Resources nection(US:RGP)2024-10-04 00:02Business Segments and Strategy - For the three months ended August 24, 2024, the company reported a significant focus on evolving its business segments, specifically On-Demand Talent, Consulting, and Outsourced Services [103]. - The company acquired Reference Point LLC on July 1, 2024, which is now included in the Consulting Services operating segment [104]. - The company aims to enhance its digital and AI capabilities, responding to increased client needs in technology migration, cybersecurity, and data modernization [109]. - The company is implementing a new brand identity to clarify its service offerings and enhance stakeholder understanding of its capabilities [109]. - The company is focused on driving long-term growth by refining its operating model and aligning incentives to business performance [102]. - The company expects to leverage its consulting capabilities to better align with client transformation agendas, enhancing financial flexibility [106]. - The company emphasizes the importance of a flexible workforce to execute transformational projects amid economic uncertainty [101]. - The company has reorganized its business into five reportable segments to better serve clients and reduce market confusion [103]. Financial Performance - Total consolidated revenue decreased by $33.2 million, or 19.5%, to $136.9 million for the three months ended August 24, 2024, compared to $170.2 million for the same period in 2023 [127]. - Direct cost of services decreased by $16.2 million, or 15.7%, to $86.9 million, resulting in a direct cost of services as a percentage of revenue of 63.5% for the first quarter of fiscal 2025 [128][129]. - Gross profit for the first quarter of fiscal 2025 was $49.99 million, representing 36.5% of revenue, down from 39.4% in the prior year [126]. - Selling, general and administrative expenses (SG&A) were $48.9 million, or 35.7% of revenue, compared to $59.9 million, or 35.2% of revenue, in the prior year [132]. - The company recorded a goodwill impairment charge of $3.9 million in the Europe and Asia Pacific segment during the first quarter of fiscal 2025 [133]. - Net loss for the first quarter of fiscal 2025 was $5.7 million, or (4.2%) of revenue, compared to a net income of $3.1 million, or 1.8% of revenue, in the prior year [126]. - Average billable hours decreased by 15.3%, and the average bill rate declined by 5.0% compared to the prior year quarter [127]. - The number of consultants on assignment decreased to 2,570 from 2,885 year-over-year [131]. Tax and Cash Flow - The effective tax rate for the first quarter of fiscal 2025 was (22.7%), reflecting a tax expense of $1.1 million against a pretax loss [134]. - The company recognized a tax benefit of approximately $0.5 million for the three months ended August 24, 2024, compared to $0.2 million for the same period in 2023 [135]. - Cash used in operating activities for Q1 fiscal 2025 was $0.3 million, compared to $2.2 million for Q1 fiscal 2024, driven by a net loss of $5.7 million [165]. - The company generated negative cash flow from operations during the three months ended August 24, 2024, but has historically generated positive cash flows from operations [154]. Revenue by Segment - Revenue in the On-Demand Talent segment declined by $25.5 million or 32.7%, to $52.5 million compared to $78.0 million in the prior year quarter [145]. - Consulting segment revenue decreased by $1.8 million or 3.2%, to $55.0 million compared to $56.8 million in the prior year quarter [146]. - Revenue in the Europe and Asia Pacific segment declined by $5.3 million or 22.7%, to $18.0 million compared to $23.3 million in the prior year quarter [147]. - Adjusted EBITDA for the On-Demand Talent segment decreased by $6.0 million or 70.1%, to $2.6 million for the first quarter of fiscal 2025 [149]. - The Consulting segment's Adjusted EBITDA decreased by $0.8 million or 9.1%, to $7.8 million for the first quarter of fiscal 2025 [150]. - The Europe & Asia Pacific segment's Adjusted EBITDA decreased by $1.5 million or 86.7%, to $0.2 million for the first quarter of fiscal 2025 [151]. Investments and Liquidity - The company had $89.6 million of cash and cash equivalents as of August 24, 2024, including $44.9 million held in international operations [154]. - The company has a $175.0 million senior secured revolving credit facility, with $173.5 million remaining capacity as of August 24, 2024 [156]. - The company expects to meet its long-term liquidity needs through cash flows from operations and financing arrangements [163]. - As of August 24, 2024, the company capitalized $18.1 million related to its technology platform initiative and recorded $1.9 million in expenses for Q1 fiscal 2025 [158]. - The estimated remaining investments for the technology platform initiative range from $11.0 million to $16.0 million, with the majority expected in fiscal 2025 [158]. - The company has non-cancellable purchase obligations totaling $11.1 million, primarily related to licensing arrangements for the technology platform initiative [160]. - An initial cash consideration of $23.0 million was paid for the acquisition of Reference Point LLC, net of $0.2 million cash acquired [161]. - Net cash used in investing activities was $10.9 million for Q1 fiscal 2025, primarily due to the acquisition of Reference Point, partially offset by $12.3 million from the sale of the Irvine office building [168]. - Net cash used in financing activities totaled $7.7 million in Q1 fiscal 2025, including $5.0 million for share repurchases and $4.7 million in cash dividends [169]. Foreign Exposure - Approximately 18.3% of the company's revenues for the three months ended August 24, 2024, were generated outside of the U.S., exposing it to foreign currency exchange rate risks [172]. - As of August 24, 2024, the company had approximately $89.6 million in cash and cash equivalents, with no outstanding debt under its Credit Facility [170][171].