Resources Connection, Inc. Reports First Quarter Results for Fiscal 2018
Resources Connection, Inc. Reports First Quarter Results for Fiscal 2018
Revenue of
Net income of
Diluted
earnings per share of
Company makes
progress on strategic initiatives to enhance revenue and profitability
Revenue for the first quarter of 2018 was
"The revenue decline flattened in the last month of the quarter and we
are seeing this trend continue," said
*Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation.
ACQUISITION
On
UPDATE ON STRATEGIC INITIATIVES
With respect to the cost reduction initiative, we finished the reduction in force at the end of fiscal 2017. This initiative reduced our headcount by 57 year over year from the third quarter fiscal 2017 to the first quarter fiscal 2018. The effect of these selling, general and administrative expenses ("SG&A") reductions are obscured currently by talent change, severance, acquisition and transformation expenses in the first quarter of fiscal 2018. Most of the transformation and inorganic growth costs will tail off towards the end of the second quarter of fiscal 2018 and we expect to see more direct benefit from the headcount reductions we have made. We remain committed to managing our cost structure to achieve the cost reduction targets we discussed in the third quarter fiscal 2017.
The Company continues to focus on its second initiative -- to cultivate a more sophisticated and robust sales culture. During the first quarter, the Company continued training of new management techniques and processes and rolled out its new compensation programs to drive accountability and growth. The Company also further developed and expanded its Strategic Client Program, with the goal of lifting revenue from targeted, long term clients, and expects the program to deliver improved growth in fiscal year 2018.
In addition, the Company began building out its national business
development function targeting the middle market, where the Company sees
significant growth opportunities. In September, the Company completed
the implementation of SalesForce in all of its offices in
Finally, the redesign of the Company's operating model is well under way, as it continues to prioritize building its integrated solutions capabilities and delivering multi-disciplinary offerings to its clients in three areas of focus -Transaction Services, Technical Accounting Services, and Data & Analytics. This focus has already delivered improved revenue growth and the Company expects this upward performance trend to continue throughout fiscal year 2018.
FISCAL FIRST QUARTER REVIEW
Revenue for the first quarter of fiscal 2018 decreased by 1.5% (1.4%
constant currency) to
Revenue in the
Net income declined in the first quarter of fiscal 2018 to
Gross margin was 38.0% in the first quarter of fiscal 2018, the same as in the prior year first quarter. Sequentially, gross margin decreased 110 basis points from 39.1% in the fourth quarter of fiscal 2017, primarily due to the impact of paid holidays in the first quarter; there were no paid holidays in the fourth quarter of fiscal 2017.
S, G & A expenses for the first quarter of fiscal 2018 were
Cash used in operations was
In the first quarter of fiscal 2018, the Company increased its dividend
per common share to
CONFERENCE CALL
RGP will hold a conference call for analysts and investors at
ABOUT RGP
RGP, the operating subsidiary of
RGP was founded in 1996 within a Big Four accounting firm. Today, we are a publicly traded company with over 3,200 professionals, annually serving over 1,800 clients around the world from 67 practice offices.
Headquartered in
The Company is listed on the NASDAQ Global Select Market, the exchange's highest tier by listing standards. More information about RGP is available at http://www.rgp.com. (RECN-F)
Certain statements in this press release are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statements may be identified by words such as
"anticipates," "believes," "can," "continue," "could," "estimates,"
"expects," "intends," "may," "plans," "potential," "predicts," "remain,"
"should" or "will" or the negative of these terms or other comparable
terminology. In this press release, such statements include expectations
regarding revenue trends and financial results, the acquisition of taskforce
and the Company's strategic initiatives. Such statements and all phases
of the Company's operations are subject to known and unknown risks,
uncertainties and other factors that could cause our actual results,
levels of activity, performance or achievements and those of our
industry to differ materially from those expressed or implied by these
forward-looking statements. Risks and uncertainties include our ability
to successfully execute on our strategic initiatives, seasonality,
overall economic conditions and other factors and uncertainties as are
identified in our most recent Quarterly Report on Form 10-Q and our
other public filings made with the
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| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
| (Amounts in thousands, except per share amounts) | |||||||||
| Three Months Ended | |||||||||
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| 2017 | 2016 | ||||||||
| (Unaudited) | |||||||||
| Revenue | $ | 141,186 | $ | 143,389 | |||||
| Direct cost of services | 87,488 | 88,862 | |||||||
| Gross margin | 53,698 | 54,527 | |||||||
| Selling, general and administrative expenses (1) | 47,415 | 43,614 | |||||||
