Resources Connection (RGP) 3 Jan 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. conference call. [Operator Instructions].

As a reminder, this conference call is being recorded. At this time, I would like to remind everyone that management will be commenting on results for the second quarter ended November 25, 2023. the to these financial comparable measures measures included refer and an GAAP also today. are of issued reconciliation to in will certain measures non-GAAP explanation financial They release press the most Today's press the section the RGP's of with viewed and today Investor filed Relations website SEC. can release be in strategies this financial performance anticipated call, forward-looking Also the may during statements regarding and make management plans, initiatives and company. actual events or may Such are predictions and statements differ results materially. Form other call. XX-K section XX, company's Factors see by may and on to materially statements operations ended discussion RGP's Please financial during cause of the in May applied differ for forward-looking made report from XXXX of Risk year risks, factors the a is for what results or this condition uncertainties business, and that expressed I'll call the Kate to CEO, RGP's now turn Duchene. over

Happy Thank to solid we Year. New Thank you, you across QX, macro performance that afternoon the a Good for In uncertain. delivered us sluggish despite and environment operator. today. and joining all be enterprise continues

This by our have engagement green we continued Again, respect tenacity. with quarter well shown and characterized can the strong. finished client retention, extensions be pipeline shoots and and quarter to

cash fiscal cost exceeded On year. on strong this environment. SG&A adjusted flow remain new and quarter, we the last has shared to as to the initiation expectations stronger our well deliver we materialize in performed EBITDA, we this As therefore, calendar year. slower guidance our while opportunities range we've also continue continuing been to pushed in revenue, disciplined have project new and On half to of

balance Our pristine. sheet remains

transformation and sustained growth, revenue capabilities. appetite earning delivered for Veracity from QX, During the new sequential services digital business

ServiceNow between and Asia positive through we to Veracity's talent Northern We're see company Cloud synergies presence partner. beginning this exceptional are across acquisition Cloud Pac elite market, of adds quarter, which year excited about the North the Veracity I transformation last around interest digital clients also expanded rest had with and The of cautious sector until tech ] new firm this mentioned about California of already environment clarity the digital showing more a performance and to there We acquisition, region [ spend Go, a also sequentially. our after the is operating economic Go. decline. the in remaining Regional and America reflected rates And movement choppy overall in again greater direction. grew than

practices delivered for all Our as Mexico, sequentially we projects grew and Switzerland major India, clients. strategic Philippines year-over-year and both large

the X.X% in rate well increase year-over-year. a bill U.S. progressing Our is with pricing in initiative

from in As Jen Europe showed you'll hear more even in improvement a moment, pricing. stronger

In Turning to throughout engagements. steady for transformation that XXXX through and metrics. pipeline technology And one more We're were moved extension transaction in opportunities converted support pleased engaged pipe demand planning QX quarter into pent-up remains and pipeline closed operational the clients as post December, to the forefront. quarter. around the in grew the in our Europe, discussions

move and Our which show from planning get new we're more in all large indicator that the projects centers. as a Across uptick activity underway Philippines, our are clients to Pacific is in increasingly positive clients engaging strength offshore year. meetings, demand particularly client service global calendar to India and they an business, Asia in-person business to global the experiencing continue geographies, for

especially support beyond. seeing to in technology capture and we're consistent digital rising professional we cloud well Given and and the areas services, market XXXX transformation we positioned are believe demand for share in which

we closed related last to mentioned optimization. and implementations cloud quarter, more business ERP As

