Earnings call transcript: Resources Connection misses Q4 2025 earnings expectations

Resources Connection Inc., a professional services firm trading at an attractive revenue multiple according to InvestingPro data, reported its fourth-quarter 2025 earnings, revealing a notable miss on both earnings per share (EPS) and revenue forecasts. The company’s stock reacted negatively in after-hours trading, reflecting investor disappointment, though analysis suggests the stock may be undervalued at current levels.

[Discover 12 additional exclusive InvestingPro Tips for RGP and gain access to comprehensive financial analysis with an InvestingPro subscription.]

Key Takeaways

• Resources Connection reported Q4 2025 EPS of $0.16, missing the forecast of $0.04 by a significant margin.
• Revenue came in at $139.3 million, below the expected $151 million.
• The stock dropped 4.18% to $5.27 in after-hours trading following the earnings announcement.
• The company recorded a $69 million non-cash goodwill impairment charge.
• Despite challenges, gross margin exceeded expectations at 40.2%.

Company Performance

Resources Connection’s performance in the fourth quarter of 2025 was marked by a shortfall in both earnings and revenue compared to forecasts. The company faced headwinds, including a $69 million non-cash goodwill impairment charge, which weighed on its financial results. Despite these challenges, the firm managed to maintain a strong gross margin of 40.2%, driven by higher bill rates and favorable medical claims.

Financial Highlights

• Revenue: $139.3 million, down from the forecasted $151 million.
• Earnings per share: $0.16, compared to a forecast of $0.04.
• Gross Margin: 40.2%, exceeding the high-end of the outlook.
• Adjusted EBITDA: $9.8 million, representing a 7.1% margin.
• Cash and Cash Equivalents: $86 million with zero outstanding debt, maintaining a healthy current ratio of 2.63 and demonstrating strong balance sheet management with more cash than debt. InvestingPro analysis highlights the company’s liquid assets exceed short-term obligations.

Earnings vs. Forecast

Resources Connection’s actual EPS of $0.16 was significantly higher than the forecasted -$0.04, resulting in a surprise of -500%. However, revenue fell short by 7.75%, coming in at $139.3 million compared to the expected $151 million. This miss in revenue marks a deviation from the company’s historical trend of meeting or exceeding expectations.

Market Reaction

Following the earnings release, Resources Connection’s stock fell by 4.18% in after-hours trading, closing at $5.27. This decline reflects investor disappointment with the earnings miss and the lower-than-expected revenue figures. The stock’s performance is notable given its 52-week range, with a high of $12.19 and a low of $4.81. With a beta of 0.61, the stock historically shows lower volatility than the broader market. According to InvestingPro’s Fair Value analysis, the current price level may present an opportunity for value investors.

Outlook & Guidance

Looking forward, Resources Connection has set a revenue outlook for Q1 2026 between $115 million and $120 million, with an expected gross margin of 36-37%. The company maintains a significant 5.31% dividend yield and has consistently paid dividends for 16 consecutive years, demonstrating commitment to shareholder returns despite market challenges.

[Access the complete RGP Research Report and in-depth analysis of 1,400+ stocks with InvestingPro to make more informed investment decisions.] The company anticipates that project starts will normalize in Q2, with growth in professional staffing expected in the second half of the fiscal year.

Executive Commentary

CEO Kate Duchene highlighted the company’s unique model, stating, "We dare to work differently, leveraging a unique model that combines on-demand talent with expert consulting and advisory services." Despite near-term uncertainty, Duchene expressed optimism about corporate transformation and modernization initiatives. Operations Executive Pradrash added, "Our diversified portfolio, strong client relationships, and consistent execution position us well for continued recovery and growth."

Risks and Challenges

• Macroeconomic uncertainty continues to pose a risk to the company’s growth prospects.
• Project delays have impacted Q1 revenue guidance, highlighting execution challenges.
• The transition and ramp-up within the sales team could affect short-term sales performance.
• The professional services marketplace remains competitive, requiring constant innovation.
• The company’s reliance on contingent labor may be affected by regulatory changes.

Q&A

During the earnings call, analysts inquired about the factors driving the gross margin beat, which was attributed to higher bill rates and favorable medical claims. Questions also focused on the slightly contracted pipeline due to disciplined opportunity management and the impact of project delays on Q1 revenue guidance.

