Revenue of
Net income of
Diluted earnings per share of
Company achieves significant milestones in implementation of its strategic initiatives and integration of recent acquisitions
Revenue for the third quarter of 2018 was
Net income for the quarter was
“We achieved strong results this quarter across our three priority focus areas: growing revenue in all geographies, the smooth integration of Accretive and taskforce, and continuing the successful execution of our strategic initiatives,” said
*Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation.
UPDATE ON ACQUISITION INTEGRATIONS
RGP has made continued progress this quarter in integrating its two acquisitions, Accretive and taskforce, and the Company remains on track to complete the integration of both acquisitions during the summer. RGP’s consolidated financial results for the third quarter include Accretive revenue of approximately
UPDATE ON STRATEGIC INITIATIVES
RGP continues to implement successfully the strategic initiatives it announced last year to improve its performance in both revenue generation and cost containment. With respect to the first initiative, to transform the Company’s sales culture, RGP has completed virtually all of its sales transformation efforts in the US. The Company has rolled out Salesforce throughout the enterprise, launched a new learning and development program and developed go to market, sales management and account development playbooks to guide sales behavior. A new incentive structure for the Company’s sales team is expected to be fully developed by the end of the fourth quarter and implemented in fiscal year 2019. Revenue for the Company’s Strategic Client Program (“SCP”) is up 9.0% year over year, and SCP is expected to deliver additional growth in fiscal year 2019.
The Company’s second initiative, to redesign its business model to enhance client offerings, is substantially complete. In the third quarter, RGP finished building out its talent group, marking the completion of all of its major structural updates. The Company also completed the implementation of a sales structure in all major markets to focus on middle market client acquisition and development. The Company is now operating entirely under its new organizational design in the US, and is focused on driving accountability, productivity and results. As part of these efforts, the Company recently hosted a leadership summit in
The Company remains committed to its third initiative, to contain costs and lower selling, general and administrative expenses (“SG&A”) as a percentage of revenue. The Company’s SG&A was higher than planned this quarter, largely due to costs associated with the integration of the Company’s two acquisitions and increased business development and training efforts. These short-term costs are a necessary investment in the growth of the business and its client base, and are expected to taper off beginning in fiscal year 2019, and to be further offset by additional cost synergies realized through the successful integrations of the Accretive and taskforce acquisitions.
FISCAL THIRD QUARTER REVIEW
Revenue for the third quarter of fiscal 2018 increased by 19.9% (17.6% constant currency) to
Including Accretive operations, revenue in the US increased by 14.9% year over year and 12.5% sequentially. Excluding Accretive operations, US revenue was flat year over year and decreased 2.0% sequentially. The sequential decrease was expected and was primarily due to the timing of holidays, as outlined above. International revenue improved by 41.4% year over year (29.6% constant currency) and 2.1% sequentially (0.6% constant currency), reflecting strength in the Company’s
Net income improved in the third quarter of fiscal 2018 to
Gross margin of 36.3% in the third quarter of fiscal 2018 was flat compared to the prior year third quarter. Sequentially, gross margin decreased 160 basis points from 37.9% in the second quarter of fiscal 2018, primarily due to an increase in average pay rate per hour and an increase in employer payroll tax expense typically experienced with the beginning of a new calendar year.
SG&A expenses for the third quarter of fiscal 2018 were
Cash used in operations was
In the third quarter of fiscal 2018, the Company paid a dividend of
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 4,000 professionals, annually serving over 2,600 clients around the world from 74 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 the successful integration of the Accretive and taskforce acquisitions, including cost synergies expected to be realized in connection with such acquisitions, revenue growth and financial results, 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 and integrate our acquisitions of Accretive and taskforce, 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
RESOURCES CONNECTION, INC. | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
February 24, | February 25, | February 24, | February 25, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
Revenue | $ | 172,414 | $ | 143,844 | $ | 470,338 | $ | 434,791 | ||||||||||||