RGP the of RGP. another and the practice, unlock type standardization. business care, us and for XXXX. are term technology governance client and in services base. longer strength the is which built AI Our set, companies get we our can see we've This for optimization and A+ to rising area and reimbursement financial that cautious improve In shines large and regulatory These pipeline into deliver process is our support market optimism an demand large for health of revenue prepare provider significant claims data for value. with heavy opportunities capture remediation, our client will revenue and In and with which middle opportunity of exactly significant creates implement offering cycle allow deeper implementation to at conversion improved of value work to

billion understand how companies our we $X need. QX, prepare help completed the to up capabilities research for at revenue leaders additional us next. client with on around to line to what's During X,XXX-plus decision-making from what's in least pulled and We agenda that

as that initiatives transformation skill $XX priority They average a an disrupted in large transformation initiatives of found report alone. world. are ever become complicated an on finding this has are million-plus year right organizations sets critical more transformation taking also initiatives for more the We

internal included organizations need. in This Group XX% sets XX talent of Employment which Manpower planned matches in bigger uncovered company the strategy enables to the of outsiders realize that by they increasingly advantages that survey, in prevalent business DNA. model Survey XX they're overload talent XX,XXX-plus In staff building becoming research had internal core of an across workforce respondents to as refer transformation initiatives. hybrid their a approach with December. that only this they dynamic workforce to even transformation more the we with workforce being model, struggling uncovered and all by countries is skill further blends it accelerated pool research to into that their is constant as today. research employers We enough Outlook our dynamic reported reported competitive Adoption the Our skilled believe X reported find

strategy Thus, and business on research we highly talent grew in to once leaders difficulty all seeing global that of talent reach work highly the skilled status. and and These model, more the transformation our of have for effectively side talent adjust proportion encouraged. choosing transformation HR talent on Connecting are is is pursue ranging professional of CEOs FTE calendar XX% to we're recognize The wide-ranging C-suite embracing critical missed XX% power our Expert and of or more to goals year. initiatives, impacts The accordingly. outside ships. collaborate and skills actively based teams equation passions the XXXX to from to in hybrid way. talent with project expected is change. their CFOs pandemic shortages proved this delays equally can regardless these this achieving on talent a operational models, more independent in research, leaders location

models. the our recent In in rates fact, retention those traditional even now increase partnership years, consistently exceeding seen reported we've by

business transparency who offer a consultants serve our key client a client and their first differentiator. feel the we more to services we agile for when and is engaged These professional attributes ago The engagements, that is time spun the launched In and also XX-plus projects empowered, when success. Experts choose experience short, client's control we committed differentiated good. our choice, to create Deloitte. we off the of years have may ahead model been from

emboldened are built see and We and today's embrace like we to to now that perfected. are what clients talent eager have and

transformation. expanding First, and the fiscal the continue of for diversification consulting focus path, will three the Our year technology we execution services, is on strategies: in especially our of rest digital

XXXX methodologies it to us globally. our of clients, acquired added been strategic and trust and We Veracity As talent. in the combination. the expansion more a we this deliver as We asked Cloud they assessments, earned of expert advice, strategy, successful most have strategy have Go start with tools, recently has to continue including this

pools the Agile with scale also talent to be we'll win and targeted faster continue to by our arbitrage. talent services excellence of world clients We rates such used These blended consulting can match our transformation enhance global Expert our build the blended consulting excited intellectual teams. grow have enterprise. service will financial teams of India talent in-demand hubs; We'll We're enhanced even push will Finally, our established clients. our that improve improve our to our quickly software good to built technology execute the to and global will growing assemble transformation We've delivery initiative operational around and this will Second, technology we centers business; can talent year to rates Manila continue be and in progress two offering efficiency launch of to performance and assets that this and we as our our demand initiative strategies and wave soon greater first forward drive benefiting one function. global made supply in these

business Jen with opportunity working best improve and our aggressively retaining operations will is when grip. consultants every standing not deliver with technology At and In we improving business value. share still, long-term to environment conditions capitalize creativity connectivity. sum, global remarks. The more improved to are detail process, in and from the far time, organization close easy, quickly are same and hard the and we're her optimizing our streamlined we to macro throughout

I'll to the turn have We call needs today. what now over Jen. business

Thank you, good afternoon, Kate, and everyone.