Full transcript - Resources Connection Inc (RGP) Q4 2025:

Conference Operator: Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Inc. Conference Call. Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this call is being recorded.

At this time, I would like to remind everyone that management will be commenting on results for the fourth quarter ended 05/31/2025. They will also refer to certain non GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures are included in the press release issued today. Today’s press release can be viewed in the Investor Relations section of RGP’s website and filed today with the SEC. Also during this call, management may make forward looking statements regarding plans, initiatives and strategies and the anticipated financial performance of the company.

Such statements are predictions and actual results or events may differ materially. Please see the Risk Factors section in RGP’s report on Form 10 ks for the year ended 05/31/2025 for a discussion of risks, uncertainties and other factors that may cause the company’s business, results of operations and financial condition to differ materially from what is expressed or implied by forward looking statements made during this call. I’ll now turn the call over to RGP’s CEO, Kate Duchene.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Thank you, operator, and welcome, everyone, to RGP’s Q4 earnings call. Thank you for joining us. We are pleased with our Q4 results and continued momentum in the firm’s evolution. At RGP, we dare to work differently, leveraging a unique model that combines on demand talent with expert consulting and advisory services to drive transformation from strategy through execution. I’ll open today’s call by sharing some insights from our recent research on CFO perspectives, risk, growth, and the future of finance.

This work is important as it demonstrates how RGP’s services and solutions are aligned to the key priorities of our primary buyers, CFOs, and provides context around what we are doing to capture more of this expanding opportunity. Our research included insights from approximately 200 CFOs and senior financial decision makers at businesses with over $500,000,000 in annual revenue to help us better understand the top priorities in the finance function. These priorities include strategic growth and resilience, operational efficiency and cost discipline, technology and AI adoption, evolving the CFO leadership role, data governance and analytics, and finally, allocation and investment strategy. Across companies and industries, CFOs we surveyed showed cautious optimism, anticipating positive performance in their businesses despite ongoing macroeconomic uncertainty. They report that with improving trends, strategic investments will accelerate as increasing competitive pressures drive digital transformation and automation.

In the short term, to mitigate risks from tariffs, geopolitical tensions, and trade disruptions, CFOs are actively reshaping supply chains and revisiting vendor relationships. They also remain focused on reducing costs without jeopardizing growth by cutting discretionary spending versus investment in strategic priorities. While there’s a clear and growing enthusiasm for AI, execution barriers remain, particularly in data readiness and workforce capability. As a result, CFOs are prioritizing technology modernization, automating workflows, and embedding AI and digital tools into financial operations. The role of the CFO has expanded beyond financial stewardship to enterprise leadership, with 70% saying they have increased influence on strategic and technology decisions.

CFOs now work more collaboratively with CIOs and CHROs on people strategy, digital initiatives, and transformation. Beyond just the numbers, they are focusing on data quality, analytics, and oversight, requiring investment in integrated data systems and governance frameworks to support responsible decision making and AI deployment. In summary, our research, which can be found on our website, illustrates a rapidly evolving landscape for CFOs, characterized by a shift from back office efficiency to enterprise level strategic influence, a delicate balance between growth initiatives and operational rigor, and a growing role as technology champions driving company wide uptake of data, AI, and broader digital transformation. What we’re seeing in the market and what we’re hearing in our CFO research dovetails precisely with RGP’s strategy. As we continue to transform building a flexible and high impact diversified delivery model, we are focused on further refining and growing the core capabilities of CFO advisory and digital transformation.

We bring a rich heritage of serving the Office of the CFO with a deep bench of experts. We deeply understand the function and how it needs to transform for today and tomorrow. We are evolving our talent across on demand and consulting to provide the skills needed around finance optimization, process redesign, technology migration, data modernization, and AI readiness. And we embed human centered design in our CFO consulting work so that employee engagement improves and it’s easier for organizations to adapt to new ways of working. Whether it’s ERP migration or strategic sourcing, we are known for speed of service, functional depth and expertise, and lean project teams that drive impact.

