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]

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 an adjusted EBITDA margin of 11% [51] - On-demand segment revenue was $47.1 million, down 24% year-over-year, with a 5% adjusted EBITDA margin [52] - Outsourced services segment revenue was $9.4 million, similar to the prior year quarter, with a 16% adjusted EBITDA margin [55] Market Data and Key Metrics Changes - Europe and Asia Pacific segments saw a sequential increase in revenue backlog, although growth slowed compared to the previous quarter [38] - The consulting segment's average bill rate increased by 13% year-over-year, while the average bill rate in Europe and Asia Pacific increased by 5% [45][46] - The federal government work represented only 1.5% of overall revenue, indicating a diversified client base [33] Company Strategy and Development Direction - The company is focusing on enhancing client offerings through a diversified services platform and flexible engagement models [10][11] - Strategic investments are being made to improve technology and infrastructure, particularly in North America [17][18] - The company aims to build scale in key markets, particularly in Southeast Asia and India, to support international client needs [8][22] Management's Comments on Operating Environment and Future Outlook - The operating environment remains sluggish due to increased uncertainty and decreased consumer confidence in the U.S. [5] - Management expressed cautious optimism about the potential for growth as project extensions improve and larger deal opportunities arise [39][57] - The near-term outlook for professional services in the U.S. is uncertain, with delays in client decision-making expected to continue [24][58] Other Important Information - A non-cash goodwill impairment charge of $42 million was recorded in Q3 due to sluggish demand in both on-demand and consulting segments [55] - The company maintains a strong balance sheet with $73 million in cash and no outstanding debt, allowing for a balanced approach to capital allocation [56] Q&A Session Summary Question: How high priority are the clients' transformational activities given the delays? - Management noted that while there are delays, there is pent-up demand in Europe leading to project advancements, whereas the U.S. market is more hesitant due to uncertainty [66][68] Question: What measures are being taken to retain consultants during challenging times? - The company is focusing on engaging consultants with prior clients and maintaining strong relationships, even with those who are not currently active [70][71] Question: How much more cost-cutting can be done before impacting the business? - Management is exploring various areas for cost reduction, including real estate and discretionary spending, while also leveraging new technology for efficiency [73][74] Question: What has been observed regarding project cancellations and delays? - Management clarified that while there are delays in project starts, cancellations are not prevalent, and extensions are actually growing [80][82] Question: What is the revenue guide for the fourth quarter and its implications? - The fourth quarter is expected to see a revenue decline of about 14% year-over-year, with variability primarily coming from North America [92][94] Question: What is the outlook for cash flow and dividends? - The company anticipates improved operating cash flow starting in fiscal 2026 and intends to maintain a balanced approach to dividends and capital allocation [96][97]

[Financial Highlights & Management Commentary](index=1&type=section&id=Financial%20Highlights%20%26%20Management%20Commentary) This section summarizes Q3 FY2025 financial performance, including revenue decline and net loss, and management's strategic commentary [Third Quarter Fiscal 2025 Highlights](index=1&type=section&id=Third%20Quarter%20Fiscal%202025%20Highlights) For the third quarter of fiscal 2025, Resources Connection, Inc. (RGP) reported a significant revenue decline and a net loss, primarily driven by a non-cash goodwill impairment charge | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $129.4 M | $151.3 M | -14.5% | | **Gross Margin** | 35.1% | 37.0% | -1.9 p.p. | | **Net (Loss) Income** | $(44.1) M | $2.6 M | - | | **Diluted (Loss) EPS** | $(1.34) | $0.08 | - | | **Adjusted Diluted (Loss) EPS** | $(0.08) | $0.17 | - | | **Adjusted EBITDA** | $1.7 M | $10.8 M | -84.3% | | **Goodwill Impairment Charge** | $42.0 M | $0 | - | | **Cash Dividends Declared** | $0.14/share | $0.14/share | No Change | [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Kate W. Duchene stated that Q3 results were in line with or better than the company's outlook, despite a deeper-than-expected holiday impact and disruptions in the U.S. market - Strategic progress was noted in several areas despite a challenging macroenvironment[3](index=3&type=chunk) - **Pricing and Deal Size:** Notable progress in driving stronger pricing and larger average deal sizes - **Efficiency:** Improved efficiency in the cost structure - **Sales Pipeline:** While new opportunity volume was soft, the