quarter, million revenue, outlook range upper achieved the provided half This of in we our which $XXX.X in was October. of

the of $XX an with cautious the adjusted the of by million million America, such still spending macro million clients to X.X% to certain same-day in our environment. recovery were conditions. compared was of Our run we $XX better constant $XX.X On end XX% significantly delivered our than cash of beginning Regional months. basis, revenue Veracity and the EBITDA and the outlook major Northern rate continue favorable fiscal of California, by to run as the Notwithstanding SG&A although solid reflective SG&A the uncertain of of million. $XX.X environment. of rate signs Atlanta the Many environment, year-over-year produced was uncertain broader $XX the in year. macro last million face pockets XX of declined have be performance economic of EBITDA show markets adjusted currency free pace margin In as or a North affected overall started to have flow

our strategic the as quarter, quarter opportunities growth extensions prior sequentially, better Pacific modest healthy. remains Philippines converting relatively while resilient project and slow, of new Asia existing primarily and engagements Europe a constant the with attributable to Switzerland, regions remained performed actual as opportunities the Operationally, on as same-day engagement declines basis. well our currency XX% large such the X% pipeline in and the Our clients. of during velocity grew have year-over-year to more year Markets over India with pipeline been on

and represent Gross matter for it's fact, upside clients the macro that quarter XX.X%, the if initiatives. which carry our These Our will conditions costs. impact not adverse point heavier quarter from of higher compared North Asia typically pay also health care in the business in spike XX America. Gross the Europe mix bill a demand, basis to suggests when, second improve. exists, forward business a margin of ratio a Pacific, execution their in solid as and of move margin reflecting with reflected in real pipeline opportunities was in

As indicative the do claims to this of in self-insured we a general, the program, a future. of not number know time. trend of from foreseeable quarter But believe is medical time sponsor spike we medical health the our care costs can in

on the fiscal pressure X% compared in pricing Next, U.S. constant Average a I rate on want basis We're from of on a in seeing quarter rates the second current backdrop, fill against X% currency provide and to XXXX, initiative. regions bill than up QX. to this also average basis. improved both Europe sequential competitive update our our an rose even more more pricing environment, was

$XXX Strategic rate $X.XX However, 'XX constant mix will from bill regions with and pay due revenue beyond. a average and while pay the emphasis year to continued rates rest for of lower rate was down the enterprise ago. from pricing the average $XX, of $XX ago, bill a point to and year the be was for currency, a fiscal down expansion shift quarter in

Turning to SG&A.

the was rate SG&A range. quarter million, I expense than run as $XX.X our which, Our significantly better for was outlook noted,

aligning financial expense with the performance this year. overall compensation was favorable fiscal Variable quarter, second company's in the

tax reduction quarter $X.X associated addition, and was the the million, at in the of Effective $X stock savings annual costs option effort XX%, $XX $XX the we million to with In amount costs contributed the on basis. tax of expect we start quarter. this SG&A Restructuring second capitalization approximately force million expirations executed of largely of to was in an purposes. for outsized a this quarter and million of rate acquisition savings go-forward attributable

at closed robust per organically million the environment. We're and $XX.XX of firm digital of flow ServiceNow during quarter a our dividends to cash average the distributed our available Turning repurchase the XX, acquisition $X in price both partner digital share, stock million Pacific generate a our share We to Asia to to end. an inorganically, and in at continue repurchased stated million ability quarter region. November program of Pursuant leaving liquidity. the proud despite we transformation of business, macro weighted on $X.X expand worth common $XX consulting to strategy free of and elite our CloudGo,