|
Operating income before amortization and depreciation (1) |
6,283 | 10,913 | |||||||
| Depreciation expense | 940 | 794 | |||||||
| Operating income (1) | 5,343 | 10,119 | |||||||
| Interest expense | 337 | - | |||||||
| Interest income | (28 | ) | (70 | ) | |||||
| Income before provision for income taxes (1) | 5,034 | 10,189 | |||||||
| Provision for income taxes (2) | 2,922 | 4,551 | |||||||
| Net income (1), (2) | $ | 2,112 | $ | 5,638 | |||||
| Net income per common share: | |||||||||
| Basic (1), (2) | $ | 0.07 | $ | 0.16 | |||||
| Diluted (1), (2) | $ | 0.07 | $ | 0.15 | |||||
| Weighted average common shares outstanding: | |||||||||
| Basic | 29,809 | 36,269 | |||||||
| Diluted | 30,059 | 36,817 | |||||||
| Cash dividends declared per common share | $ | 0.12 | $ | 0.11 | |||||
EXPLANATORY NOTES
(1) Selling, general and administrative expenses include non-cash
compensation expense for employee stock option grants, restricted share
grants and employee stock purchases of
(2) The Company's effective tax rate was approximately 58% and
approximately 45% for the three months ended
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| RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | ||||||||||
| (Dollars in thousands) | ||||||||||
| Three Months Ended | ||||||||||
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| 2017 | 2016 | |||||||||
| (Unaudited) | ||||||||||
| Net income | $ | 2,112 | $ | 5,638 | ||||||
| Adjustments: | ||||||||||
| Depreciation expense | 940 | 794 | ||||||||
| Interest expense | 337 | - | ||||||||
| Interest income | (28 | ) | (70 | ) | ||||||
| Provision for income taxes | 2,922 | 4,551 | ||||||||
| EBITDA | 6,283 | 10,913 | ||||||||
| Stock-based compensation expense | 1,612 | 1,295 | ||||||||
| Adjusted EBITDA | $ | 7,895 | $ | 12,208 | ||||||
| Revenue | $ | 141,186 | $ | 143,389 | ||||||
| Adjusted EBITDA Margin | 5.6 | % | 8.5 | % | ||||||
EXPLANATORY NOTE
The Company utilizes certain financial measures and key performance indicators that are not defined by, or calculated in accordance with, GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA is calculated as net income before amortization of intangible assets, depreciation expense, interest and income taxes. Adjusted EBITDA is calculated as EBITDA plus stock-based compensation expense. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, which are used by management to assess the core performance of our Company, also provide useful information to our investors because they are alternative financial measures that investors can also use to assess the core performance of our Company and compare it to the Company's peers. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our profitability or liquidity. These measures should be considered in addition to, and not as a substitute for, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP.
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| CONSTANT CURRENCY REVENUE COMPARISON | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Revenue for the Three Months Ended | |||||||||||||||||||
|
2017 GAAP |
2016 GAAP |
2017 GAAP |
% Decrease
vs.
GAAP |
% Decrease
vs.
Constant Currency (1) |
% Decrease
vs.
2017 GAAP |
% Decrease
vs.
2017 Constant Currency (2) |
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| $ | 141,186 | $ | 143,389 | $ | 148,620 | -1.5 | % | -1.4 | % | -5.0 | % | -5.6 | % | ||||||
| (1) The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the first quarter of fiscal 2017 and applying those rates to foreign-denominated revenue in the first quarter of fiscal 2018. | |||||||||||||||||||
| (2) The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the fourth quarter of fiscal 2017 and applying those rates to foreign-denominated revenue in the first quarter of fiscal 2018. | |||||||||||||||||||
EXPLANATORY NOTE
In order to provide a more comprehensive view of trends in our business,
this table shows revenue data on an as-reported basis (GAAP) for the
respective periods and relative change in the same periods from the
impact on revenue of exchange rate fluctuations between
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| SELECTED BALANCE SHEET, CASH FLOW AND OTHER INFORMATION | |||||||||
| (Amounts in thousands, except consultant headcount) | |||||||||
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| 2017 | 2017 | ||||||||
| (Unaudited) | |||||||||
| Cash, cash equivalents and short-term investments | $ | 49,607 | $ | 62,329 | |||||
| Accounts receivable, less allowances | $ | 98,984 | $ | 98,222 | |||||
| Total assets | $ | 352,075 | $ | 364,128 | |||||
| Current liabilities | $ | 54,573 | $ | 71,771 | |||||
| Total stockholders' equity | $ | 243,792 | $ | 238,142 | |||||
| Consultant headcount, end of period | 2,495 | 2,569 | |||||||
| Shares outstanding, end of period | 29,899 | 29,662 | |||||||
| Three Months Ended | |||||||||
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| 2017 | 2016 | ||||||||
| (Unaudited) | |||||||||
| Cash flow from operating activities | $ | (13,129 | ) | $ | (7,055 | ) | |||
| Cash flow from investing activities | $ | (382 | ) | $ | 13,898 | ||||
| Cash flow from financing activities | $ | (465 | ) | $ | (5,595 | ) | |||
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For Resources Global Professionals
Media Contact:
(US+) 1-310-788-2850
mike_sitrick@sitrick.com
or
Analyst
Contact:
(US+)
1-714-430-6500
herb.mueller@rgp.com
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