pipeline quality has meaningfully improved to include larger, higher-value deals - **Client Relationships:** Client relationships remain strong, enabling growth into new buying centers[3](index=3&type=chunk) [Consolidated Financial Performance](index=1&type=section&id=Consolidated%20Financial%20Performance) This section provides a detailed analysis of the company's consolidated revenue, profitability, and operating expenses for the period [Revenue Analysis](index=1&type=section&id=Revenue%20Analysis) Third-quarter revenue was $129.4 million, a 14.5% decrease year-over-year (11.2% on a constant currency basis) | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $129.4 M | $151.3 M | -14.5% | | **Constant Currency Revenue** | $134.4 M | $151.3 M | -11.2% | | **Billable Hours** | - | - | -17.0% | | **Average Bill Rate** | - | - | +3.4% | [Profitability Analysis](index=1&type=section&id=Profitability%20Analysis) Gross margin decreased to 35.1% from 37.0% YoY, primarily due to additional holiday pay and lower utilization of salaried consultants - Gross margin declined to **35.1%** from **37.0%** in Q3 FY2024, primarily due to additional holiday pay and lower utilization of salaried consultants during the Christmas and New Year's holidays[5](index=5&type=chunk) - A non-cash goodwill impairment charge of **$42.0 million** was recorded during the quarter, with **$12.4 million** allocated to the On-Demand Talent segment and **$29.6 million** to the Consulting segment[8](index=8&type=chunk) - The company reported a net loss of **$44.1 million** (net loss margin of **34.0%**), a significant downturn from the **$2.6 million** net income (**1.7%** margin) in the prior year quarter, mainly due to the goodwill impairment[10](index=10&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) SG&A expenses increased to $51.2 million (39.5% of revenue) from $49.6 million (32.8% of revenue) in the prior year - SG&A expenses rose year-over-year primarily due to: - **$1.3 million increase** in employee termination benefits from the 2025 Restructuring Plan - **$1.1 million increase** in computer software expenses related to technology transformation - These were partially offset by a **$1.2 million decrease** in employee compensation[7](index=7&type=chunk) [Segment Performance Analysis](index=2&type=section&id=Segment%20Performance%20Analysis) This section examines the revenue and performance across the company's various operating segments, highlighting key drivers for each [Segment Results Overview](index=2&type=section&id=Segment%20Results%20Overview) In Q3 FY2025, most segments experienced revenue declines, with On-Demand Talent seeing the sharpest drop at 26.6%, while Consulting and Europe & Asia Pacific saw more moderate declines | Segment | Q3 FY2025 Revenue | Q3 FY2024 Revenue | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | | **On-Demand Talent** | $47.1 M | $64.2 M | -26.6% | Billable hours down 24.8%, bill rate down 2.1% | | **Consulting** | $52.6 M | $55.8 M | -5.8% | Billable hours down 18.8%, bill rate up 12.8%; includes $4.0M from Reference Point | | **Europe & Asia Pacific** | $18.6 M | $19.6 M | -5.4% | Billable hours down 5.5%, bill rate up 1.7% | | **Outsourced Services** | $9.4 M | $9.4 M | 0.0% | Billable hours and bill rates remained steady | | **All Other** | $1.8 M | $2.3 M | -21.7% | Billable hours down 31.9%, bill rate up 6.1% | [Financial Statements and Key Metrics](index=3&type=section&id=Financial%20Statements%20and%20Key%20Metrics) This section presents a summary of consolidated financial statements, including balance sheet, cash flow, and other key operational metrics [Summary of Consolidated Financial Results](index=3&type=section&id=Summary%20of%20Consolidated%20Financial%20Results) The consolidated financial results for the third quarter and first nine months of fiscal 2025 show a significant downturn compared to the prior year Consolidated Financial Results (in thousands, except per share data) | Metric | Three Months Ended Feb 22, 2025 | Three Months Ended Feb 24, 2024 | Nine Months Ended Feb 22, 2025 | Nine Months Ended Feb 24, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $129,438 | $151,307 | $411,991 | $484,603 | | **Gross Profit** | $45,374 | $56,008 | $151,447 | $186,485 | | **Goodwill Impairment** | $42,039 | $0 | $125,376 | $0 | | **(Loss) Income from Operations** | $(49,725) | $4,261 | $(131,260) | $17,491 | | **Net (Loss) Income** | $(44,052) | $2,550 | $(118,474) | $10,562 | | **Diluted (Loss) EPS** | $(1.34) | $0.08 | $(3.58) | $0.31 | [Selected Balance Sheet and Cash Flow Information](index=17&type=section&id=Selected%20Balance%20Sheet%20and%20Cash%20Flow%20Information) As of February 22, 2025, the company's balance sheet reflects a decrease in cash and total assets compared to the end of fiscal year 2024, primarily due to the net loss and goodwill impairment Selected Balance Sheet Information (in thousands) | Metric | Feb 22, 2025 | May 25, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $72,495 | $108,892 | | **Total assets** | $375,625 | $510,914 | | **Total liabilities** | $97,799 | $92,151 | | **Total