PART I—FINANCIAL INFORMATION [Consolidated Financial Statements](index=4&type=section&id=ITEM%201.%20Consolidated%20Financial%20Statements) The unaudited financial statements show decreased revenue and operating income, with net income rising due to a one-time tax benefit [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets and liabilities increased, driven by goodwill from acquisitions and the adoption of new lease accounting standards Consolidated Balance Sheet Highlights (in thousands) | Account | Feb 22, 2020 | May 25, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$485,974** | **$428,370** | **+13.4%** | | Cash and cash equivalents | $35,944 | $43,045 | -16.5% | | Goodwill | $213,451 | $190,815 | +11.9% | | Operating right-of-use assets | $38,176 | $ - | N/A | | **Total Liabilities** | **$183,172** | **$145,974** | **+25.5%** | | Long-term debt | $49,000 | $43,000 | +14.0% | | Operating lease liabilities | $44,776 | $ - | N/A | | **Total Stockholders' Equity** | **$302,802** | **$282,396** | **+7.2%** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Quarterly and nine-month revenues declined, but net income increased due to a significant income tax benefit Three Months Ended Performance (in thousands, except per share data) | Metric | Q3 FY2020 | Q3 FY2019 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $168,052 | $179,498 | -6.4% | | Gross Margin | $61,420 | $67,911 | -9.6% | | Income from Operations | $3,452 | $10,213 | -66.2% | | Net Income | $6,942 | $5,796 | +19.8% | | Diluted EPS | $0.21 | $0.18 | +16.7% | Nine Months Ended Performance (in thousands, except per share data) | Metric | 9M FY2020 | 9M FY2019 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $524,784 | $546,855 | -4.0% | | Gross Margin | $203,300 | $209,483 | -2.9% | | Income from Operations | $29,202 | $36,287 | -19.5% | | Net Income | $24,218 | $22,101 | +9.6% | | Diluted EPS | $0.75 | $0.68 | +10.3% | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased while investing cash use grew significantly due to the Veracity acquisition Cash Flow Summary for Nine Months Ended (in thousands) | Cash Flow Activity | Feb 22, 2020 | Feb 23, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,563 | $13,496 | | Net cash used in investing activities | ($26,469) | ($5,939) | | Net cash used in financing activities | ($1,824) | ($15,624) | | **Net decrease in cash** | **($7,101)** | **($8,503)** | | Cash at end of period | $35,944 | $47,967 | - The significant increase in cash used for investing activities was driven by the **$30.3 million acquisition of Veracity**, net of cash acquired[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the adoption of a new lease standard, acquisitions, a major tax benefit, and subsequent events like restructuring and COVID-19 impacts - The company adopted ASU No 2016-02 (Leases) on May 26, 2019, resulting in the recognition of **material right-of-use assets and lease liabilities** on the Consolidated Balance Sheet[33](index=33&type=chunk)[37](index=37&type=chunk) - On July 31, 2019, the company acquired Veracity Consulting Group for initial cash consideration of **$30.3 million** to enhance its digital transformation capabilities[43](index=43&type=chunk) - A net tax benefit of **$6.6 million** was recorded in Q3 FY2020 due to a worthless stock deduction related to the company's decision to exit markets in Belgium, Luxembourg, and the Nordics[70](index=70&type=chunk)[141](index=141&type=chunk) - Subsequent to the quarter end, the company initiated a restructuring plan to reduce its workforce by **7.5%** and consolidate real estate, expecting to incur **$4-5 million** in termination costs[93](index=93&type=chunk)[94](index=94&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue declines, strategic acquisitions, a major restructuring plan, and the emerging risks from the COVID-19 pandemic [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Revenue fell across all geographic regions in Q3, driven by fewer billable days and exits from certain European markets Revenue by Geography - Three Months Ended (in thousands) | Region | Q3 FY2020 | Q3 FY2019 | % Change | | :--- | :--- | :--- | :--- | | North America | $138,819 | $146,817 | -5.4% | | Europe | $18,031 | $20,911 | -13.8% | | Asia Pacific | $11,202 | $11,770 | -4.8% | | **Total** | **$168,052** | **$179,498** | **-6.4%** | Revenue by Geography - Nine Months Ended (in thousands) | Region | 9M FY2020 | 9M FY2019 | % Change | | :--- | :--- | :--- | :--- | | North America | $431,617 | $446,811 | -3.4% | | Europe | $56,163 | $64,758 | -13.3% | | Asia Pacific | $37,004 | $35,286 | +4.9% | | **Total** | **$524,784** | **$546,855** | **-4.0%** | - Direct cost of services as a percentage of revenue increased to **63.5%** in Q3 FY2020 from 62.2% in Q3 FY2019, primarily due to an increase