remaining play clients globally. determined quarter, earn-out metrics areas target including and to strategy of $XXX continuing second CloudGo's million combination most a cash period. return to technology performance by transformation $X.X in our and strategic growth continuing allocation with will capabilities not quarter and disciplined while will the of X shares. completing opportunistically consideration the role and paid to be better us a fiscal repurchasing of with regional plan. position investing of set a in and will support our to ended while available million of performance of growth focused of financial be pursue positioning total the X-year our capital together end second will debt, outstanding Veracity, accelerate cash through up quarter our $XX our $XX.X long-term the liquidity or M&A dividends CloudGo contribute Initial significant business, on was revenue by key million EBITDA and at to the project to consideration against during a impactful cash over results. this profitability with quarter We the did equivalents million to cash shareholders CloudGo's

provide project. update technology Now an our let me on transformation

the decision-making, in the platforms with million of and third new have management only better followed as new $X.X third North in for more million $X.X live which now was year. We and by go-live later our quarter, remaining in visibility the go processes for during systems costs tremendous and calendar capitalized planned will business expense. and operating plan The talent much progress employees. not non-run also quarter, clients, to America the We data management our for of provide with close financial a $X.X rate favorable fiscal with enhance set our consultants they a systems incurred made our outlook. implementation of improve contract will included I'll the of million quarter experience efficiency

been revenue last that has certainly the are weekly we stable has year, a it encouraged weeks. our been challenging XX While over

the to in of revenue at XX.X%, to typical QX $XXX holidays, expect revenue gross giving the we We and the during taxes the new the holiday of sluggish opportunity million. impact Gross of including in QX third margin compressed the from the to current of to close calendar range a of seasonality well employer We the including to to QX revenue $XXX After and in with pace in as estimate effect margin the from conversion project will revenue CloudGo, in remain Asia proportion million mix be quarter. start higher the range of year coming be Europe global the XX%. be reset payroll in as Pacific. by

to the in the in to SG&A expense We increase beginning also CloudGo's includes Non-run for expenses reflects of range the expect approximately compensation at and of year. by of consist In $XX payroll of call we're conditions and be as $X positioned Q&A. outlook. compelling SG&A of which business million excited the and our expense. $X This taxes will ready third we million creation see a believe quarter remarks, a while expense we and run prepared again, driving sheet macro headwinds uncertainty, acknowledge market our value we rate million, transformation our calendar we long-term the and closing, concludes continue prolonged and to are now employer $XX for model, presented balance technology model rate the durable noncash about liquidity, will our stock costs million recover. start and open cost well And for the variable opportunities to we execute pristine With ahead the shareholders. to long-term ample

[Operator Instructions].

comes Our question with JPMorgan. from first Stephanie Yee

gave what's constant for revenue quarter, the decline that a I the guide basis? third on currency implied same-day afternoon. for ask Can you revenue Good the

year-over-year of a million on The constant year a $XXX guidance is decline currency XX% full same-day the Stephanie. Hi, approximately at the at top range basis.

included And third Great. of the you to how contribute understand help much then is And on us outlook. Okay. expected how in was quarter guess annual basis, an to CloudGo much I CloudGo could

a impact amount material is don't acquisition believe this This future going to We of drive acquisition. on Yes. to and more our expect in synergy serve very lot tremendous from immediate enhanced nature. capabilities clients, We this value. our is financials there's strategic more to of that

So given their the the size not acquisition, disclosing of financials. we're

with comes question Baird. next Our Mark Marcon from

proceed. may You

New the is taking Childress This questions Year, you I on and happy everyone. Mark. appreciate Andre for

about So regards well to talked Kate, about same some this pipeline. and quarter talked last those you green you as shoots green shoots the quarter, with

we expectations get regards are end seeing you now As the with your the for clients ended set? that year, XXXX, and the what hearing from year, we their are budgets to of to calendar

that think cloud continued still our more we're I ERP transformation, remarks. as digital prepared opportunity I of in opportunity. Yes, said optimization And around seeing

today, fact, introduce ERP, In wraparound another Andre, of data work that, a cloud, selection and lot improvement. our request cleanup, and around got Andrew system -- client around process is implementation data services. I tied governance, a And which to services both from to there's

we're our support some clients with in conversation we're how could to expect do some conversations around Europe divest uptick strategy. I divestiture large work, seeing really especially opportunity see still with couple in clients. and that about in that's around So we a business, where decisions transaction we of might

progressed should over we changed? sense. in how softer And then expectations Or half those out things of that? the about have stronger back how also months, have think and past year makes That X first terms XXXX for calendar the the a laid last quarter, expectations as you half

