Resources Connection (RGP) 3 Apr 242024 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Resources Connections, 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 third quarter ended February 24, 2024. They will also refer to certain non-GAAP financial measures.

of are to release included reconciliation GAAP most issued and measures financial in explanation these the measures comparable today. An the press Relations and release of SEC. press can reviewed the Today's be RGP's today filed Investor website with the in sections management this forward-looking make strategies call, initiatives of the statements financial the anticipated Also performance plans, company. and may during regarding and

ended in call company's Such results May during and to for differ made see the Please or may differ statements Duchene. Kate the materially. XX-K cause a may for are RGP's predictions XXXX condition other is by Form Factors XX, financial implied operations this and to call. that RGP's CEO, sections discussion actual from expressed over the uncertainties on events what year or results business risks, report the Risk of of I statements and will forward-looking materially turn now factors

and In despite solid for Good taking uncertain. Thank you retention still joining client thank In operator. environment the macro convert with a across to previous today. us be than performance and robust, project continues quarter, new that afternoon, sluggish you, have client extensions longer to starts and delivered we the everyone, engagement cycles. QX, been enterprise

this well consistent we revenue, and exceeded this strong driving cash our fiscal also remaining On flow environment performed with EBITDA, continuing expectations, we on conversion therefore, efficiencies and year. while expectations, to in cost adjusted deliver in On headcount. disciplined SG&A

balance Our sheet pristine. remains

positive saw we a QX, in momentum regions. certain During

year. earlier in fiscal to from returned growth quarters Pacific Asia the

strategic for we Switzerland delivered Mexico, year-over-year projects grew and as India Our clients. large practices all long-term

delivering more economic initiatives. and environment lower moving operating with scale-ups HR indicators confidence unit is in quarter. outsourced improving major rates America North interest finance and the in and reflected choppy the startups, services which business accounting also many as for ahead spinouts our before grew and Countsy, clients overall want

the seeing pandemic. services the strongest demand Countsy since for fact, is In

pricing in allow with progressed and as has Overall, strong as will fast maintaining This a to with increase including reflects in Our us we operating retention, client success superb and and service initiative efficiencies what control, the broader year-over-year. X% sheet. rate balance quarter bill very a success environment be can the ready improving U.S. improves. this buying customer soon

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results we decline. discover pleased commissioned to XXX with of decision-makers decision-makers to development. priorities the of XX% We financial when more the a YouGov I'm than learned in fund who share recent are in workforce financial start to increase what plan investment to rates that to the ready survey Finally, interest survey participated

reskilling, full-time utilizing employees are upskilling blend most new external, to strategies prioritizing resources. on-demand with and engagement employees current Specifically,

blend with employee internal learned global would for perspective clients, initiatives needed related sets target initiative skill funding employees this in incumbent independent strategic inventory they transfer, tools. discussions desire they data and invest also transformation Also, I are to said desires new specific They're and building pattern than They pharmaceutical the of sets with digital financial In development capturing projects teams medical and to last exactly. and a They more capital with of skill total and this on-demand new device a are half following to the knowledge and for AI. flexibility. week periods experts time. specific talent digital execution exactly

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deliver standing drive shareholder we growth. Far from are We account are talent capitalize scale under with to all on-demand business consulting model align optimizing still, our to leadership to more training to aggressively development focus and improving structure cross-sell brand also one conditions enable operating long-term our quickly the We're with platform. on improving deliver improving for capabilities and our more teams value. positioning to to

the Jen. I'll over turn now call to

Kate, everyone. afternoon, Thank good and you,

spending we clients which the adjusted America of margin with macro quarter, revenue, and consistent of currency margin SG&A gross $XX.X adjusted run our basis, XX continue have be our achieved XX% same-day conditions, X.X% of year-over-year delivered the provided. cash a EBITDA Both than pace produced with in . On January. $XXX.X of Europe. of solid better was in of We million as the XX% were declined rate of by million favorable in North revenue significantly outlook This in outlook free ranges of end million range and and our or cautious provided $XX.X $XX.X our particularly constant a last face EBITDA million months. to uncertain the flow the

well, Pacific with India clients Asia Philippines as while shift lower-cost costs. decline and Markets to to better the currency a in they a region to as relatively markets to containing Our attributable advance their spend X% year-over-year opportunities transformation continue basis. such strategic of to with project primarily performed same-day constant effort continue our on an perform initiative large

growth CloudGo. and Singapore pipeline the business mentioned, resilient expansion Kate of prior the year Operationally, quarter. our over from addition, with the Australia In our digital during remained grew as

new converting slow, in opportunities strong. to of remain extensions the velocity pipeline engagements existing the on While were engagements actual