Looking ahead, we’re also cautiously optimistic on the professional services marketplace in North America, currently our largest source of revenue. The US consulting services market is rebounding, bolstered by rising demand for digital transformation. Impact driven engagements, which are RGP specialty, are becoming mainstream with clients focused on agile teams that can collaborate together with their own people. We expect accelerating growth in the professional staffing landscape in the second half of the fiscal year, as potentially inflation stabilizes and we see lower interest rates. Professional staffing will benefit when greater confidence returns to the labor market and talent begins to move.

We are optimistic in improving operating leverage by integrating AI technologies to source, screen, and engage candidates, boosting efficiency and enabling human recruiters to focus on higher value tasks. We also see strong interest from our clients in skills first hiring. A recent blog post from Staffing Industry Trends noted that 76% of companies are embracing contingent labor and flexible pay models to remain competitive and to access skill sets that they could not afford to hire full time. In sum, despite near term uncertainty, strong interest remains in corporate transformation and modernization initiatives, which we expect will drive growth for RGP in the next twelve months and beyond. We remain confident that agile firms like ours, which can deliver with fast, efficient, and innovative ways of working, will benefit the most.

Against this backdrop, we continue to make progress on our own transformation in Q4. We achieved revenue and gross margin above the high end of our outlook and had improved pricing in our key markets even in this disruptive macro environment. We achieved the same strong gross margin above 40% as the prior year quarter and improved enterprise run rate SG and A despite the extra week of cost in the fiscal quarter. Our average bill rate improved by four percent year over year. Our diversified services model is allowing us to win work in the most relevant categories for the CFO in the ways the CFO wants to engage.

From a solutions perspective in the on demand segment, digital and technology and supply chain grew nicely in the quarter. Within consulting, digital transformation work grew both sequentially and year over year, again aligned directly with the CFO agenda we are focused on serving. Europe and Asia grew in Q4 to the highest revenue level of the now completed fiscal year. Bill rates improved quarter over quarter in the Europe and Asia Pac segment by 7%. Europe was a bright spot in Q4 with quarter over quarter constant currency growth of 8%.

Most of the momentum in Europe came from The UK, our largest market in the region. We also improved revenue stability in Europe, driven by stickiness and project extensions, which grew to 40% of revenue. Our client retention in Europe remains high at 90% year over year. Asia Pac improved results as well despite significant disruption in China related to tariffs and supply chain migration. Asia Pac revenue growth was 3% sequentially, driven primarily by Japan.

In our outsourced services segment, county continued to grow sequentially in Q4 and year over year through client wins in the startup scale up and divestiture space. Beyond venture capital, Gantsey is actively working to build channels and traditional middle market private equity as a solution for divested assets needing stand up finance and accounting functions quickly and efficiently. Ganti is also introducing more AI tools on the platform to accelerate client acquisition and service capacity with better cost leverage. As you’ll hear from Badrash, pipeline creation has grown in all regions with a higher volume of larger value deals. While these deals have a longer sales cycle, we believe the trade off is worth it as they will position us well over the longer term, providing greater certainty around future revenues and growth.

We’re evolving to do more for our clients across on demand consulting and outsourced services, and we’re getting deeper in our client base. We’re pleased by our progress and opportunity pursuits, especially given the current macro environment is still difficult as it relates to the timing of project starts. In closing, I’m also very pleased to welcome two new board members to RGP. Jeff Fox is the CEO and founding partner of Circumference Group, a strategic investment firm and long term RGP shareholder. He is a former board member of Avis Budget Group and Convergys.

Jeff brings critical investor insight and a shareholder focused lens to the board. His expertise in improving profitability and unlocking shareholder value supports RGP’s focus on disciplined capital deployment, sustainable growth, and enhancing ROIC. His appointment strengthens alignment between the board and long term investors. Philippe today is the former president and CEO of Computer Task Group, where he led a strategic shift from staffing to digital consulting. He brings thirty plus years in global IT services with extensive European leadership.

