On October 1, 2024, Resources Connection Inc (RGP, Financial) released its 8-K filing detailing its financial results for the first quarter of fiscal 2025, which ended on August 24, 2024. Resources Connection Inc provides consulting and business initiative support services predominantly through its operative subsidiary, Resources Global Professionals. It operates in two segments: RGP and Sitrick. The RGP segment focuses on delivering consulting services catering to clients' operational needs and change initiatives, while the Sitrick segment provides corporate, financial, transactional, and crisis communication and management services.
Performance Overview
Resources Connection Inc (RGP, Financial) reported revenue of $136.9 million for the first quarter of fiscal 2025, a 19.5% decline from $170.2 million in the same period last year. This figure fell short of the analyst estimate of $137.92 million. The company also reported a net loss of $5.7 million, or a loss of $0.17 per diluted share, compared to net income of $3.1 million, or $0.09 per diluted share, in the prior year quarter. This result was below the analyst estimate of a loss of $0.05 per share.
Key Financial Metrics
| Metric | Q1 FY2025 | Q1 FY2024 |
|---|---|---|
| Revenue | $136.9 million | $170.2 million |
| Net (Loss) Income | $(5.7) million | $3.1 million |
| Diluted EPS | $(0.17) | $0.09 |
| Gross Margin | 36.5% | 39.4% |
| Adjusted EBITDA | $2.3 million | $11.5 million |
Challenges and Strategic Initiatives
The decline in revenue was attributed to a persistently choppy demand environment driven by broader economic trends. Clients have been hesitant to move forward with transformation projects, resulting in extended timelines for opportunities to close in the pipeline. Billable hours decreased by 15.3%, and the average bill rate declined by 5.0%, reflecting a more competitive pricing environment and a shift in revenue mix to the Asia Pacific region, which typically carries a lower average bill rate.
Gross margin decreased to 36.5% from 39.4% in the prior year quarter, primarily due to less favorable leverage on indirect costs of services, lower salaried consultant utilization, and a 60 basis point increase in the pay/bill ratio. Selling, general, and administrative expenses (SG&A) improved by 18.4% to $48.9 million, net of a $3.4 million gain on the sale of the Irvine office building, compared to $59.9 million in the prior year quarter.
Segment Performance
During the first quarter of fiscal 2025, the company reorganized its business segments to better align with changes in its internal management framework. The On-Demand Talent segment saw a revenue decline of 32.7% to $52.5 million, while the Consulting segment experienced a 3.2% decrease to $55.0 million. The Europe and Asia Pacific segment reported a 22.7% decline in revenue to $18.0 million. The Outsourced Services segment remained flat at $9.5 million, and the All Other segment saw a 26.3% decline to $2.0 million.
Management Commentary
"This quarter, our teams have continued to push hard to gain momentum on topline revenue, while also working diligently to lay the foundation for our diversification strategy to broaden RGP's addressable market," said Kate W. Duchene, Chief Executive Officer. "The combination of technology transformation, operating model evolution, and brand refresh initiatives enables us to further improve speed to market, extend buying centers, and strengthen brand recognition."
Financial Achievements and Outlook
Despite the challenges, Resources Connection Inc (RGP, Financial) declared cash dividends of $0.14 per share, consistent with the prior year quarter. The company maintained a strong liquidity position with cash and cash equivalents plus borrowings available under its senior secured revolving loan facility totaling $263.2 million, compared to $283.1 million in the prior year quarter, with zero debt.
Resources Connection Inc (RGP, Financial) continues to focus on cost discipline and strategic initiatives to drive long-term growth and profitability. The company's efforts to diversify its service offerings and improve operational efficiency are expected to position it well for future opportunities.
Explore the complete 8-K earnings release (here) from Resources Connection Inc for further details.