stockholders' equity** | $277,826 | $418,763 | Selected Cash Flow Information (in thousands, for nine months ended) | Metric | Feb 22, 2025 | Feb 24, 2024 | | :--- | :--- | :--- | | **Cash flow -- operating activities** | $2,149 | $18,754 | | **Cash flow -- investing activities** | $(13,083) | $(8,432) | | **Cash flow -- financing activities** | $(23,114) | $(12,977) | [Other Key Metrics](index=16&type=section&id=Other%20Key%20Metrics) The company's consultant headcount decreased to 2,514 at the end of Q3 FY2025 from 2,765 a year prior Selected Other Information (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | **Consultant headcount, end of period** | 2,514 | 2,765 | | **Average bill rate** | $123 | $119 | | **Average pay rate** | $58 | $58 | Average Bill Rate by Segment | Segment | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | **Consolidated** | $123 | $119 | | **On-Demand Talent** | $140 | $143 | | **Consulting** | $159 | $141 | | **Europe & Asia Pacific** | $59 | $58 | | **Outsourced Services** | $137 | $139 | [Non-GAAP Financial Measures Reconciliation](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section reconciles non-GAAP financial measures such as adjusted revenue, EBITDA, and EPS to their most directly comparable GAAP equivalents [Adjusted Revenue Reconciliation](index=7&type=section&id=Adjusted%20Revenue%20Reconciliation) The company provides a reconciliation for same-day constant currency revenue, which adjusts for currency fluctuations and differing numbers of business days Q3 FY2025 Revenue Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **As reported revenue (GAAP)** | $129,438 | | Currency impact | $1,209 | | Business days impact | $3,768 | | **Same-day constant currency revenue** | $134,415 | | **Prior Year As reported revenue (GAAP)** | $151,307 | | **YoY Decline (Same-day constant currency)** | **-11.2%** | [Adjusted EBITDA and Adjusted EPS Reconciliation](index=9&type=section&id=Adjusted%20EBITDA%20and%20Adjusted%20EPS%20Reconciliation) For Q3 FY2025, the company reconciled its net loss of $44.1 million to an Adjusted EBITDA of $1.7 million, and diluted loss per share to a non-GAAP loss of $(0.08) per share Q3 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | **Net (Loss) Income** | $(44,052) | $2,550 | | Adjustments (incl. Goodwill Impairment of $42,039) | $45,703 | $8,236 | | **Adjusted EBITDA** | **$1,651** | **$10,786** | | **Adjusted EBITDA Margin** | 1.3% | 7.1% | Q3 Adjusted Diluted EPS Reconciliation | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | **Diluted (Loss) EPS, as reported** | $(1.34) | $0.08 | | Goodwill impairment per share | $1.28 | $0.00 | | Other adjustments (net) | $(0.02) | $0.09 | | **Adjusted Diluted (Loss) EPS** | **$(0.08)** | **$0.17** | [Segment Adjusted EBITDA](index=13&type=section&id=Segment%20Adjusted%20EBITDA) All operating segments saw a decline in Adjusted EBITDA and Adjusted EBITDA margin year-over-year in the third quarter Q3 Segment Adjusted EBITDA (in thousands) | Segment | Q3 FY2025 Adj. EBITDA | Q3 FY2024 Adj. EBITDA | Q3 FY2025 Margin | Q3 FY2024 Margin | | :--- | :--- | :--- | :--- | :--- | | **On-Demand Talent** | $2,567 | $7,341 | 5.5% | 11.4% | | **Consulting** | $5,914 | $8,769 | 11.2% | 15.7% | | **Europe & Asia Pacific** | $841 | $1,342 | 4.5% | 6.8% | | **Outsourced Services** | $1,493 | $1,577 | 15.9% | 16.8% | | **All Other** | $(727) | $(244) | (40.2%) | (10.6%) | [Company Overview and Other Information](index=4&type=section&id=Company%20Overview%20and%20Other%20Information) This section provides an overview of RGP's business model and brands, along with important disclosures regarding forward-looking statements [About RGP](index=4&type=section&id=About%20RGP) RGP is a professional services firm that provides operational and change initiative support through three distinct brands: On-Demand by RGP, Veracity by RGP, and Countsy by RGP - RGP operates through three main engagement brands: - **On-Demand by RGP:** Provides on-demand expert talent - **Veracity by RGP:** A consulting arm focused on transformation across people, processes, and technology - **Countsy by RGP:** Offers outsourced accounting, HR, and equity services for startups and scaleups[18](index=18&type=chunk)[21](index=21&type=chunk) - The company has a global presence with **42 physical offices**, multiple virtual offices, and approximately **3,200 professionals**, serving **88% of the Fortune 100**[19](index=19&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains standard cautionary language regarding forward-looking statements made in the press release, warning that actual results could differ materially from expectations - The press release includes forward-looking statements concerning operational plans, expected benefits of segments, and the demand environment[20](index=20&type=chunk) - The company's operations are subject to numerous risks and uncertainties that could cause actual results to differ, including macroeconomic conditions, market competition, and the ability to retain talent[20](index=20&type=chunk)[22](index=22&type=chunk)

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]