on deal uptick We the in average saw during size deals also closed an quarter. third

in do cycle economic technology Consistent earlier, targeted in are do and survey current results budgets the environment of our movement in transformation. own exist, direction, our a recent more we with that believe highlighted sales bit Kate that still lacks and the weeks. are we concentrated investments suggest upgrades clients conversations starting see highly with to While

top building have our been grow on pipeline area this We laser-focused line. to our key in

seasonality health outlook third in margin our tend normalized reflects Pacific, ratios business than Europe the also to of care and range bill more the Gross in margin reflecting again, Asia to once higher and see anticipated. XX%, we quarter a holiday North heavier and XX.X% than mix pay a level of exceeding America. usual in XX% in the Gross we where quarter costs was

for $XXX constant and our up average of $XXX a pressure, such Enterprise has bill average during as have the continued As to the compared quarter. lower-cost mentioned across weighted this the become was increasingly rates. work Despite shifted the competitive, January U.S. pricing the shifting average to ago. was XXXX. quarter markets clients from year Philippines trend the down revenue environment globe our Furthermore, fiscal X% bill and therefore, bill multinational mix India large and rate rate our in currency, the third call, third quarter stand-alone global pricing

optimize will We balancing pricing by to continue our operating volume results effectively growth. overall and

Now on SG&A.

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

have in bonus remained the the this with align true-up the year. cost over was savings $X favorable we million expense Variable executed force approximately fiscal also reflecting overall in quarter, with expense quarter. late third We calendar SG&A prior in disciplined compensation year contributed financial and management reduction to company's the in a of performance XXXX

liquidity. to Turning

continue under the in We of will of the in and repurchase healthy dividends and macro liquidity pursuing After while after our business, the of end ended program, the project of growth to shareholders investing through most total flow the of debt. of M&A impactful million implementation accelerate cash $XX on return quarter third the focus equivalents including fiscal by quarter, financial remaining strategy $X.X long-term dividends of distributing to available completing generate our disciplined cash transformation at cash $XXX opportunistically and with continued environment. continuing the our areas and profitability, We and million investments million to quarter. $X.X free million to cash despite to a share million X end outstanding shares technology $XXX technology have which and we repurchasing the continue with at

acquisition. our provide transformation an Now of the on and project deployment, capital in strategic let technology update investment me key areas

during America made management launched our have and quarter. contract talent We and systems in progress new the North tremendous management

live planned year. in financial is calendar Our for go systems the later

status. benefits, already and talent speed enhanced seeing marketing campaign immediate including accuracy We improved matching, contract and visibility ease are talent and into of and consultant

continue and will leverage us this we will value extract as operating we the higher technology scale and achieve optimize from and perfectly to functionalities for us adoption, We platform new user enable growth. positions believe to to system

signed is we advisory acquire a acquisition the Kate firm strategic stated, On front, the to as Reference a for agreement an services vertical RGP. serving financial industry, definitive important Point, which

accretive performance. We expect to this acquisition our to financial be

fourth outlook. our with close now I'll quarter

opportunities revenue the new putting quarter, As for in the revenue conversion on we early with for quarter third of trends, the fourth coupled timing of in pace the quarter early revenue be to run quarter engagements, weekly pipeline to million. has anticipated, range completion remained been third sluggish fourth pressure modest large the revenue $XXX fourth We million certain to the rate of project $XXX quarter. compared in

reflect in to coming Pacific, QX margin current global the range margin With gross proportion QX continue XX%. of the and competitive to a environment will Asia Gross from in estimate Europe XX.X% to of revenue the pricing revenue higher be mix. and in we

which technology expect will range $XX normalized and and million costs our fourth of of the be transformation compensation fourth compensation stock noncash quarter with be to expenses run We variable for SG&A a expense, expense more million. $X $XX quarter to rate Non-run million of consist approximately expense. in will both rate

balance compelling impending headwinds recover, remarks, pristine sheet, for prolonged and This the to cost presented business a prepared variable will with as X Reference opportunities we're our our by open our Point, we to see for outlook, ahead start value ready a these and closing, of excited and we ample now are execute durable model we positioned market and long-term the call macro shareholders. model, longer-term well liquidity driving creation we accretive continue acquisition believe concludes conditions uncertainty, In about to Q&A. and

Mark [Operator from Instructions] with It is Marcon Baird.

did regards Can detail more anticipating give How is you us Reference large little you it? you the spending? -- how Like growth Point? rate? are a much What's with to

Reference then not fulsome and really this jump is consulting disclosing in X table It from opportunity that They the they to script within this together we start to prepared correction execution perspective. don't want that We going next bring boutique Jen just Sure. that given much and respect which do strategic a global moment. especially the to we and in. more do, is to we earnings execution. days. close Mark, at clarify, to advisory have size XX work left enables their Point, What expect have is in a the Jen us did I'll do our firm, we're this then will as have on scale a With time.

