting segment revenue increased by $1.6 million (2.7%) to $60.6 million in Q2 fiscal 2025, driven by a 6.2% increase in average bill rate[339] - The company's Outsourced Services segment revenue increased by $0.4 million or 2.3% to $18.9 million for the six months ended November 23, 2024, driven by a 1.5% increase in billable hours and a 0.7% increase in average bill rate[289] Adjusted EBITDA Performance by Segment - The Consulting segment's Adjusted EBITDA decreased by $1.2 million or 11.0% to $9.7 million in Q2 FY2025, despite a $1.6 million revenue increase, due to higher cost of services and SG&A expenses[311] - The Europe & Asia Pacific segment's Adjusted EBITDA decreased by $0.2 million or 13.0% to $1.5 million in Q2 FY2025, driven by a $2.1 million revenue decline partially offset by lower cost of services and SG&A expenses[312] - The Outsourced Services segment's Adjusted EBITDA declined by $0.2 million or 13.0% to $1.5 million in Q2 FY2025, primarily due to increased cost of services[313] - On-Demand Talent segment's Adjusted EBITDA decreased by $3.1 million (35.3%) to $5.6 million in Q2 fiscal 2025, with revenue declining by $17.5 million[341] - Consulting segment's Adjusted EBITDA decreased by $2.0 million (10.2%) to $17.5 million for the six months ended November 23, 2024[343] - Europe & Asia Pacific segment's Adjusted EBITDA decreased by $1.7 million (49.9%) to $1.7 million for the six months ended November 23, 2024[344] - Outsourced services segment's Adjusted EBITDA declined by $0.4 million (11.6%) to $2.9 million for the six months ended November 23, 2024[345] - All Other segment's Adjusted EBITDA declined by $0.5 million (114.5%) to $(1.0) million for the six months ended November 23, 2024[346] Business Reorganization and Strategic Focus - The company reorganized its business into three core engagement models: On-Demand Talent, Consulting, and Outsourced Services, aiming to reduce market confusion and enhance client engagement[253][254] - The company's fiscal 2025 strategic focus areas include evolving business segments, launching a new brand identity, and enhancing digital and AI capabilities[297][299] - The company's consulting business, Veracity by RGP, is focused on digital transformation, combining digital expertise with legacy Project Consulting Services to offer integrated solutions[280] - The company is enhancing its digital and AI capabilities, focusing on areas such as technology migration, cybersecurity, and data modernization to meet evolving client needs[280] Share Issuance and Compensation Costs - The company issued 229,341 shares of common stock under the ESPP during the six months ended November 23, 2024, compared to 198,150 shares in the same period in 2023[261] - The company has $0.5 million of total unrecognized compensation costs related to unvested liability-classified RSUs, expected to be recognized over a weighted-average period of 1.65 years[263] - The company's PSUs allow for vesting of shares ranging from zero to 150% of the target number based on revenue and Adjusted EBITDA performance over a three-year period[264] Acquisitions and Capital Expenditures - The company acquired Reference Point LLC for $23.0 million (net of $0.2 million cash acquired) on July 1, 2024, adding technology and data modernization offerings for financial services clients[300][321] - The company capitalized $20.1 million related to its technology platform initiative as of November 23, 2024, with non-cancellable purchase obligations totaling $8.0 million for future licensing payments[320] Cash Flow and Financial Position - Operating activities provided $1.5 million in cash for the first six months of FY2025, driven by $80.3 million in non-cash adjustments (primarily goodwill impairment), offset by a $74.4 million net loss and unfavorable changes in operating assets and liabilities[325] - The company has $173.5 million remaining capacity under its Credit Facility as of November 23, 2024, with no debt outstanding[318] - Cash and cash equivalents as of November 23, 2024, were $78.2 million, with $42.1 million held in international operations[328][347] - The company has a $175.0 million senior secured revolving credit facility, with an option to increase by an additional $75.0 million[349] - Net cash used in investing activities for the first six months of fiscal 2025 was $12.7 million, primarily due to $23.0 million spent on the acquisition of Reference Point and $2.0 million for internal-use software and property development, offset by $12.3 million from the sale of the Irvine office building[358] - Net cash used in financing activities totaled $17.4 million in the first six months of fiscal 2025, compared to $11.2 million in the same period of fiscal 2024[359] Dividends and Share Repurchases - A dividend of $0.14 per share was paid on December 16, 2024, to stockholders