Philippe’s track record in transforming a traditional staffing firm into a modern digital solutions provider directly supports RGP’s strategic evolution. His deep understanding of IT and digital services will help guide the firm’s ongoing pivot toward high value consulting and technology enabled offerings that are increasingly relevant to the CFO’s agenda. His global leadership experience also reinforces RGP’s growth ambitions in international markets and cross border delivery models. The appointments of Jeff and Philippe are well aligned with RGP’s strategic priorities, which include evolving from a staffing centric model to becoming a value added consulting and digital solutions firm, enhancing shareholder value through disciplined operations and capital allocation strategies, scaling technology transformation and digital capabilities, and expanding our global presence while enhancing international client delivery. I’ll now turn the call over to Pradrash for an update on operations.

Pradrash, Operations Executive, RGP: Thank you, Kate, and good afternoon, everyone. As we close out the fiscal year, I want to recognize the leadership and commitment of our RGB team. Their efforts have been instrumental in navigating a dynamic and rapidly evolving market, enabling us to sharpen our value proposition and enhance our relevance in today’s changing professional services landscape. As a reminder, RGP operates at the intersection of professional staffing, consulting, and outsourced services. Our integrated model breaks away from the rigid structures of traditional firms, offering a more flexible client centric experience across both transformation and operational needs.

In q four, we delivered results ahead of expectations in both revenue and gross margin driven by disciplined pricing. Together with our continued focus on cost efficiency, we delivered improved bottom line performance. Following a holiday impact of q three, pipeline creation rebounded in q four across several core offerings. However, total pipeline contracted during fourth quarter as we sharpened our focus on funnel discipline and enhanced efforts around opportunity qualification and conversion. Encouragingly, Europe also closed more net new business balanced with higher extension rates than previous quarter, reflecting continued strength in attracting new clients and retaining existing business.

Now I’ll provide an update on our quarterly performance by segment. Our consulting segment revenue was overall down compared to same quarter last year. However, we’re encouraged by several leading indicators that validate our strategy and execution. Bill rates rose meaningfully year over year, reflecting sustained demand for specialized solutions and our continued focus in value based pricing. Offerings in digital transformation, supply chain, project management, and change management all grew in fiscal twenty five compared to prior year, signaling increased client prioritization of modernization initiatives.

It’s worth noting that recent changes in federal policy landscape had only a modest impact on our results as federal government work represents just 1.6% of total revenue. Most importantly, we secured multiple new opportunities exceeding $1,000,000 and expanded the number of $1,000,000 plus projects in our pipeline relative to same quarter last year. We’re also seeing growing momentum in larger opportunities, each exceeding $5,000,000 driven by the strength of our integrated transformation capabilities, which naturally take longer to close. Notable wins this quarter include finance and tax acquisition integration PMO work streams for a large integrated health system, technology migration for a regional health care insurance provider, supply chain category management initiative for a Fortune 500 financial technology company. In addition, we expanded our footprint with new and enhanced preferred supplier relationships with several Fortune 100 clients.

These achievements underscore our increasing relevance in complex high impact transformation initiatives across industries. Our pipeline is showing steady progress across both public and private sectors, including US and international government agencies. In addition, we’re actively pursuing a global digital modernization initiative with a Fortune 100 financial services firm, AI driven r and d modeling for a Fortune one fifty biopharmaceutical company, and an ARP implementation for a leading education technology provider. Many of these new wins and pipeline additions are with existing clients who’ve historically supported through our on demand talent solutions, highlighting our ability to now engage in deeper, more strategic transformational initiatives. This marks a clear step change from a year ago made possible by the deep relationships we’ve built with clients leveraging on demand talent, enabling a more strategic and engaged level of partnership than we’ve had previously.

Today, our strategy is successfully elevating RGP’s role within our clients’ value chain. Increasingly, clients are turning to us for end to end support across domain, functional, and technology transformation, tapping into our global delivery centers in India and Philippines to scale efficiently. One last note in consulting. As we continue to deepen our focus on CFO advisory and digital transformation, I’d like to welcome Brett Wells, our new ERP practice leader. He brings deep experience from companies such as Accenture, Infosys, and IBM with a strong track record of building and scaling global ERP practices and driving multimillion dollar growth through strategic innovation and outcome focused transformation.