will we talent Center our example, For access already in stronger of of that's Mumbai, Reference firms. together be Point an both there's front in competitive client an existing with because actually us opportunity our allow example. bid Excellence pool to But for of

we are excited about our really we to sales you and together industry very team. know strong capabilities long-term synergistically very vertical bringing for what So a serve where has been a have us,

that Is there something correct you the transcript? from wanted to

trying . Yes. Jen hear jump I in. to Jen. can't is you,

[Operator Instructions].

disclosure and in I'll currency, constant this. actually made constant down X% and about being X.X% we a It Okay. really was better, stat much the jump correct it's is that APAC currency. decline

X.X%. that decline, out. again, a So we X% call just want to It's a not,

of deals. the in North Great. Okay. you you're can about little to And ability in terms a both seeing what talk America, bit close

then of clients, there markets waiting just I they do Because to ask close in healthy. want you're Obviously, rates like, has Employment what But are start been GDP then growth and exactly specifically. I'll what about interest pricing has to to terms But exactly are the for? been high. they see? still your and Kate, So healthy. need

-- going be we're they're it's that firm direction. broadly, the for I in in decline a the line sand think going rate show that interest is the right to first waiting to moving

. opportunity do would think while remaining as bullish unlock cautious I capital. my right on say, now Fed's more I will the So more timing. characterize decision outlook on I

wraparound both was change, around are So pipeline I QX biggest require technology my I prior to our migration. management, the one and shoots, closed that technology QX, and reviewing we management involve for green especially about prepared the in talked opportunities change already see just most starting to are in call, these project most remarks. services then

challenge. really So starting opportunity. timing. It's That's are the about we feel bullish more to

say about major QX. about in sector projects the and that do we have a or is I'd couple conclude we're thing, revenue, the roll other will conservative that of for in that Mark, energy

that taken we've into account. so And

new we prior ramp-up gap those Now and we've already be ending of projects new there identified projects have take to the clients. may a the that consideration. into between But opportunities the at

okay, And in that. And little some those Kate, Northern a doing? if talk markets, like, the Chicago, would us about some U.S. can the not you factor California it's but your to that major trying you of you you but whether appreciate within offices compare the York how to like about Tri-Cities Really area seeing are biggest just North gave how of those or small bit like think and your or Southern America are New offices what markets? offices, And I'm in we contrast smaller or numbers,

Yes.

think middle a more smaller more look much to serve conservative. have like Clients I Mark, it slower where see buying industries. would bit offices little but as are base starting momentum been market. the at been that industries because territories, not we I really in has

retail continue about we our those financial our in feel health financial has we is -- definitely now. talked on it's bullish but care, I client So proposals when client when that right services, serve growing to into just services. to in them, opportunities bit. that's an have X longest-standing Pipeline that big see start. manufacturing And in last, Europe. starting clients true back of is little a The spending again in goods we're come concentration particularly will next or then to space. category starting important say That's the projects to I'd consumer is because

of the area, bit central probably of little a Atlanta that's Chicago more too. impacts more the country impacts that base. So

So that's we're really about how think how gaining momentum. we

call of earnings say for strong in that technology, us. also our quarters in to see a mentioned has we because see and kind technology a I'd And big Then about which with starting seeing were talk sector momentum, we're movement been we on starts, very couple project also we'll on-demand ago because put some me of wants see Let start nobody to then more things just they've done see layoffs. fits get a that some layoffs. when we'll we'll hold talent

but positive So have say, herky-jerky, Southern we've changes. that's pretty starting that in bit, and little in I'd see leadership space, exciting. momentum is had California some entertainment we're been where some a media will turnover And which to the and impact more

actively addressing as those there. we're more get So for ready opportunity we

for you. has I helpful hope been So this color

a are from Absolutely. And talk and some the big they've competitors? seeing been reading just America. you you little within you're you more them America? about What obviously continue how the of anticipate in that X the you to other thinking wondering But North when with just pricing then that competing can about Or bit things actually We've that that? are pricing doing. through? come about year-over-year would stay up does Would how been North

Yes.

So, Jen.