in holiday pay for consultants in the U.S[131](index=131&type=chunk) - SG&A expenses were flat at **$55.3 million** for Q3 FY2020 compared to $55.6 million in the prior year, but increased as a percentage of revenue to **32.9%** from 31.0%[133](index=133&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through cash from operations and its credit facility, from which it drew an additional $39.0 million post-quarter-end - As of February 22, 2020, the company had **$49.0 million** in borrowings and **$69.5 million** available under its revolving credit facility[162](index=162&type=chunk) - In March 2020, the company borrowed an additional **$39.0 million** from its credit facility as a precautionary measure in response to the COVID-19 pandemic[94](index=94&type=chunk)[163](index=163&type=chunk) - Cash provided by operating activities for the nine-month period increased to **$21.6 million** from $13.5 million in the prior year[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk on its variable-rate debt and foreign currency exchange rate risk - The company is exposed to interest rate risk on its **$49.0 million** of variable-rate debt, with a 10% rate change estimated to impact annual interest expense by approximately **$0.2 million**[177](index=177&type=chunk)[180](index=180&type=chunk) - Approximately **19.0%** of revenues for the three months ended February 22, 2020, were generated outside the U.S, creating exposure to foreign currency exchange rate fluctuations[181](index=181&type=chunk) [Controls and Procedures](index=49&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period, February 22, 2020[184](index=184&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=49&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company states it is **not party to any material legal proceedings**[185](index=185&type=chunk) [Risk Factors](index=49&type=section&id=ITEM%201A.%20Risk%20Factors) A new significant risk factor has been added concerning the business impact of the COVID-19 pandemic - A new risk factor has been introduced concerning the business impact of epidemic diseases, specifically the **COVID-19 pandemic**[186](index=186&type=chunk) - The company notes that COVID-19 had an adverse impact on its business in Asia Pacific during the quarter and expects an **adverse impact on operating results** in the fourth quarter of fiscal 2020[186](index=186&type=chunk)[189](index=189&type=chunk) - Potential impacts from COVID-19 include **reduced demand**, delayed client decisions, and deterioration in clients' ability to pay, which could also lead to a goodwill impairment assessment[187](index=187&type=chunk)[188](index=188&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased approximately $5.0 million of its common stock during the third quarter Share Repurchases for Q3 FY2020 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Nov 24, 2019 – Feb 22, 2020 | 318,430 | $15.70 | - As of February 22, 2020, approximately **$85.1 million** remained available for repurchase under the company's authorized stock repurchase program[79](index=79&type=chunk)[192](index=192&type=chunk) [Other Information](index=51&type=section&id=ITEM%205.%20Other%20Information) The company details a significant restructuring plan to reduce its workforce and real estate footprint, expecting substantial annual savings - On February 27, 2020, the company committed to a restructuring plan to reduce its management and administrative workforce by approximately **7.5%** and consolidate its geographic presence[193](index=193&type=chunk) - The company expects to incur a restructuring charge of **$4 million to $5 million** for employee termination costs and anticipates annual pre-tax savings of **$13 million to $15 million** upon completion[194](index=194&type=chunk) - In March 2020, the company borrowed **$39.0 million** under its Credit Facility as a precautionary measure due to the uncertainty caused by the COVID-19 pandemic[196](index=196&type=chunk) [Exhibits](index=53&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and employment agreements - The Exhibit Index lists documents filed with the report, including employment agreements for Jennifer Ryu, Kate W Duchene, and Tim Brackney, as well as required Sarbanes-Oxley certifications[197](index=197&type=chunk)[200](index=200&type=chunk)

Resources Connection, Inc. (NASDAQ:RECN) Q2 2020 Earnings Conference Call January 2, 2020 5:00 PM ET Company Participants Alice Washington - General Counsel Kate Duchene - Chief Executive Officer Tim Brackney - President and Chief Operating Officer Jennifer Ryu - Interim Chief Financial Officer Conference Call Participants Andrew Steinerman - JP Morgan Mark Marcon - Baird Operator Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Incorporated Conference Call. At this time, all p ...