Direct cost of services | 109,904 | 91,597 | 294,711 | 271,507 | ||||||||||||||||
Gross margin | 62,510 | 52,247 | 175,627 | 163,284 | ||||||||||||||||
Selling, general and administrative expenses (1) | 55,268 | 45,376 | 150,181 | 135,046 | ||||||||||||||||
Operating income before amortization | ||||||||||||||||||||
and depreciation (1) | 7,242 | 6,871 | 25,446 | 28,238 | ||||||||||||||||
Amortization of intangible assets | 1,004 | - | 1,326 | - | ||||||||||||||||
Depreciation expense | 1,089 | 909 | 2,976 | 2,511 | ||||||||||||||||
Operating income (1) | 5,149 | 5,962 | 21,144 | 25,727 | ||||||||||||||||
Interest expense | 542 | 351 | 1,276 | 415 | ||||||||||||||||
Interest income | (34 | ) | (16 | ) | (94 | ) | (126 | ) | ||||||||||||
Income before provision for income taxes (1) | 4,641 | 5,627 | 19,962 | 25,438 | ||||||||||||||||
Provision for income taxes (2) | 46 | 2,743 | 5,117 | 11,224 | ||||||||||||||||
Net income (1), (2) | $ | 4,595 | $ | 2,884 | $ | 14,845 | $ | 14,214 | ||||||||||||
Net income per common share: | ||||||||||||||||||||
Basic (1), (2) | $ | 0.15 | $ | 0.10 | $ | 0.49 | $ | 0.42 | ||||||||||||
Diluted (1), (2) | $ | 0.14 | $ | 0.09 | $ | 0.48 | $ | 0.41 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||
Basic | 31,440 | 29,764 | 30,473 | 33,916 | ||||||||||||||||
Diluted | 32,066 | 30,584 | 30,901 | 34,550 | ||||||||||||||||
Cash dividends declared per common share | $ | 0.12 | $ | 0.11 | $ | 0.36 | $ | 0.33 | ||||||||||||
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 1% and approximately 49% for the three months ended
The nine months ended
RESOURCES CONNECTION, INC. | ||||||||||||||||||||||||
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
February 24, | February 25, | February 24, | February 25, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
Net income | $ | 4,595 | $ | 2,884 | $ | 14,845 | $ | 14,214 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Amortization of intangible assets | 1,004 | - | 1,326 | - | ||||||||||||||||||||
Depreciation expense | 1,089 | 909 | 2,976 | 2,511 | ||||||||||||||||||||
Interest expense | 542 | 351 | 1,276 | 415 | ||||||||||||||||||||
Interest income | (34 | ) | (16 | ) | (94 | ) | (126 | ) | ||||||||||||||||
Provision for income taxes | 46 | 2,743 | 5,117 | 11,224 | ||||||||||||||||||||
EBITDA | 7,242 | 6,871 | 25,446 | 28,238 | ||||||||||||||||||||
Stock-based compensation expense | 1,437 | 1,508 | 4,499 | 4,658 | ||||||||||||||||||||
Adjusted EBITDA | $ | 8,679 | $ | 8,379 | $ | 29,945 | $ | 32,896 | ||||||||||||||||
Revenue | $ | 172,414 | $ | 143,844 | $ | 470,338 | $ | 434,791 | ||||||||||||||||
Adjusted EBITDA Margin | 5.0 | % | 5.8 | % | 6.4 | % | 7.6 | % | ||||||||||||||||
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.
RESOURCES CONNECTION, INC. | |||||||||||||||||||||||||
CONSTANT CURRENCY REVENUE COMPARISON | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Revenue for the Three Months Ended | |||||||||||||||||||||||||
February 24,
2018 GAAP |
February 25,
2017 GAAP |
November 25,
2017 GAAP |
% Increase
February 24, 2018 vs. February 25, 2017 GAAP |
% Increase
February 24, 2018 vs. February 25, 2017 Constant Currency (1) |
% Increase
February 24, 2018 vs. November 25, 2017 GAAP |
% Increase
February 24, 2018 vs. November 25, 2017 Constant Currency (2) |
|||||||||||||||||||
$ | 172,414 | $ | 143,844 | $ | 156,738 | 19.9 | % | 17.6 | % | 10.0 | % | 9.6 | % | ||||||||||||
(1) The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the third quarter of fiscal 2017 and applying those rates to foreign-denominated revenue in the third 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 second quarter of fiscal 2018 and applying those rates to foreign-denominated revenue in the third 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
RESOURCES CONNECTION, INC. | ||||||||||
SELECTED BALANCE SHEET, CASH FLOW AND OTHER INFORMATION | ||||||||||
(Amounts in thousands, except consultant headcount) | ||||||||||
February 24, | May 27, | |||||||||
2018 | 2017 | |||||||||
(Unaudited) | ||||||||||
Cash and cash equivalents | $ | 43,217 | $ | 62,329 | ||||||
Accounts receivable, less allowances | $ | 125,795 | $ | 98,222 | ||||||
Total assets | $ | 420,134 | $ | 364,128 | ||||||
Current liabilities | $ | 78,313 | $ | 71,771 | ||||||
Total stockholders’ equity | $ | 268,912 | $ | 238,142 | ||||||
Consultant headcount, end of period | 3,143 | 2,569 | ||||||||
Shares outstanding, end of period | 31,487 | 29,662 | ||||||||
Nine Months Ended | ||||||||||
February 24, | February 25, | |||||||||
2018 | 2017 | |||||||||
(Unaudited) | ||||||||||
Cash flow from operating activities | $ | (2,254 | ) | $ | 6,926 | |||||
Cash flow from investing activities | $ | (25,086 | ) | $ | 21,133 | |||||
Cash flow from financing activities | $ | 8,233 | $ | (73,785 | ) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180404006251/en/
Source:
Media Contact:
Michael Sitrick
(US+) 1-310-788-2850
mike_sitrick@sitrick.com
or
Analyst Contact:
Herb Mueller, Chief Financial Officer
(US+) 1-714-430-6500
herb.mueller@rgp.com