Turning to on demand. While fourth quarter revenue declined year over year, we’re seeing signs of stabilization and early momentum driven by improved scale motions. Alongside stabilized volume, average bill rates also improved compared to same quarter last year. Clients are increasingly valuing the flexibility and specialized expertise of our on demand talent model, particularly in areas like accounting and financial reporting as they continue to manage leaner teams and tighter budgets. Pipeline creation in Q4 returned to first half level signaling renewed client engagement.

At the same time, increased funnel movement, both wins and losses and heightened client caution contributed to a modest sequential decline in total pipeline compared to previous quarter. Building on this momentum, we’ve increased engagements across our go to market teams with a focused effort on pipeline generation and early stage opportunity development. Extension management remains a top priority across our revenue and talent team with a focus on maximizing billable utilization and deepening client continuity. Moving on to international. Our Europe and APAC segment delivered top line revenue growth both year over year and sequentially, driven by strong performance in UK, Netherlands and Japan, along with increases in average bill rates across most markets in Europe and APAC.

While our China business continues to face macroeconomic headwinds, the broader region’s overall performance reflects the strength of our execution. We’re expanding cross sell opportunities by focusing on large global clients, particularly in ERP and data and reinforcing disciplined extension management. Our ability to deliver local talent while scaling teams for our global delivery centers remains a powerful differentiator. Turning to our outsourced services segment, we delivered revenue growth both year over year and sequentially supported by new engagements with AI startup spin outs and scale ups. This reflects our ability to meet the needs of fast growing clients seeking flexible, scalable solutions.

In summary, while macroeconomic uncertainty and regional challenges persist, we remain focused on executing our strategy and delivering meaningful value to our clients. Our diversified portfolio, strong client relationships, and consistent execution position us well for continued recovery and growth. Heading into fiscal year twenty twenty six, we are operationally prioritizing pipeline generation and conversion, expanding strategic accounts and optimizing delivery to sustain our momentum. With that, I’ll now turn the call over to Jen.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Thank you, Poudresh, and good afternoon, everyone. In the fourth quarter, we delivered strong performance against our expectations. Revenue of $139,300,000 and gross margin of 40.2 were both well above the high end of our outlook range, while run rate SG and A expense was within the range. We delivered adjusted EBITDA of $9,800,000 or a 7.1% adjusted EBITDA margin, which is our strongest quarterly performance in fiscal twenty five. We’re encouraged to see continued recovery in our Europe and Asia Pac segment with a 5% sequential growth over the third quarter on a same day constant currency basis.

Our outsourced services segment continued to demonstrate the strength of its execution and business model with a 4% growth year over year and a 3.5% sequential growth over q three, both on a same day basis. Relatively, the on demand and consulting segments, which are both predominantly US based, continue to be soft given the uncertain macro environment as domestic economic policies continue to evolve. With that said, despite the uncertainty, as a result of our focus on sales execution, the on demand segment demonstrated more stability in q four with moderating year over year decline compared to previous fiscal quarters. We achieved strong gross margin for the quarter at 40.2, better than the high end of our outlook range. We’re pleased that pay bill ratio continued to strengthen throughout fiscal twenty five due to improvement in the enterprise average bill rate for the last three consecutive quarters.

Enterprise wide average bill rate increased to a 125 constant currency from 01/20 a year ago, led by our consulting segment with a 13% increase. Average bill rate in the Europe and Asia Pac segment increased by 7% on a constant currency basis over both the prior year and sequential quarter. In our on demand segment, average bill rate also increased both year over year and sequentially. These improvements reflect the impact of our disciplined value based pricing strategy, our continued shift toward in demand consulting skill sets, and a favorable mix shift toward higher value, larger scale engagements. As we strive to drive higher bill rates in all business segments and across all geographic regions, revenue mix will continue to be reflected in our total company especially as we increasingly leverage our global delivery center for offshore delivery team.

Importantly, while the use of offshore teams will typically blend down the average bill rate, it will allow us to enhance gross margin and overall profitability while also helping us compete more effectively. Now on to SG and A expense. Our enterprise run rate SG and A expense for the quarter was $46,200,000, an improvement from 46,500,000.0 a year ago, especially after giving effect to a fourteen week quarter in the current fiscal year. The improvement in SG and A was primarily driven by lower management compensation expense. We will continue to pull the cost levers within our control to improve operating leverage.