Yes.

it's -- close been ball And shift the see to crystal still calendar occur. has we'll think a of I say XXXX exactly XXXX, sluggish. unfortunately, when the

macro especially decision-making. around interest client think conditions, a rate I and clarity every little is around for looking more certainty more economic getting

that continues be to So a sluggish. little

we if. As Jen prepared it's said her believe when, a remarks, not matter in of

our And And these where a getting It's more us comfort so economy about. initiatives them ready decision-makers that optimism and support stay to pull is talking little the more a business just are to trigger. very that all we about headed. clients little to is getting the

queue. then in explain lot pricing in That about Jen, commentary some a dynamics. market more I'll hop Could had just me pricing one and U.S. sense. you of And you're the the a you in a little bit more makes what then for about competitive from the back perspective, particularly seeing

sure. mean in they'll the and for, pricing tougher When and X, the professional I reason we of this operations they've another services competing to offshore side, is And gotten is offshore and all the I often think that it Yes, on and the general, the environment bottom pool been blended teams, down Kate work. when talent win win averages that firms we're racing talked against competing staffing to the tougher to another has the smaller against reason other alluded pool a about have are big as of competitive. stay And to making work. work. in we're firms remarks, why her compete pricing our to or rates building on

through we pricing catch pressure from. pricing, With I So are that's is the our where think up new of on work that but challenging to on MSAs. is working said, on more getting kind existing still coming competitive

our pushback regard. had clients with much this really from far, we So haven't

still pricing, think some So to we've raise probably I X there. our X over quarters room I go to quarters, job really last done think there's to multiple great a and the

just touched more one given it. just you Sorry, follow-up, on

about Could you. and as little the about you centers over that pools you and center few building more and how -- talk with the out blending talent think going strategy building that of that think the excellence that your internationally. quarters bit you're forward? that that Thank just about a next So out we integrating other

work services for talked little their a into for digital only I'll but not of the reason work example, piece a pool transformation. have it rates very are client Yes. India we the is And that's talent won We, my capability. Veracity just ServiceNow because jump we strong in I about financial continuing big around prepared tapped blending, here. remarks. bit Andre, with a a we won in in

the the outlook do. able still every research from bring introduce being skill down. world mentioned, the I So I arbitrage as finding company it's into right and not and continuing today. also and mean the of as cost of that just own talent more is our highlights December needs labor and the to biggest It's the what and AI finding that sets technology challenges manpower more digitize one we to is labor

pools engagements, cost especially offer need. anymore, these what so not the right that they talent about it's about and our And finding it's just can consulting clients on

in So, we're reasons. -- a we're we're I mean America finance and in the very accounting talent and exiting the in what the for finance building thing variety Philippines. reading and of North same India, finance excited around talent the talent about doing all about stories accounting we're profession

And pools not world, think so other to be to but competitive the terms important winning financially, remain competitive of these will in that parts the increasingly needing find in exist only I work. also talent of

next with comes Riddick Marc from Our question Sidoti.

proceed. may You

Good evening.

already start where thoughts you're start maybe kind finished with what where level for if now? around and that to you quarters, wanted to of shore with to you how of the all be sort the we sort other think about you're would of versus seeing to if next to where we provided. you've maybe thanks might the as or want color that couple of X that headcount wanted adjustments the -- want to are need you where need as quarter where for to from commentary I give up? months ended if kind and to you the are -- should be made Or you I there some comfort be some would though you So on areas -- quarter XX could feel of you

to sure answering... referring I'm want make headcount? you consultant just I to are Marc,

Yes.