of record as of November 15, 2024[352] - The company purchased 598,031 shares at an average price of $8.36 per share between September 22, 2024, and October 19, 2024, as part of publicly announced plans[368] Macroeconomic and Market Risks - The company expects macroeconomic uncertainty, including interest rate ambiguity, softening labor markets, and currency fluctuations, to continue through FY2025, potentially impacting billable hours and bill rates[301] - Approximately 18.2% of the company's revenues for the six months ended November 23, 2024, were generated outside the U.S., exposing the company to foreign currency exchange rate risk[361] Debt and Credit Facility - The company had no debt outstanding under the Credit Agreement as of November 23, 2024, following an amendment to exclude goodwill impairments from the consolidated interest coverage ratio[369] - The company may seek additional capital resources beyond the next 12 months through equity sales, increased use of the Credit Facility, or debt financing[355] Net Income and Non-Cash Adjustments - Net income for the first six months of fiscal 2024 was $8.0 million, with non-cash adjustments of $8.6 million and unfavorable changes in operating assets and liabilities totaling $18.4 million[357]

Financial Performance - Revenue for Q2 fiscal 2025 was $145.6 million, a decline of 10.7% from $163.1 million in Q2 fiscal 2024[2] - Net loss was $68.7 million, resulting in a net loss margin of 47.2%, compared to a net income of $4.9 million (3.0% margin) in the prior year quarter[5] - Adjusted EBITDA was $9.7 million, with an Adjusted EBITDA margin of 6.6%, down from $16.1 million (9.8% margin) in the prior year[2] - Gross profit for the six months ended November 23, 2024, was $106,073, down 18.7% from $130,477 for the same period in 2023[25] - The net loss for the three months ended November 25, 2023, was $68,715, compared to a net income of $4,895 for the same period in the previous year[45] - For the six months ended November 25, 2023, the company reported a net loss of $74,422,000, a decrease of 26.3% compared to a net income of $8,012,000 in the same period last year[66] - Adjusted EBITDA for the six months ended November 25, 2023, was $11,976,000, representing 4.2% of revenue, compared to $27,607,000 or 8.3% of revenue in the prior year[66] Segment Performance - Consulting segment revenue increased by $1.6 million (2.7%) to $60.6 million, driven by a 6.2% increase in average bill rate[6] - On-Demand Talent segment revenue declined by $17.5 million (24.7%) to $53.5 million, primarily due to a 21.7% decrease in billable hours[14] - Europe and Asia Pacific segment revenue decreased by $2.1 million (9.6%) to $19.7 million, with billable hours down by 5.3%[15] - On-Demand Talent segment revenue for the three months ended November 23, 2024, was $53,452, a decrease of 24.8% from $70,949 in the same period last year[32] - Consulting segment revenue for the six months ended November 23, 2024, was $115,668, slightly down from $115,903 for the same period in 2023[32] Expenses and Margins - SG&A expenses were $51.3 million, or 35.2% of revenue, improved from $53.0 million (32.5% of revenue) in the prior year[12] - Gross margin was 38.5%, slightly down from 38.9% in the prior year, attributed to higher pay/bill ratios and lower utilization[11] Cash and Assets - Cash and cash equivalents plus borrowings available were $251.7 million, compared to $269.4 million in the prior year, with zero debt[2] - Total assets decreased to $424,873,000 as of November 23, 2024, down from $510,914,000 as of May 25, 2024[80] - The company’s total stockholders' equity decreased to $325,677,000 as of November 23, 2024, compared to $418,763,000 as of May 25, 2024[80] Goodwill and Impairments - Goodwill impairment charge for the three months ended November 23, 2024, was $79,482, with no impairment recorded in the same period of 2023[25] - The Company experienced a goodwill impairment of $79,482 during the reporting period[45] - The company recognized goodwill impairment charges of $79,482,000 during the three months ended November 25, 2023, which accounted for 54.6% of revenue[64] Future Outlook - The company expressed cautious optimism for a stronger demand environment in the upcoming calendar year based on pipeline activities[2] - The Company served 88% of the Fortune 100 as of August 2024, indicating strong market presence[52] Restructuring and Changes - The company initiated a U.S. restructuring plan in October 2023, which was substantially completed during fiscal 2024[41] - The Company acquired Reference Point LLC on July 1, 2024, which is included in the Consulting segment[43] Shareholder Information - Cash dividends declared per common share remained stable at $0.14 for both the three months ended November 23, 2024, and November 25, 2023[25] - The company reported a weighted-average number of diluted shares outstanding of 33,901 for the three months ended November 23, 2024[25] Headcount and Rates - Consultant headcount at the end of the period was 2,639, down from 3,167 in the previous year[74] - The average bill rate for On-Demand Talent was $140 for November 2024, consistent with previous months[47] - The average bill rate increased to $123 for the six months ended November 23, 2024, compared to $122 for the same period last year[74]

