Resources nection(RGP) - 2025 Q3 - Quarterly Results

Financial Highlights & Management Commentary This section summarizes Q3 FY2025 financial performance, including revenue decline and net loss, and management's strategic commentary Third Quarter Fiscal 2025 Highlights 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 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] - 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] Consolidated Financial Performance This section provides a detailed analysis of the company's consolidated revenue, profitability, and operating expenses for the period Revenue Analysis 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 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] - 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] - 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] Operating Expenses 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] Segment Performance Analysis This section examines the revenue and performance across the company's various operating segments, highlighting key drivers for each Segment Results Overview 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 This section presents a summary of consolidated financial statements, including balance sheet, cash flow, and other key operational metrics Summary of Consolidated Financial Results 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 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 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 This section reconciles non-GAAP financial measures such as adjusted revenue, EBITDA, and EPS to their most directly comparable GAAP equivalents Adjusted Revenue Reconciliation 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 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 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 This section provides an overview of RGP's business model and brands, along with important disclosures regarding forward-looking statements About RGP 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][21] - 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] Forward-Looking Statements 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] - 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][22]