Resources nection(RGP) - 2025 Q4 - Annual Report

Part I Business RGP is a global professional services firm specializing in consulting, on-demand talent, and outsourced services, serving over 1,600 clients and reorganizing into new operating segments - RGP is a professional services firm specializing in consulting, on-demand resourcing, and outsourced services for clients navigating transformation, transactions, or compliance[17] - The company serves over 1,600 clients globally, including 88% of the Fortune 100, with a team of approximately 3,100 professionals as of May 2025[19] - In fiscal 2025, the company reorganized its business into four main reportable segments: On-Demand Talent, Consulting, Europe & Asia Pacific, and Outsourced Services[20][21] - On July 1, 2024, RGP acquired Reference Point LLC, an advisory firm for financial institutions, which is now part of its Consulting segment[22] - The company's growth strategy focuses on increasing penetration of its existing client base, growing its client base, optimizing service offerings with a focus on digital capabilities, and engaging in strategic acquisitions[37][38][39][41] Risk Factors The company faces significant risks from economic downturns, intense competition, human capital challenges, operational issues, cybersecurity threats, and evolving data privacy regulations - Economic downturns, inflation, geopolitical conflicts (such as in Ukraine and the Middle East), and trade friction could reduce demand for the company's services and adversely affect financial results[77][78] - The professional services market is highly competitive and fragmented, with competitors including consulting firms, accounting firms, independent contractors, and staffing firms, some of whom have greater financial resources and name recognition[81][83] - The business depends on attracting and retaining highly qualified consultants, and failure to do so could be caused by an inability to offer challenging projects or competitive compensation[87] - Technological advances, particularly in AI and automation, may reduce demand for the company's services or enable competitors to develop new offerings, potentially bypassing the need for external experts[92][93] - Cybersecurity incidents, such as data breaches or ransomware attacks, could disrupt business operations, damage the company's reputation, and result in significant costs for remediation and potential legal penalties[114][119][121] - Failure to comply with evolving and complex data privacy laws, such as GDPR and various U.S. state laws, could result in significant civil and criminal penalties and damage the company's reputation[124][126] Unresolved Staff Comments There are no unresolved staff comments to report - Not applicable[148] Cybersecurity The company manages cybersecurity risks through an enterprise-wide strategy, governed by a CSIRT and Board oversight, employing various risk management practices - The company has an enterprise-wide strategy to manage cybersecurity risks, including an Information Assurance Program and a Cybersecurity Incident Response Plan[149][150] - Cybersecurity governance is managed by a Cybersecurity Incident Response Team (CSIRT) led by the Chief Information Officer (CIO) and overseen by the Board's Audit Committee, which receives quarterly updates[157][158] - Risk management practices include third-party penetration testing, cybersecurity awareness training for employees, and phishing test campaigns[153] - As of the report date, the company states that known risks from cybersecurity threats have not materially affected its business, operations, or financial condition[155] Properties The company sold its Irvine building for $13.0 million, relocated its principal office to Dallas, and maintains leased offices in over 38 cities globally - The company sold its building in Irvine, California for $13.0 million in August 2024 and entered into a new lease in Irvine effective November 1, 2024[159] - Effective November 1, 2024, the company's principal executive office was relocated to Dallas, Texas[160] - As of May 31, 2025, the company leases facilities in over 38 cities in 14 countries, including major business centers such as New York, London, Tokyo, and Shanghai[161] Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[163] Mine Safety Disclosures This item is not applicable to the company - Not applicable[164] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, with a reduced quarterly dividend and $79.2 million remaining for repurchases, while stock performance has underperformed benchmarks - The company's common stock is listed on The Nasdaq Global Select Market under the symbol "RGP"[166] - The quarterly dividend was reduced from $0.14 per share to $0.07 per share, approved on April 29, 2025[167] - As of May 31, 2025, approximately $79.2 million remained available for future stock repurchases under the company's authorized programs, with no shares repurchased in the fourth quarter of fiscal 2025[169][170] 5-Year Cumulative Total Return Comparison | | May 29, 2020 | May 31, 2025 | | :--- | :--- | :--- | | Resources Connection, Inc. | $100.00 | $57.82 | | Russell 3000 | $100.00 | $204.11 | | SIC Code 8742 - Management Consulting | $100.00 | $191.50 | | Peer Group | $100.00 | $204.25 | Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2025 saw a 12.9% revenue decrease to $551.3 million and a $191.8 million net loss due to goodwill impairment, with strategic focus on new segments and digital capabilities Fiscal Year 2025 vs. 2024 Financial Performance | Metric | FY 2025 | FY 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $551.3M | $632.8M | ($81.5M) | (12.9)% | | Gross Profit | $207.4M | $246.1M | ($38.7M) | (15.7)% | | Net Income (Loss) | ($191.8M) | $21.0M | ($212.8M) | (1013.3)% | | Adjusted EBITDA | $23.5M | $51.5M | ($28.0M) | (54.4)% | - The significant net loss in fiscal 2025 was primarily driven by a non-cash goodwill impairment charge of $194.4 million[240] - Revenue decline was attributed to reduced client spending due to global macroeconomic uncertainty, protracted sales cycles, and attrition within the sales team following strategic changes[233] - The company's strategic focus in fiscal 2025 was on evolving its new business segments (On-Demand Talent, Consulting, Outsourced Services), launching a new brand identity, and enhancing digital and AI capabilities, including the acquisition of Reference Point[181][182][183] - As of May 31, 2025, the company had $86.1 million in cash and cash equivalents, and subsequently entered into a new $50.0 million secured revolving loan facility on July 2, 2025[280][284] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are from interest rate fluctuations on cash and variable-rate debt, and foreign currency exposure from 18.2% international revenue - The company's primary market risks are from fluctuations in interest rates and foreign currency exchange rates[302][305] - Interest rate risk exposure relates to earnings on $86.1 million of cash and cash equivalents and potential borrowings under its new variable-rate credit facility, with no borrowings outstanding as of May 31, 2025[303][304] - Approximately 18.2% of fiscal 2025 revenues were generated outside the U.S., exposing operating results to foreign currency fluctuations, though the company does not currently use financial hedges to mitigate this risk[305][307] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal year 2025, including balance sheets, income statements, and cash flow statements, along with notes Consolidated Balance Sheet Summary (in thousands) | | May 31, 2025 | May 25, 2024 | | :--- | :--- | :--- | | Total Current Assets | $203,686 | $240,755 | | Goodwill | $28,757 | $216,579 | | Total Assets | $304,688 | $510,914 | | Total Current Liabilities | $75,402 | $72,433 | | Total Liabilities | $97,607 | $92,151 | | Total Stockholders' Equity | $207,081 | $418,763 | Consolidated Statement of Operations Summary (in thousands) | | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Revenue | $551,331 | $632,801 | $775,643 | | Gross Profit | $207,424 | $246,068 | $313,142 | | Goodwill Impairment | $194,409 | $0 | $2,955 | | Income (Loss) from Operations | ($196,757) | $28,776 | $72,788 | | Net Income (Loss) | ($191,780) | $21,034 | $54,359 | Consolidated Statement of Cash Flows Summary (in thousands) | | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $18,899 | $21,919 | $81,636 | | Net Cash from Investing Activities | ($13,571) | ($8,554) | $3,943 | | Net Cash from Financing Activities | ($27,731) | ($20,709) | ($71,914) | | Net (Decrease) Increase in Cash | ($22,745) | ($7,892) | $12,560 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - None[509] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of May 31, 2025, a conclusion audited by RSM US LLP - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025[510] - Management concluded that the company's internal control over financial reporting was effective as of May 31, 2025, based on the 2013 COSO framework[513] - The independent registered public accounting firm, RSM US LLP, audited and confirmed the effectiveness of the company's internal control over financial reporting as of May 31, 2025[514] Other Information There is no other information to report in this section - None[515] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[516] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 proxy statement - The required information for this item is incorporated by reference from the company's proxy statement for the 2025 Annual Meeting of Stockholders[519] Executive Compensation Information on executive and director compensation is incorporated by reference from the 2025 proxy statement - The required information for this item is incorporated by reference from the company's proxy statement for the 2025 Annual Meeting of Stockholders[520] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference, with 3,547,662 securities issuable under equity plans and 2,138,601 remaining for future issuance - Information on security ownership is incorporated by reference from the 2025 proxy statement[521] Equity Compensation Plan Information as of May 31, 2025 | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Remaining for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Approved by Security Holders | 3,547,662 | $16.89 | 2,138,601 | | Not Approved by Security Holders | - | - | - | | Total | 3,547,662 | $16.89 | 2,138,601 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 proxy statement - The required information for this item is incorporated by reference from the company's proxy statement for the 2025 Annual Meeting of Stockholders[526] Principal Accountant Fees and Services Information on principal accountant fees and services from RSM US LLP is incorporated by reference from the 2025 proxy statement - The company's independent registered public accounting firm is RSM US LLP[527] - Information regarding principal accountant fees and services is incorporated by reference from the 2025 proxy statement[528] Part IV Exhibits and Financial Statement Schedules This section lists financial statements and exhibits filed as part of the Form 10-K, with consolidated financial statements in Item 8 - This section includes the list of financial statements filed in Item 8 and the Exhibit Index[531][532] Form 10-K Summary This item is not applicable - Not applicable[536]