"�RGP" Investor Presentation &RGP® F o r w a r d L o o k i n g S t a t e m e n t s During this presentation, we may make forward-looking statements – in other words, statements regarding future events or future financial performance of the Company. We wish to caution you that such statements are only predictions and actual events or results may differ materially. We refer you to our 10-K report for the year ended May 26, 2018 for a discussion of some of the risks, uncertainties and other factors such as sea ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 23, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-32113 RESOURCES CONNECTION, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 33-0832424 (S ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements, management's discussion, market risk disclosures, and controls and procedures for the period [ITEM 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for the three months ended August 24, 2019, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, with accompanying notes detailing significant accounting policies, acquisitions, divestitures, and new lease accounting standard adoption [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity as of specific dates Consolidated Balance Sheet Highlights (as of August 24, 2019 vs. May 25, 2019) | Account | August 24, 2019 ($ thousands) | May 25, 2019 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **496,611** | **428,370** | **+15.9%** | | Goodwill | 216,420 | 190,815 | +13.4% | | Operating right-of-use assets | 40,198 | - | New | | **Total Liabilities** | **208,180** | **145,974** | **+42.6%** | | Long-term debt | 73,000 | 43,000 | +69.8% | | Operating lease liabilities | 47,048 | - | New | | **Total Stockholders' Equity** | **288,431** | **282,396** | **+2.1%** | - The significant increase in assets and liabilities is primarily due to the acquisition of Veracity, which increased goodwill, and the adoption of the new lease accounting standard (ASC 842), which resulted in the recognition of operating right-of-use assets and lease liabilities[10](index=10&type=chunk)[34](index=34&type=chunk)[39](index=39&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, including revenue, expenses, and net income over a period Statement of Operations Summary (Three Months Ended) | Metric | August 24, 2019 ($ thousands) | August 25, 2018 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 172,225 | 178,558 | -3.5% | | Gross Margin | 67,503 | 68,151 | -0.9% | | Income from Operations | 8,062 | 9,761 | -17.4% | | Net Income | 4,939 | 5,741 | -14.0% | | Diluted EPS | $0.15 | $0.18 | -16.7% | - Cash dividends declared per common share increased to **$0.14** from **$0.13** in the prior-year quarter[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the sources and uses of cash from operating, investing, and financing activities - Net cash used in operating activities was **$3.0 million**, a significant improvement compared to **$16.6 million** used in the same period last year[17](index=17&type=chunk) - Investing activities used **$24.8 million**, driven by the **$30.3 million** acquisition of Veracity (net of cash acquired)[17](index=17&type=chunk) - Financing activities provided **$30.7 million**, primarily from **$35.0 million** in proceeds from the Revolving Credit Facility, which was used to fund the Veracity acquisition[17](index=17&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements - On July 31, 2019, the Company acquired Veracity Consulting Group for initial cash consideration of **$30.3 million** (net of **$2.1 million** cash acquired), plus potential earn-out payments, provisionally adding **$25.8 million** to goodwill[36](index=36&type=chunk)[39](index=39&type=chunk) - The company adopted the new lease accounting standard (ASC 842) on May 26, 2019, which resulted in the recognition of right-of-use assets and lease liabilities for its operating leases, materially impacting the balance sheet[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The company divested its business in Sweden and closed its office in Belgium during the quarter, incurring **$0.7 million** in exit costs[43](index=43&type=chunk) - As of August 24, 2019, borrowings on the secured revolving credit facility were **$73.0 million**[58](index=58&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **3.6%** year-over-year revenue decrease to **$172.2 million** for the first quarter of fiscal 2020, attributing it to reduced client demand in the Nordics and the conclusion of certain technical accounting projects, highlighting the acquisition of Veracity as a key strategic initiative to bolster digital transformation services, and detailing operational results, including a decline in Adjusted EBITDA margin to **6.9%**, and improved operating cash flow with increased borrowing to fund the acquisition [Overview and Business Strategy](index=22&type=section&id=Overview%20and%20Business%20Strategy) This section outlines the company's strategic objectives and key initiatives for business growth and market positioning - The company's core business strategy focuses on hiring and retaining highly qualified consultants, maintaining a distinctive corporate culture, building consultative client relationships, and strengthening the RGP brand[75](index=75&type=chunk) - A key strategic move in the quarter was the acquisition of Veracity Consulting Group to enhance digital transformation capabilities and offer comprehensive end-to-end