Street Calls of the Week
DALLAS - Resources Connection, Inc. (NASDAQ:RGP) saw its shares surge 13.5% after the professional services firm reported better-than-expected first-quarter fiscal 2026 earnings, despite revenue falling short of analyst estimates.
The company posted adjusted earnings of $0.03 per share for the quarter ended August 30, exceeding the analyst consensus of $0.01. Revenue came in at $120.2 million, below the consensus estimate of $135 million and down 12.2% from $136.9 million in the same quarter last year.
Despite the revenue decline, RGP showed significant improvement in profitability metrics. Gross margin increased to 39.5% from 36.5% YoY, while adjusted EBITDA margin rose to 2.5% from 1.7% in the prior-year period. The company reduced its net loss to $2.4 million from $5.7 million a year earlier.
"First quarter results exceeded our outlook ranges on all fronts and we continue to make progress to transform our business to be more integrated, diversified and resilient," said Kate W. Duchene, Chief Executive Officer. "We are engaging with clients on more consulting opportunities which have higher bill rates, larger deal size and often create more extension and cross selling."
The revenue decline was primarily attributed to a 14.3% decrease in billable hours, which the company said reflected "choppy demand, as clients delayed transformation projects amid continued global economic uncertainty and soft labor markets." However, average bill rates increased 2.2% YoY.
By segment, On-Demand Talent revenue fell to $44.4 million from $52.5 million, while Consulting revenue dropped to $43.6 million from $55 million. The Europe & Asia Pacific segment was a bright spot, with revenue increasing 10.6% to $19.9 million.
The company declared a quarterly cash dividend of $0.07 per share.
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