Earnings ESP and Zacks Rank Analysis - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate being a more recent version of the consensus EPS estimate [1] - A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold), with stocks in this combination producing a positive surprise nearly 70% of the time [3] - A negative Earnings ESP reading does not necessarily indicate an earnings miss, but it is difficult to predict an earnings beat with confidence for stocks with negative Earnings ESP readings or Zacks Rank of 4 (Sell) or 5 (Strong Sell) [6] Resources Connection Earnings Outlook - Resources Connection is expected to post break-even quarterly earnings per share, representing a year-over-year change of -100% [4] - The Most Accurate Estimate for Resources Connection is higher than the Zacks Consensus Estimate, suggesting analysts have recently become bullish on the company's earnings prospects, resulting in an Earnings ESP of +200% [10][22] - The consensus EPS estimate for the quarter has been revised 42.22% lower over the last 30 days, reflecting how analysts have collectively reassessed their initial estimates [20] Revenue and Historical Performance - Revenues for Resources Connection are expected to be $136.63 million, down 16.2% from the year-ago quarter [14] - Over the last four quarters, the company has beaten consensus EPS estimates three times [28] - For the last reported quarter, Resources Connection was expected to post earnings of $0.04 per share but actually produced break-even earnings, delivering a surprise of -100% [23] Market Expectations and Stock Movement - The market expects Resources Connection to deliver a year-over-year decline in earnings on lower revenues for the quarter ended November 2024 [13] - The stock might move higher if key numbers top expectations in the upcoming earnings report, expected to be released on January 2, but could move lower if they miss [9] - While an earnings beat or miss may not be the sole basis for stock movement, unforeseen catalysts can help stocks gain despite an earnings miss [18]

Company Performance - Resources Connection Inc (NASDAQ: RGP) has experienced declining revenue and a significant drop in stock performance over the past few years [1] - The company faces intense competition from gig platforms such as Upwork and Fiverr, which are impacting its market share [1] - The rise of AI technology is further challenging the company by automating tasks traditionally handled by its services [1] Industry and Market Focus - Grassroots Trading focuses on providing objective, unbiased, and data-driven research, particularly for small- to mid-cap companies [1] - The platform aims to highlight investment opportunities in these often-overlooked segments of the market [1] - Grassroots Trading also periodically identifies potential opportunities in large- and mega-cap companies to offer comprehensive coverage of the equity markets [1]

Business Segment Reorganization and Financial Recast - The company reorganized its business segments in Q1 fiscal 2025, resulting in new reportable segments: On-Demand Talent, Consulting, Outsourced Services, Europe and Asia Pacific, and All Other[4] - Recast segment revenue, adjusted EBITDA, and average bill rate for fiscal 2024 quarters are included in the investor presentation and Exhibit 99.1 to assist in reviewing fiscal 2025 financial results[6] - The recast of financial information does not affect the company's reported net income, earnings per share, total assets, or stockholders' equity for any previously reported periods[6] - The investor relations presentation with recasted financial information was posted on October 3, 2024, on the company's investor relations website[6] - The recast financial information is not considered a restatement of previously issued financial statements[6] Company Information and Stock Details - The company's common stock is registered on the Nasdaq Global Select Market under the symbol RGP[1] - The company's principal executive offices are located at 17101 Armstrong Avenue, Irvine, California, 92614[2] - The company's telephone number is (714) 430-6400[2] Regulatory and Compliance Information - The company is not classified as an emerging growth company[3] - The information in Item 2.02 and Exhibit 99.1 is not deemed "filed" under Section 18 of the Securities Exchange Act of 1934[7]