solutions[81](index=81&type=chunk) - As part of a strategic review, the company divested its business in Sweden and closed its office in Belgium during the first quarter of fiscal 2020[82](index=82&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue trends, expense management, and profitability Q1 FY2020 vs Q1 FY2019 Performance | Metric | Q1 FY2020 | Q1 FY2019 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $172.2M | $178.6M | -3.6% | | Revenue (Constant Currency) | - | - | -3.0% | | Adjusted EBITDA | $11.9M | $13.2M | -10.1% | | Adjusted EBITDA Margin | 6.9% | 7.4% | -50 bps | - The revenue decrease was primarily driven by reduced client demand in the Nordics and the wind-down of technical accounting implementation projects[93](index=93&type=chunk) - SG&A expenses increased slightly to **$57.0 million** from **$56.4 million**, mainly due to retention bonuses, severance costs from the Sweden divestiture, and **$0.6 million** in costs related to the Veracity acquisition[99](index=99&type=chunk) - The effective tax rate decreased to approximately **35%** from **38%** in the prior year quarter, attributed to lower global income and fewer stock option expirations[105](index=105&type=chunk)[106](index=106&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet short-term obligations and fund long-term growth through its financial resources - Primary liquidity sources are cash from operations and a **$120 million** secured revolving credit facility[110](index=110&type=chunk) - As of August 24, 2019, the company had **$45.7 million** in cash and cash equivalents and **$73.0 million** in borrowings under its credit facility[110](index=110&type=chunk)[112](index=112&type=chunk) - The company borrowed an additional **$35.0 million** during the quarter to finance the acquisition of Veracity[117](index=117&type=chunk) - No shares of common stock were repurchased during the quarter, with approximately **$90.1 million** remaining available under the stock repurchase program[60](index=60&type=chunk)[118](index=118&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are identified as interest rate risk and foreign currency exchange rate risk, where interest rate fluctuations affect earnings on cash and costs on its **$73.0 million** of variable-rate debt, and foreign currency risk stems from international operations, which constitute **20.5%** of revenue, potentially impacting reported financial results, with the company not currently using hedging instruments - The company is exposed to interest rate risk on its **$73.0 million** of borrowings under its variable-rate credit facility, where a **10%** change in interest rates would impact quarterly interest expense by approximately **$0.1 million**[122](index=122&type=chunk)[124](index=124&type=chunk) - Foreign currency exchange rate risk exists as **20.5%** of revenues were generated outside the U.S., and the company does not currently use financial hedging to mitigate this risk[125](index=125&type=chunk)[129](index=129&type=chunk) [ITEM 4. Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Based on an evaluation as of August 24, 2019, the company's Chief Executive Officer and Interim Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no material changes made to the internal control over financial reporting during the quarter - Management, including the CEO and Interim CFO, concluded that the company's disclosure controls and procedures were effective as of August 24, 2019[130](index=130&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[130](index=130&type=chunk) [PART II—OTHER INFORMATION](index=35&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report [ITEM 1. Legal Proceedings](index=35&type=section&id=ITEM%201.%20Legal%20Proceedings) The company reports that it is not a party to any material legal proceedings, and any ongoing legal matters are considered part of the ordinary course of business and are not expected to have a material adverse effect - The company is not a party to any material legal proceedings[131](index=131&type=chunk) [ITEM 1A. Risk Factors](index=35&type=section&id=ITEM%201A.%20Risk%20Factors) The company states there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended May 25, 2019 - There have been no material changes in risk factors from those disclosed in the company's most recent Form 10-K[132](index=132&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports that it did not purchase any of its common stock during the first quarter of fiscal 2020 - The Company did not repurchase any of its common stock during the first quarter of fiscal 2020[133](index=133&type=chunk) [ITEM 6. Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) This section provides an index of all exhibits filed with the report, including various consulting and severance agreements, offer letters, and certifications required by the Sarbanes-Oxley Act - The report includes several exhibits, such as consulting agreements, a retention bonus agreement, and CEO/CFO certifications pursuant to the Sarbanes-Oxley Act[137](index=137&type=chunk)

Resources Connection, Inc. (RECN) Q1 2020 Results Earnings Conference Call October 2, 2019 5:00 PM ET Company Participants Alice Washington - General Counsel Kate Duchene - CEO Tim Brackney - COO Jennifer Ryu - Interim CFO Conference Call Participants Andrew Steinerman - JPMorgan Operator Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Incorporated Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn ...