Yes.

or didn't decrease movement last So same a end the of it the headcount added from of much the in CloudGo, you're -- count point at the we end of one around the that consultant at, this And our of consultant talent remember time. the consultants that you because period looking quarter as acquisition. of the end then is from from year other all the pool really time. at One is

it of adding that's talent on or, we large that. that the example, Philippines, onetime depends kind clients on there, a had we're So to add some the for serve and our in group consultants working of independent

So overall, if I between our average, , say, decreased to you at consulting if count, the year-over-year. the XXX look about anywhere XXX look at would average you Yes.

you're I I uses about little million then bit gears. could about that of And the bit a And evaluation little X you share certainly, briefly talk -- CloudGo. if look you on I or another looking you wonder acquisition appreciate I talk shifting maybe -- the current wondering mean, is on there's a changed, seeing, you maybe ago? was whether cash. the if wondering Okay. or so pipeline the did I months could at pipeline you're on commentary during touch could if repurchase versus to $X today currently has X changed how quarter. that

are about more building opportunity business So CloudGo Jen and Agile we it also testament But, and M&A hand as comment our then of Veracity pipeline talk cash to structure. in and let on me to about, us business. We higher-growth capital uses follow to a we to exactly and just with scale continue, higher-margin an see to I'll I've as our our strategy. and talked for consulting is And diversification business that businesses. the activity,

additional that, can continue of strategy consulting mapping them consulting process PCS going as the And does to we're analyzing in our We're drive around strategy practice, capabilities and have that we what with especially in been that experience. in closer forward. also their do user Veracity business together bringing look so what assets at to our and

together. our a part practices business you. of being And agile functional Again, part it closer in our experience those both So scale is Jen, strengthening role hand play we will bring consulting talent. I'll expertise able to user that. the that to and now a M&A and with of then

Yes.

So want Mark, of investing from a a we capital to the drive in continue allocation to number as we business to long-term have areas standpoint, growth.

as said the to year, anywhere $XX in looking buyback also remarks, to million of transformation at in we're we're about as And area, I to the between digital my going one we're project. $X So said, still remainder of for that And million our spend is -- pipeline I complete area. And at deploy could looking as deals share via around reminder, acquisition that's dividends $XX our and some the to assess million an pipeline, shareholder we in area continue the spent we on just cash. basis, and year-to-date have far. and a so on right, return a

our capital year, I to remain going on think allocation given the fiscal we uncertain strategy. this environment and just overall prudent in lower expected are earnings

for then was me. remarks, mention a And your mentioned, I around believe. you couple client of verticals, made one the services last In prepared Great. financial

Cal rest the You around some Northern footprints mentioned of geographic the some of and kind and North of America of that versus the thing. --

were you other any areas could anything activity? and of there So and pharma health either stood that kind might that of like be as ventures, at any negative a particular bit, recent little things talk sort as care far positive why or

health new, talked the in -- Yes, say industry about and is but of transformation. before, their overall we've I'd terms digital I'd say, as care this behind isn't

we're to transactions get so work pharma big client there, in some to that space. And from hoping opportunity -- base been our have as there continue the see and in we

of both regulatory these data also that as issues are some in Especially to I in a back financial huge for organizations still a house the are ahead lot of up, house, systems compliance of remediation orders financial So address you focus as of as environment, the I still disparate, of banking do connect very Financial lot front because consent lot some the the problems. to still there think, see there's a work is of green shoots and coming these services on the and to there's work cleaning the and reporting, up. often but services. around

set. to strengthen performance, So I've with continuing pleased fiscal very to practice, the rest that's we're our close financial their bit client year. that And very I see staying of and services a this move we through the been as

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

I new hard, you third again, we'll your after talking you to to again, interest thank and RGP. year. for working everyone of the in happy Well, with forward end Thank continuing We're our look quarter. want and

Thank you for your participation.

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