Company Overview - RGP is a global professional services firm with nearly 2,600 delivery professionals and a history of partnering with Fortune 500 companies, with $600 million LTM total revenue[5] - 88% of clients are Fortune 100 & 77% of Fortune 500 companies[5] - 51% of consultants have Big 4, Big Consulting or Big Law experience[11] - 69% of U.S.-based consultants are Racially/Ethnically Diverse or Women[11] Financial Performance - The company has zero debt and a 70% variable cost structure[6] - In FY2024, revenue was $632.801 million, a decrease of 18.4% compared to FY2023[42] - Adjusted EBITDA for FY2024 was $51.483 million, with an adjusted EBITDA margin of 8.1%[42] - The company paid $164 million in total dividends and $255 million in total share repurchases[41] - Q1 Fiscal 2025 revenue by business segment: On-Demand Talent 38.3%, Consulting 40.2%, EU/Asia Pacific 13.1%, Outsourced Services 6.9%, Other 1.4%[5] Strategic Initiatives - The company is implementing a new Go-to-Market Strategy with three engagement models[7] - The company is expanding its addressable market by evolving its service offering catalog[7] - The company reduced its global real estate footprint by over 30,000 square feet during Fiscal Year 2024 and 196,000 square feet since Fiscal Year 2021[35] - The company is investing in digital innovation and AI development to create advanced experiences in response to market demand[39]

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]

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]