Part I [Item 1. Business](index=4&type=section&id=ITEM%201.%20BUSINESS) RGP is a global consulting firm specializing in business transformation, risk, and technology, serving over 2,400 clients with 3,800+ professionals, and growing through client expansion and strategic acquisitions - RGP is a global consulting firm focused on business transformation, risk, and technology, serving over **2,400 clients**, including **86 of the Fortune 100**, with a network of over **3,800 professionals**[14](index=14&type=chunk)[16](index=16&type=chunk) - The company's business strategy is built on hiring and retaining high-caliber consultants, maintaining a unique culture (LIFE AT RGP), building long-term consultative client relationships, and strengthening the RGP brand[25](index=25&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Key growth strategies include expanding services within the existing client base, attracting new clients, expanding geographically, and pursuing strategic acquisitions. In **fiscal 2018**, RGP acquired taskforce in Germany and Accretive in the United States[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) - As of **May 25, 2019**, the company had **3,896 employees**, consisting of **2,965 consultants** and **931 management and administrative staff**. None are covered by collective bargaining agreements[54](index=54&type=chunk) - In **fiscal 2019**, no single client accounted for more than **10% of revenue**, and the top **10 clients** represented approximately **15% of total revenues**[41](index=41&type=chunk) [Item 1A. Risk Factors](index=9&type=page&id=ITEM%201A.%20RISK%20FACTORS) The company faces multiple risks in economic downturns, intense competition, talent retention, IT systems, and regulatory compliance - An economic downturn could reduce demand for the company's services, and a significant downturn in the stock's market value could lead to goodwill impairment[58](index=58&type=chunk)[60](index=60&type=chunk) - The professional services market is highly competitive and fragmented. Many competitors have greater financial resources, revenue, and name recognition[62](index=62&type=chunk) - The business depends on attracting and retaining highly qualified consultants. The loss of a significant number of consultants could adversely affect operating results[77](index=77&type=chunk) - IT systems are vulnerable to security breaches, including cyber-attacks. Unauthorized access could lead to disclosure of confidential information, legal liability, and reputational harm[78](index=78&type=chunk) - The company's credit facility imposes operating and financial restrictions, including covenants on debt, interest coverage, and leverage ratios. Failure to comply could result in the acceleration of debt[85](index=85&type=chunk) - Compliance with evolving and stringent data privacy laws, such as the GDPR, may result in additional costs, require changes to business practices, and increase potential exposure to significant fines for non-compliance[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 1B. Unresolved Staff Comments](index=15&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) Not applicable - Not applicable[92](index=92&type=chunk) [Item 2. Properties](index=15&type=section&id=ITEM%202.%20PROPERTIES) As of May 25, 2019, RGP maintained 48 domestic offices and 25 international offices, all under operating leases except for its corporate headquarters - As of **May 25, 2019**, the company maintained **48 domestic offices** and **25 international offices**, primarily under operating lease agreements[93](index=93&type=chunk) - The company owns its corporate office building in Irvine, California, which is approximately **57,000 square feet**. It occupies about **44,000 square feet** and leases the remaining **13,000 square feet** to third parties[93](index=93&type=chunk) [Item 3. Legal Proceedings](index=15&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[94](index=94&type=chunk) [Item 4. Mine Safety Disclosures](index=15&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Not applicable - Not applicable[95](index=95&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq, featuring a $0.13 quarterly dividend and an active stock repurchase program - The company's common stock trades on the Nasdaq Global Select Market under the symbol 'RECN'[98](index=98&type=chunk) Quarterly Dividend per Common Share | Fiscal Year | Quarterly Dividend per Share | | :--- | :--- | | 2019 | $0.13 | | 2018 | $0.12 | Issuer Purchases of Equity Securities (Q4 Fiscal 2019) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet be Purchased Under Announced Program | | :--- | :--- | :--- | :--- | | Feb 24 - Mar 23, 2019 | - | - | $97,736,690 | | Mar 24 - Apr 20, 2019 | 352,629 | $15.70 | $92,199,776 | | Apr 21 - May 25, 2019 | 131,034 | $16.05 | $90,096,548 | | **Total Q4 2019** | **483,663** | **$15.80** | **$90,096,548** | [Item 6. Selected Financial Data](index=18&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section summarizes five years of financial data, showing revenue growth, fluctuating net income, and consistent dividend increases Selected Financial Data (2015-2019) | (In thousands, except per share data) | May 25, 2019 | May 26, 2018 | May 27, 2017 | May 28, 2016 | May 30, 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $728,999 | $654,129 | $583,411 | $598,521 | $590,589 | | **Income from operations** | $50,159 | $30,624 | $34,402 | $53,803 | $50,258 | | **Net income** | $31,470 | $18,826 | $18,651 | $30,443 | $27,508 | | **Diluted Net income per common share** | $0.98 | $0.60 | $0.56 | $0.81 | $0.72 | | **Cash dividends declared per common share** | $0.52 | $0.48 | $0.44 | $0.40 | $0.32 | | **Total assets** | $428,370 | $432,674 | $364,128 | $417,255 | $416,981 | | **Long-term debt** | $43,000 | $63,000 | $48,000 | - | - | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Fiscal 2019 saw revenue grow 11.5% to $729.0 million, with improved profitability and positive operating cash flow [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Fiscal 2019 revenue grew 11.5% to $729.0 million, driven by acquisitions and improved profitability metrics Fiscal 2019 vs. 2018 Performance | Metric | Fiscal 2019 | Fiscal 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $729.0M | $654.1M | 11.5% | | Gross Margin | 38.7% | 37.6% | +1.1 p.p. | | Income from Operations | $50.2M | $30.6M | 63.8% | | Net Income | $31.5M | $18.8M | 67.2% | | Adjusted EBITDA | $64.6M | $43.0M | 50.1% | Revenue by Geography (FY 2019 vs. FY 2018) | Geography | FY 2019 Revenue (in millions) | % of Total | FY 2018 Revenue (in millions) | % of Total | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $593.8M | 81.5% | $524.9M | 80.3% | 13.1% | | Europe | $86.4M | 11.8% | $84.7M | 12.9% | 1.9% | | Asia Pacific | $48.8M | 6.7% | $44.6M | 6.8% | 9.6% | | **Total** | **$729.0M** | **100.0%** | **$654.1M** | **100.0%** | **11.4%** | - Direct cost of services as a percentage of revenue improved to **61.3%** in **fiscal 2019** from **62.4%** in **fiscal 2018**, primarily due to an improved bill/pay ratio and lower self-insured medical program costs[140](index=140&type=chunk) - SG&A expenses increased by **$14.8 million**, mainly due to higher payroll from acquisitions and new hires (**$12.9 million**), increased commissions and bonuses (**$5.5 million**), and higher marketing costs (**$1.8 million**), offset by lower acquisition and integration costs (**$7.2 million**)[142](index=142&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from operating cash flow and a $120 million credit facility, with cash used for share repurchases and debt repayment - Primary sources of liquidity are cash from operations and a **$120 million** secured revolving credit facility. As of **May 25, 2019**, the company had **$43.0 million** in cash and equivalents and **$43.0 million** in borrowings under the facility[160](index=160&type=chunk)[162](index=162&type=chunk) Cash Flow Summary (Fiscal 2019 vs. 2018) | (In millions) | Fiscal 2019 | Fiscal 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43.6 | $15.4 | | Net cash used in investing activities | ($12.9) | ($25.7) | | Net cash (used in)/provided by financing activities | ($43.6) | $3.5 | - Financing activities in **fiscal 2019** included **$29.9 million** for share repurchases, **$16.2 million** for dividend payments, and a **$20.0 million** repayment on the revolving credit facility[166](index=166&type=chunk)[167](index=167&type=chunk) Contractual Obligations as of May 25, 2019 | (In thousands) | Total | Fiscal 2020 | Fiscal 2021-2022 | Fiscal 2023-2024 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $54,705 | $12,828 | $21,548 | $14,286 | $6,043 | | Purchase obligations | $1,959 | $1,784 | $175 | - | - | | Long-term debt | $43,000 | - | $43,000 | - | - | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks from interest rate and foreign currency fluctuations, with no current hedging strategies - The company is exposed to interest rate risk on its **$43.0 million** of variable-rate borrowings under its credit facility. A **10% change** in interest rates would result in an approximate **$0.2 million** change in annual interest expense[177](index=177&type=chunk) - Approximately **21.0%** of the company's revenues for **fiscal 2019** were generated outside the United States, exposing the company to foreign currency exchange rate risk[179](index=179&type=chunk) - The company does not currently use financial hedging techniques to mitigate risks associated with foreign currency fluctuations[181](index=181&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=30&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the company's audited consolidated financial statements for fiscal year ended May 25, 2019, including key statements and notes [Consolidated Balance Sheets](index=32&type=section&id=Consolidated%20Balance%20Sheets) As of May 25, 2019, total assets were $428.4 million, with decreased liabilities and increased stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | May 25, 2019 | May 26, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $191,657 | $194,881 | | Goodwill | $190,815 | $191,950 | | **Total Assets** | **$428,370** | **$432,674** | | **Total Current Liabilities** | $91,416 | $94,524 | | Long-term debt | $43,000 | $63,000 | | **Total Liabilities** | **$145,974** | **$163,849** | | **Total Stockholders' Equity** | **$282,396** | **$268,825** | [Consolidated Statements of Operations](index=33&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal year ended May 25, 2019, revenues increased to $729.0 million, leading to higher operating and net income Consolidated Statements of Operations (in thousands, except per share data) | Metric | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Revenue | $728,999 | $654,129 | $583,411 | | Gross margin | $282,439 | $246,055 | $221,325 | | Income from operations | $50,159 | $30,624 | $34,402 | | Net income | $31,470 | $18,826 | $18,651 | | Diluted net income per share | $0.98 | $0.60 | $0.56 | [Consolidated Statements of Cash Flows](index=36&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For fiscal year ended May 25, 2019, operating activities provided $43.6 million in cash, leading to a $13.4 million net decrease in cash and equivalents Consolidated Statements of Cash Flows (in thousands) | Activity | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $43,621 | $15,370 | $28,265 | | Net cash (used in) provided by investing activities | ($12,877) | ($25,666) | $20,409 | | Net cash (used in) provided by financing activities | ($43,601) | $3,474 | ($76,876) | | **Net decrease in cash** | **($13,425)** | **($5,859)** | **($28,760)** | | Cash and cash equivalents at end of period | $43,045 | $56,470 | $62,329 | [Notes to Consolidated Financial Statements](index=37&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, acquisitions, credit facility, income taxes, stock repurchases, and compensation plans - The company adopted ASC 606 (Revenue from Contracts with Customers) in **fiscal 2019** using the modified retrospective method, which did not have a significant impact on revenue recognition[207](index=207&type=chunk) - In **fiscal 2018**, the company acquired taskforce for initial consideration of approximately **$6.9 million** plus contingent consideration, and Accretive for **$20.0 million** in cash and **1,072,000 shares** of common stock[241](index=241&type=chunk)[244](index=244&type=chunk) - The company has a **$120 million** secured revolving credit facility expiring in **October 2021**. As of **May 25, 2019**, borrowings were **$43.0 million**[250](index=250&type=chunk)[253](index=253&type=chunk) - The effective tax rate for **fiscal 2019** was **34.4%**, compared to **34.8%** in **2018** and **44.8%** in **2017**. The company has foreign net operating loss carryforwards of **$63.5 million**[256](index=256&type=chunk)[260](index=260&type=chunk) - Under its stock repurchase program, the company bought back **1.8 million shares** for **$29.9 million** in **fiscal 2019**. Approximately **$90.1 million** remains available for future repurchases[272](index=272&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=54&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) None reported - None[298](index=298&type=chunk) [Item 9A. Controls and Procedures](index=54&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) As of May 25, 2019, the company's disclosure and internal controls over financial reporting were deemed effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of **May 25, 2019**[299](index=299&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of **May 25, 2019**. The independent auditor, RSM US LLP, also issued an unqualified opinion on its effectiveness[302](index=302&type=chunk)[303](index=303&type=chunk) - There were no changes in the company's internal control over financial reporting during the **fourth quarter of fiscal 2019** that materially affected, or are reasonably likely to materially affect, these controls[303](index=303&type=chunk) [Item 9B. Other Information](index=56&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) None reported - None[312](index=312&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=56&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section incorporates by reference information from the company's definitive proxy statement for its 2019 Annual Meeting of Stockholders - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2019 Annual Meeting of Stockholders proxy statement[314](index=314&type=chunk) [Item 11. Executive Compensation](index=56&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) This section incorporates by reference information from the company's 2019 proxy statement - Information regarding executive compensation is incorporated by reference from the company's 2019 Annual Meeting of Stockholders proxy statement[315](index=315&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=56&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership information is incorporated from the 2019 proxy statement, detailing equity compensation plan issuances and remaining availability - Information regarding security ownership is incorporated by reference from the company's 2019 Annual Meeting of Stockholders proxy statement[316](index=316&type=chunk) Equity Compensation Plan Information as of May 25, 2019 | Plan Category | Number of Securities to Be Issued Upon Exercise (a) | Weighted-Average Exercise Price of Outstanding Options (b) | Number of Securities Remaining Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 6,028,841 | $15.95 | 1,816,514 | | Equity compensation plans not approved by security holders | - | - | - | | **Total** | **6,028,841** | **$15.95** | **1,816,514** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=57&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) This section incorporates by reference information from the company's 2019 proxy statement concerning director independence and the company's policy on related party transactions - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2019 Annual Meeting of Stockholders proxy statement[322](index=322&type=chunk) [Item 14. Principal Accounting Fees and Services](index=57&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) This section incorporates by reference information from the company's 2019 proxy statement regarding principal accounting fees