Next, I’ll provide some additional color on segment performance. All year over year percentage comparisons for revenue are adjusted for business days and currency impact. And as a reminder, segment adjusted EBITDA excludes certain share corporate costs. Revenue for our consulting segment was $51,000,000, a decline of 14% from prior year. Fourth quarter segment adjusted EBITDA was $8,300,000 or a 16% margin compared to 10,200,000.0 or an 18% margin in the prior year quarter.

Revenue for our on demand segment was $53,000,000, a decline of 16% versus prior year. Segment adjusted EBITDA was $6,400,000 or a margin of 12% compared to $7,100,000, also a 12% margin in the prior year quarter. Turning to our Europe and Asia Pac segment, revenue was $21,300,000 flat to the prior year quarter. Segment adjusted EBITDA was $1,900,000 or a 9% margin, both up from half a million dollars and a 3% margin in the prior year. Finally, our outsourced services segment revenue is $11,300,000, up 4% compared to the prior year.

Segment adjusted EBITDA was $3,100,000 or a 28% margin, up from $2,700,000 or 27% margin. I also want to note, we recorded a non cash goodwill impairment charge of $69,000,000 in our consulting segment during the fourth quarter in response to business performance and the reduction in our market capitalization. Turning to liquidity. Our balance sheet remains pristine with $86,000,000 of cash and cash equivalents and zero outstanding debt. We distributed $4,600,000 worth of dividends in the quarter.

With cash on hand, combined with available borrowing capacity under our credit facility, we will continue to take a balanced approach to capital allocation between investing in the business to drive growth and returning cash to shareholders through dividends and opportunistic share buybacks under our share repurchase program, which had $79,000,000 remaining at the end of the quarter. I’ll now close with our first quarter outlook. As I mentioned earlier, the macro conditions remain choppy, especially in The US given ongoing policy uncertainty. While we’re pleased to see improving quality in the pipeline with larger deal opportunities, the sales cycle remains elongated. The exact timing for a more normalized cycle remains unpredictable.

In the meantime, as Badrush mentioned, we will continue to focus on pipeline generation to drive additional project wins. Early first quarter weekly revenue run rate has shown the typical summary impact as consultants take holidays. Also, are seeing some additional softness compared to the fourth quarter as a result of delayed project starts, both of which will impact the run rate for the remainder of the quarter. Taking all this into account, our outlook calls for revenue a 115 to a $120,000,000. On the gross margin front, we expect the typical summer impact to affect utilization of our consultants.

And as such, we estimate gross margin to be in the range of 36% to 37%, which is in line with the prior year’s first quarter. First quarter run rate SG and A expense is expected to be in the range of 46,000,000 to $48,000,000 Non run rate and non cash expenses will be around 3,000,000 to $4,000,000 consisting mostly of non cash stock compensation and ERP amortization expense. In closing, in the current operating environment, we continue to be laser focused on improving our execution even further to drive long term value creation. As better economic clarity emerges for our customers and new business prospects, we will be well positioned for a return to growth accompanied by stronger profitability. That concludes our prepared remarks, and we will now open the call for Q and A.

Conference Operator: Thank you. Our first question comes from Joe Gomes with NOBLE Capital. You may proceed.

Joe Gomes, Analyst, NOBLE Capital: Good afternoon. Congrats on the quarter.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Thanks, Joe. Thanks, Joe.

Joe Gomes, Analyst, NOBLE Capital: So nice on the gross margin beat. Just wondering if you could give us even a little bit more color on what was driving versus where you originally had expected it to be?

Kate Duchene, CEO, RGP (Resources Connection Inc.): Hi, Joe. This is Jen. Yes. So we are very pleased that we beat our gross margin pretty well above our gross margin guidance. The main driving factor is improvement in our average bill rate.

As you know, we’ve been working on our pricing strategy for some time now. This quarter in particular, as we continue to win, as I said, larger and more complex deals, higher value deals, we were able to command higher bill rates. So if you were to take a look at all of the new projects that started in Q4 compared to existing projects going in, we are seeing a double digit increase in our average bill rate. So that’s what’s driving the favorability in our gross margin compared to the guide. And Joe, let me just add, it’s Kate.