I'm back some difficulties. having I'm guys. I to sorry. was you so technical

think I I heard basis. a think of increase decline -- that of Mark, X.X% constant of instead I I is said Asia Yes. on in correct X% an I actually Kate one heard currency the Pac, the a stat of

deployed resources. obviously, that. this for And the last I that clear about we free up. we're take can when jump the I'll And they're a mean, Mark. Kate, the feel And that talked in of I kind to free, maybe we then certainly from So bench deploy X, call, doing pricing they sure then have resources, to big some seeing in. want make bench what question, at stab X, when they big the they

And have rates the resources. offshore boutique staffing they compete Therefore, competition firms, of lot too. the with And a they we when there's can deployed also blend down.

this using building kind we're delivery pricing. terms tend down want bottom talked of they in as last as quarter, rates to we actively I sure, in blend combat margin. our hubs to mean own to then to -- our talent and much race the them For can offshore we the order actively protecting about To of while that,

even our good our given is, a still share. able and between Obviously, model, rates, news But market the bill with now strike to we're to we've margin. variable maintain got to our maintain pricing volume cost predominantly lower balance

that seeing. we're hopefully, what Mark, your So that's that that, helps question. Hopefully, answers

that we term, add But your it when Jen, big focused on away puts value-based rational pricing, That the in their Mark. not term. pressure X the very would, changing. for not short you remain free, I the Yes, resources is bench long have giving

the comes It of from line Steinerman with JPMorgan. Andrew

you you terms an over difference constant the just for a for what ago fourth change be revenue mention of a year if quarter versus the go this days year-over-year could thanks on that if fourth Jen, guide in currency in the in quarter. basis? would same-day basis quarter. on organic a Could fourth percentage there's And

on no business there Yes. at range, full the -- guidance And -- the quarter to XX% it's The constant of difference. the currency a $XXX million, top basis. Sure. is compared year-over-year is down the top there at which same-day day no about in end is a U.S.,

Instructions] it And from Marc with Sidoti. Riddick comes of [Operator line the

of drivers driver? start those your improved those, this financial what year. services pickup a So some little financial I think a out starting on a remarks, and which a off in you a M&A services, touch wondering if Is prepared with bit there, seeing seems little bit mentioned Are was are. health to maybe decent could be to particularly you I that you far care. so maybe from regulatory of

regulatory to tied it's primarily, say I'd requirements. Yes,

see to those uptick and request services grown Some that organizations large system think alignment an have a Marc. address. something that technology we're resources, in management is Financial is activity we're change. type with some project starting investment for starting there of And in to to I lot consolidation M&A, see related

Jen, financial there we a thinking I very talent Great. sort you encouraging North sure the I system. was management was Okay. for the Is I And prepared the fiscal think -- I see frame calendar launch. your time if that be to that? around ballpark you mentioned said wasn't you if wondering you think should then or remarks about could of in launch year in America -- system in mentioned year. it

calendar year. later financial systems The Yes. will this go live Yes.

year. Calender

Okay.

a of of way. about, then but circling Point. sort I sort question Reference appreciate Excellent. different maybe guess, thinking in to the I And commentary back Okay. the was M&A around I

been Could couple targets give of out there maybe transactions sort of as what's as potential getting to things during the and there what's of views and you there's a So more out thoughts attractive there, your the quality and far to of are maybe as the now be the valuation? year. acquisition out volume

Yes.

So and we're our much invest that I capabilities digital very companies focused would to we're capabilities in on functional more continuing at so because to looking in bear strong say, bring, forward-looking expertise here.

And so that investing Veracity are is that which add in to looking and in globally. 'XX more CloudGo, did looking reasonable. platform now more valuations of we've platform late of the as we're We is getting well been Veracity-type part looking brand to and something at the and calendar

So of though, looking companies capability might to have. add targeted that our We're very in grown. way to a has pipeline what also, we we're at at

] client capabilities think our So [ retention some our budget about gaining space and momentum and of that grow the terms chain project like in in to base, there. be procurement to supply seems we'd

discussion they the tied the Great. some then And had was you do any And fits of sense starts around customers earlier. I regulatory that the to activity. not technology pressures, the to you know some or be sort I wondering, rate interest home more whether that or mentioned Okay. is of around made abroad and tied commentary you of the get last whether or thing, maybe that are

Yes.

been don't I are I so that rate know tied it's that those Marc, don't feel headcount those I it's been roles extended, do fully. think in we say would think at making. decisions qualified I all interest tied technology that a to largest to But account, question company, were that for answer had to some think and coming, have regulatory. I firms knew and I opportunity we growing and now again. about that our that account we example, worried see folks is that

think those matter more over out it's justifying really than, of I headcount, of that timing firms a they're opportunity. or now And it's of think, that more hire coming more a So matter of I pandemic. the rightsizing again to tended

as to no further Kate turn final back the queue. And will I questions comments. I see for in it

everyone, forward then. call you you you, Thank all We'll very year fiscal you, . call. Bhadresh following attending the Thank of our the thank our to and to earnings much. Well, look operator. adding again for to talking end

And with Thank that, participating. for I you conference. all conclude the

You disconnect. may now