Resources nection(RGP) - 2024 Q4 - Annual Results

Financial Performance Overview Fourth Quarter Fiscal 2024 Performance In the fourth quarter of fiscal 2024, the company's revenue declined 19.7% year-over-year to $148.2 million, primarily due to a challenging macroeconomic environment leading to reduced client spending and lower bill rates. Q4 FY2024 Key Financial Metrics (vs. Q4 FY2023) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $148.2M | $184.4M | -19.7% | | Gross Margin | 40.2% | 41.1% | -90 bps | | SG&A | $46.4M | $56.5M | -18.0% | | Net Income | $10.5M | $11.8M | -11.1% | | Net Income Margin | 7.1% | 6.4% | +70 bps | | Diluted EPS | $0.31 | $0.35 | -11.4% | | Adjusted EBITDA | $13.1M | $23.2M | -43.6% | | Adjusted EBITDA Margin | 8.8% | 12.6% | -380 bps | - The revenue decline was driven by a 13.0% decrease in billable hours and a 7.0% decline in the average bill rate, reflecting a tepid demand environment, cautious client spending, and a competitive pricing landscape[23] - SG&A expenses improved primarily due to a $4.4 million favorable non-cash contingent consideration adjustment related to the CloudGo acquisition and lower management compensation, bonuses, and commissions[24] - The effective tax rate for Q4 FY2024 was significantly lower at 9.0% compared to 31.4% in the prior year, mainly due to nontaxable income from the contingent consideration adjustment and other tax benefits[14] Full Fiscal Year 2024 Performance For the full fiscal year 2024, revenue decreased by 18.4% to $632.8 million compared to the prior year, leading to a significant drop in profitability with net income falling to $21.0 million and diluted EPS decreasing to $0.62. Full Fiscal Year 2024 Key Financial Metrics (vs. FY2023) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $632.8M | $775.6M | -18.4% | | Gross Margin | 38.9% | 40.4% | -150 bps | | SG&A | $208.9M | $228.8M | -8.7% | | Net Income | $21.0M | $54.4M | -61.4% | | Net Income Margin | 3.3% | 7.0% | -370 bps | | Diluted EPS | $0.62 | $1.59 | -61.0% | | Adjusted EBITDA | $51.5M | $100.2M | -48.6% | | Adjusted EBITDA Margin | 8.1% | 12.9% | -480 bps | - The annual revenue decline was attributed to a 13.8% decrease in billable hours and a 4.7% decline in the average bill rate, caused by reduced client spending and a competitive pricing environment[26] - SG&A reduction was driven by a $17.1 million decrease in bonuses and commissions, a $4.4 million favorable contingent consideration adjustment, and lower stock and management compensation, partially offset by restructuring and acquisition costs[27] - The effective tax rate for FY2024 increased to 29.5% from 25.1% in FY2023, primarily due to a non-recurring increase in forfeiture of stock options[52] Management Commentary The CEO, Kate W. Duchene, highlighted that the business stabilized in the fourth quarter, with results exceeding the company's outlook, and management is focused on controlling costs while preparing for future growth. - Management reported business stabilization in Q4, delivering results above their outlook ranges despite macroeconomic challenges[11] - The company is focused on cost control and setting a foundation for growth once broader human capital sector conditions improve[11] - Strategic priorities for the upcoming year include unlocking cross-sell opportunities in digital transformation and data modernization, and expanding into broader buying centers within the existing A-list client base[11] Consolidated Financial Statements Summary of Consolidated Financial Results The consolidated financial results show a year-over-year decline in key performance indicators for both the fourth quarter and the full fiscal year 2024, with revenue, gross profit, and net income all decreasing compared to fiscal 2023. Consolidated Income Statement Highlights (in thousands) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $148,198 | $184,449 | $632,801 | $775,643 | $805,018 | | Gross Profit | $59,583 | $75,718 | $246,068 | $313,142 | $316,642 | | Income from Operations | $11,285 | $17,049 | $28,776 | $72,788 | $83,438 | | Net Income | $10,472 | $11,768 | $21,034 | $54,359 | $67,175 | Diluted Earnings Per Share | Period | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | Q4 | $0.31 | $0.35 | N/A | | Full Year | $0.62 | $1.59 | $2.00 | - Cash dividends declared per common share remained consistent at $0.14 for the quarter and $0.56 for the full fiscal year, unchanged from the prior year[29] Selected Balance Sheet and Cash Flow Information As of May 25, 2024, the company's balance sheet remains healthy with $108.9 million in cash and cash equivalents and no long-term debt, though cash flow from operating activities saw a substantial decrease. Selected Balance Sheet Data (in thousands) | Metric | May 25, 2024 | May 27, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $108,892 | $116,784 | | Total assets | $510,914 | $531,999 | | Total liabilities | $92,151 | $117,479 | | Total stockholders' equity | $418,763 | $414,520 | Selected Cash Flow Data (in thousands) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Cash flow -- operating activities | $21,919 | $81,636 | | Cash flow -- investing activities | $(8,554) | $3,943 | | Cash flow -- financing activities | $(20,709) | $(71,914) | Other Operational Information | Metric | May 25, 2024 | May 27, 2023 | | :--- | :--- | :--- | | Consultant headcount | 2,585 | 3,145 | | Average bill rate | $120 | $129 | | Average pay rate | $57 | $62 | Segment and Geographic Performance Segment Results The RGP segment dominates the company's operations, constituting the vast majority of revenue and Adjusted EBITDA, both of which declined significantly in fiscal year 2024. - RGP is the company's only operating segment that meets the quantitative threshold to be a reportable segment, with the Sitrick segment disclosed under 'Other Segments'[48] Segment Revenue (in thousands) | Segment | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | RGP | $145,521 | $181,662 | $622,895 | $764,511 | | Other Segments | $2,677 | $2,787 | $9,906 | $11,132 | | Total Revenue | $148,198 | $184,449 | $632,801 | $775,643 | Segment Adjusted EBITDA (in thousands) | Segment | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | RGP | $20,980 | $31,045 | $84,677 | $132,377 | | Other Segments | $32 | $419 | $(676) | $1,179 | | Reconciling items | $(7,922) | $(8,227) | $(32,518) | $(33,362) | | Total Adjusted EBITDA | $13,090 | $23,237 | $51,483 | $100,194 | Revenue by Geography North America remains the company's largest market, accounting for approximately 86% of total revenue in fiscal 2024, though revenue from this region and Europe declined year-over-year. Revenue by Geography (in thousands) | Region | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | North America | $126,554 | $160,999 | $543,926 | $680,993 | | Europe | $8,518 | $10,757 | $38,383 | $42,509 | | Asia Pacific | $13,126 | $12,693 | $50,492 | $52,141 | | Total Revenue | $148,198 | $184,449 | $632,801 | $775,643 | - On a same-day constant currency basis, total consolidated revenue for FY2024 was $629.6 million, representing a decline of 18.8% from the prior year[11][65] Non-GAAP Financial Measures and Reconciliations Definition of Non-GAAP Measures The company utilizes several non-GAAP financial measures, including 'Same-day constant currency revenue,' 'EBITDA,' 'Adjusted EBITDA,' and 'Adjusted diluted earnings per common share,' to evaluate its core operating performance by adjusting for various non-cash and non-recurring items. - Same-day constant currency revenue is a non-GAAP measure that adjusts reported revenue for the impact of differing numbers of business days and fluctuations in foreign currency exchange rates between periods[35][60] - Adjusted EBITDA is defined as net income before interest, taxes, depreciation, and amortization, further adjusted for items such as stock-based compensation, technology transformation costs, goodwill impairment, acquisition costs, restructuring costs, and contingent consideration adjustments[36][61] - Adjusted diluted earnings per common share adjusts GAAP diluted EPS for the per-share impact of the same items excluded from Adjusted EBITDA, along with their related tax effects[63] Reconciliation of GAAP to Non-GAAP Measures The company provides detailed reconciliations of its GAAP results to non-GAAP measures for both quarterly and annual periods, primarily accounting for non-cash expenses and special items like restructuring and technology transformation costs. Quarterly Reconciliations (Q4 FY2024) Q4 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Description | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $10,472 | $11,768 | | Amortization & Depreciation | $1,948 | $2,162 | | Interest & Tax | $796 | $5,282 | | EBITDA | $13,216 | $19,212 | | Stock-based compensation | $1,483 | $2,146 | | Technology transformation costs | $1,914 | $1,879 | | Acquisition & Restructuring costs | $877 | $0 | | Contingent consideration adj. | $(4,400) | $0 | | Adjusted EBITDA (Non-GAAP) | $13,090 | $23,237 | Q4 Reconciliation of Diluted EPS to Adjusted Diluted EPS | Description | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.31 | $0.35 | | Non-GAAP Adjustments (net of tax) | $(0.03) | $0.09 | | Adjusted Diluted EPS (Non-GAAP) | $0.28 | $0.44 | Annual Reconciliations (FY 2024) Annual Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Description | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $21,034 | $54,359 | | Amortization & Depreciation | $8,428 | $8,557 | | Interest & Tax | $7,731 | $18,811 | | EBITDA | $37,193 | $81,727 | | Stock-based compensation | $5,732 | $9,521 | | Technology transformation costs | $6,901 | $6,355 | | Other adjustments | $1,651 | $2,591 | | Adjusted EBITDA (Non-GAAP) | $51,483 | $100,194 | Annual Reconciliation of Diluted EPS to Adjusted Diluted EPS | Description | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.62 | $1.59 | | Non-GAAP Adjustments (net of tax) | $0.31 | $0.41 | | Adjusted Diluted EPS (Non-GAAP) | $0.93 | $2.00 | Corporate Information About RGP RGP is a global consulting firm that provides project execution services to assist clients with business transformations, strategic transactions, and regulatory changes, utilizing a flexible talent model with approximately 3,400 professionals. - RGP is a global consulting firm focused on co-delivering enterprise initiatives precipitated by business transformation, strategic transactions, or regulatory change[55] - The company employs approximately 3,400 professionals and serves over 1,800 clients globally, including 88% of the Fortune 100 as of May 2024[56] - RGP's business model is positioned to help clients manage transformation pressures and skilled labor shortages by offering a flexible workforce for executing projects[31] Conference Call Information The company scheduled a conference call for analysts and investors at 5:00 p.m. ET on July 18, 2024, to discuss the financial results, with a live webcast and replay available on the Investor Relations section of the company's website. - A conference call was held on July 18, 2024, at 5:00 p.m. ET to discuss the financial results[30] - A live webcast and a 30-day replay of the call are accessible through the Events section of the company's Investor Relations website[30] Forward-Looking Statements This section provides a standard legal disclaimer regarding forward-looking statements, cautioning readers that these statements are subject to various known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. - The press release contains forward-looking statements concerning matters that are not historical facts, which are subject to significant risks and uncertainties[57] - Key risks include economic downturns, the competitive nature of the professional services market, ability to retain consultants, and potential impacts from restructuring and technology transformation efforts[57][58]