I really want to thank our management team because they’re really stepping up to have very careful conversations with our clients about the caliber and quality of our people and why we’re worth it. And when you think about our model versus some of the more traditional partnership models where we bring experience, really experts to execute, they create faster impact. And it’s really helping our clients understand that. And while the rates may be a little higher, the outcomes they’ll achieve are stronger. And let me just add one more thing, Joe.

So from an indirect cost standpoint, we did also experience more favorable medical claims this quarter too. So that’s, you know, that’s sitting on top of the the favorable trend that we’re seeing in average bill rates. So that’s that’s also another contributing factor.

Joe Gomes, Analyst, NOBLE Capital: Okay. Thanks for that. I know one of the goals you guys have out there is for the cross selling. And I’m just wondering maybe you could talk a little bit more of how that is going. Are you are you really seeing, you know, any significant cross selling benefits?

And are they are they starting to generate even more? Any more color you can drive on that would be great.

Pradrash, Operations Executive, RGP: Hi, Vincent. Thanks for that. I’m sorry. Yes. You know, the sort of the responses that we are seeing a good uplift in our existing clients where we’ve traditionally been serving them with on demand talent, where we’re able to bring in our deeper capabilities in consulting and able to cross sell there.

And, you know, that’s that’s even for our future. That’s our upside. Right? Because we have so many existing clients that we’ve been. So we have to do more cross sell into these clients, and we’re gonna continue pushing that as we, you know, move forward over the quarters.

Joe Gomes, Analyst, NOBLE Capital: Great. And and one more, if I may. Jen, correct me if I didn’t hear you. The guide for revenue for the first quarter is 115,000,000 to 120,000,000

Kate Duchene, CEO, RGP (Resources Connection Inc.): Yes, that is correct. And Joe, had this in my prepared remarks. We as you know, Q1 typically is slower than Q4 because of summer. So we are experiencing typical summer impacts, but it was also driving the revenue run rate. It’s also the fact that we’ve had a few large deals, very specific deals that were delayed in terms of project start decision with some of the a few of them we thought that we were going to get the decision in second half of Q4 that we won the project and got to the final decision just about a week ago.

And so that is pushing out the revenue into Q2. So that’s another factor that’s impacting Q1’s revenue guide.

Joe Gomes, Analyst, NOBLE Capital: Okay. And then also, in your release, you talked about some involuntary attrition on the sales team. What kind of impact, if you can kind of quantify somewhat, is that having, if any, on your outlook for Q1?

Pradrash, Operations Executive, RGP: Hey, Joe. This is Badrash. We have been ramping up new salespeople into our organization, especially with the archetype of the evolving market. So there’s a little bit of impact there as they’re ramping up, but, you know, all of them are ramping up really well against our targets and goals. So there’s some impact there, but I think we are starting to see more traction as we continue to move forward with the new people we brought on board as well.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Yes. Joe, I would say the sales attrition, that disruption impacted our Q4. But going into Q1, I would say, as Badrash said, we are definitely stabilizing to a certain extent. We are still ramping up some new sales team members. But I would say the Q1 to Q4 comparison, the trend isn’t because of the sales attrition.

Joe Gomes, Analyst, NOBLE Capital: Okay, great. Thanks. I’ll get back in queue.

Conference Operator: Thank you. Our next question comes from Mark Marcon with Baird. You may proceed.

Mark Marcon, Analyst, Baird: Good afternoon. I was wondering if you could give a little bit more color with regards to what the expected trends would be both on the consulting as well as the on demand talent. Because it sounds like Europe and Asia are relatively stable and doing well. So when I take a look at the overall guide, I’m trying to see what that implies for on demand as well as consulting.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Yes. Hi, Mark. You’re exactly right. Europe and Asia Pac, we are expecting stability with normal summer impact. The softness is really sitting in The U.

S. And on demand and consulting. On demand, I expect that it’s going to be it’s still going to maintain the stability that we’ve seen in Q4. The consulting side is impacted more, and this goes back to the project delays that I referred to. But I think overall, I would say that in the on demand business, are seeing stability in Q4, and we expect that stability to continue into Q1.

Yes. Hi, Mark, it’s Kate. I think just to be really, really clear, on demand just gets hit because people take vacation. And they generally negotiate that with clients directly. So we don’t have clarity about when that’s happening.