and services - Information regarding principal accounting fees and services is incorporated by reference from the company's 2019 Annual Meeting of Stockholders proxy statement[323](index=323&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=58&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report - This item lists the consolidated financial statements of the company included in Item 8[325](index=325&type=chunk) - Financial Statement Schedule II (Valuation and Qualifying Accounts) is included within the Notes to Consolidated Financial Statements[326](index=326&type=chunk) - An index of all exhibits filed with the Form 10-K is provided, including corporate governance documents, material contracts, and certifications[328](index=328&type=chunk)[329](index=329&type=chunk) [Item 16. Form 10-K Summary](index=60&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) Not applicable - Not applicable[331](index=331&type=chunk)

Financial Data and Key Metrics Changes - The total revenue for Q4 2019 was $182.1 million, a 0.9% decrease year-over-year but a 1.5% increase sequentially [42] - Gross margin for Q4 was 40.1%, up 180 basis points from the prior year, primarily due to improvements in the pay rate to bill rate ratio [43] - Net income improved to $9.4 million or $0.29 per diluted share compared to $4 million or $0.12 per diluted share in the prior year quarter [44] Business Line Data and Key Metrics Changes - Global revenue increased 11.4% to $729 million on an annual basis, with North America showing improvements in sales productivity [31] - SG&A expenses for Q4 were $56.9 million or 31.2% of revenue, down from $58.9 million or 32% of revenue in the previous year [55] - Adjusted EBITDA for Q4 was $17.5 million or 9.6% of revenue, compared to $13.1 million or 7.1% of revenue in the year-ago quarter [44][58] Market Data and Key Metrics Changes - U.S. revenue decreased 0.6% year-over-year but increased 0.5% sequentially, with significant improvements in the Southeast, Chicago, and Northwest [45] - International revenues for Q4 were $39 million, a decrease of 1.8% year-over-year, but increased 5.3% sequentially [46] - Europe’s revenue decreased 7.9% year-over-year but increased 3.3% sequentially [47] Company Strategy and Development Direction - The company aims to become a more digital business, focusing on building a digital engagement platform and enhancing consulting capabilities [10][11] - A refreshed brand was launched to emphasize the human aspect of their services, reflecting a shift towards project-based talent engagement [25][27] - The company is committed to operational improvements in sales productivity, cost containment, and delivery efficiency [31][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future prospects despite short-term uncertainties, particularly in Europe [49] - The company is adapting to changes in client buying patterns, particularly among millennials who prefer efficient engagement methods [78] - There is a recognition of the need for ongoing transformation to meet client demands in the digital space [88] Other Important Information - The company is transitioning to an open office footprint to enhance collaboration among teams [62] - Cash and short-term investments at the end of Q4 were $49 million, with receivables at approximately $133.3 million [61] - The company repurchased $7.6 million in stock during Q4 and $29.9 million for the fiscal year [63] Q&A Session Summary Question: Revenue opportunity from digital initiatives - The marketplace for the human cloud platform is estimated to be about $63 billion, with a significant opportunity for professional services [75] Question: Client demand for self-service options - There is a notable demand from clients for self-service options, particularly among millennials who prefer efficient engagement [78] Question: Changes in client decision-making - There is cautious purchasing behavior, but clients are beginning to push through critical initiatives despite macroeconomic uncertainties [82] Question: Internal reception of digital transformation strategy - The company is undergoing a purposeful cultural transformation to enhance capabilities in technology and digital space [88] Question: Timeline for digital initiatives - The transformation is expected to take three to five years, with some products anticipated to launch by the end of the fiscal year [92] Question: Impact of Brexit and labor regulations in Europe - Changes in labor and tax regulations are negatively impacting the business, particularly regarding independent contractors [103] Question: Prospects in specific U.S. markets - There is a renewed focus on leadership in key markets like Tri-State and Southern California to improve performance [112]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 23, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-32113 RESOURCES CONNECTION, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 33-0832424 (S ...

Resources Connection, Inc. (RECN) Q3 2019 Results Conference Call April 3, 2019 5:00 PM ET Company Participants Alice Washington - General Counsel Kate Duchene - Chief Executive Officer Herb Mueller - Chief Financial Officer Tim Brackney - Chief Operating Officer Conference Call Participants Andrew Steinerman - JPMorgan Mark Marcon - Baird Operator Good day, ladies and gentlemen. And welcome to the Resources Global Professionals' Q3 Fiscal Year 2019 Earnings Conference Call. At this time, all participants a ...