I think the second thing, the two largest deals in our pipe, as Jen said that we thought would close late April, we did win those. So I want to be clear. We successfully closed one those, but they’re not starting until Q2. And we had those in the pipe sooner. And so we’re reflecting that in the guidance.

Mark Marcon, Analyst, Baird: Got it. And then just to be clear, with regards to on demand and that being stable, does that mean stable with the constant currency same business day trend that we ended up seeing during the last quarter?

Kate Duchene, CEO, RGP (Resources Connection Inc.): Yes, that’s correct.

Mark Marcon, Analyst, Baird: Great. And then can you address you talked a little bit about the pipeline. Can you talk a little bit more about if I heard you correctly, and I’m not sure if I did, so forgive me if I didn’t, but did you say the pipeline shrank a little bit? And I’m just wondering what drove the shrinkage in that, if that’s correct? And then what are the efforts to kind of rebuild the pipeline?

And when do you see the sales cycle actually the the closings actually and the project starts reaccelerating?

Pradrash, Operations Executive, RGP: Of course. I think the biggest thing to kinda break the pipeline down, I think we should look at it. Where we’re hyper focused right now is pipeline creation, which, you know, with one back to first half levels where we’re highly focused on putting more into the pipeline. In the same vein, what we’re seeing is, you know, between, you know, closed won and closed lock opportunities as we’re doing better federal management. That’s where we’re seeing the pipeline kind of, you know, decreasing as win and lose work.

But, you know, our focus is highly on pipeline generation, getting into the right areas, cross selling into our accounts, and building the pipeline. I think the second piece of this also is that, you know, we’ve seen a little bit more of a trend, especially in on demand, where deals get into our pipeline, and then clients are actually either stopping the need or using their own resources to staff the need. So we’ll see more of what we call abandoned deals into our pipeline than we have, you know, sequential quarter. And the third piece of this is, you know, in the consulting side, you know, we continue to add larger deals as we’re moving up the value chain for our clients. But, you know, some of the discretionary, you know, as the clients look at it going, is it strategic to the organization or is it discretionary?

They’re putting some of these initiatives on hold. So, you know, we’re kind of, you know, putting those out of our pipeline as well. So none of it is, you know, we’re hyper focused on pipeline generation and creation, hyper focused on funnel management, right, and and being having the discipline that we need so we can continue, you know, scaling our pipeline and making sure we’re bringing the right type of deals into the pipeline.

Mark Marcon, Analyst, Baird: That’s great. Thank you.

Conference Operator: Thank you. Our next question comes from Andrew Steinerman with JPMorgan. You may proceed.

Judson Lembley, Analyst, JPMorgan: Hi, this is Judson Lembley on for Andrew Steinerman. I was just wondering if you guys could maybe help us bridge from your dollar revenue guidance for 1Q to an organic constant currency growth rate, maybe provide the components for M and A impact, FX and days adjustment.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Hi, Justin. So our revenue guide at the top end of the guidance at 120,000,000 is a 14% decline from q one of last year on a same day basis. Currency impact is not significant, and it is it is mostly organic because we acquired we closed the ReferencePoint acquisition last year at the July.

Mark Marcon, Analyst, Baird: Okay. Great.

Kate Duchene, CEO, RGP (Resources Connection Inc.): Thank so apples to apples comparison. Yes.

Judson Lembley, Analyst, JPMorgan: Okay. Great. Great. And then I guess sort of a similar question for the current quarter. Could you just maybe help me confirm what the reference point impact was and if there was any impact from FX?

Kate Duchene, CEO, RGP (Resources Connection Inc.): Yes. Q4, right? You’re talking about Q4 to last year’s Q4. Same day constant currency comparisons is down 11%.

Judson Lembley, Analyst, JPMorgan: Great. Thank you so much.

Conference Operator: Thank you. I would now like to turn the call back over to Kate Duchene for any closing remarks.

Kate Duchene, CEO, RGP (Resources Connection Inc.): I just want to thank everyone for joining us. We look forward to talking to you at the end of Q1 and enjoy a productive and healthy summer. Thank you.

Conference Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.