IRVINE, Calif., April 2, 2014 - Resources Connection, Inc. (NASDAQ: RECN), today announced financial results for its fiscal third quarter ended February 22, 2014. Resources Connection, Inc. (the "Company") is a multinational professional services firm that provides to clients - through its operating subsidiary, Resources Global Professionals ("RGP") - consulting services in the areas of accounting, finance, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, healthcare solutions, and legal and regulatory services.
Revenue for the third quarter of fiscal 2014 was $132.7 million, decreasing 3.8% (3.4% on a constant dollar basis) compared to the prior year's third quarter and 9.1% (9.0% on a constant dollar basis) sequentially. Revenue in the U.S. decreased 2.4% quarter-over-quarter and 8.4% sequentially. U.S. revenue in the third quarter of fiscal 2014 was unfavorably impacted by an estimated $3.3 million, as the Thanksgiving holiday fell in the third quarter this year but occurred in the second quarter last year. International revenue decreased 8.7% quarter-over-quarter and 11.5% sequentially (6.9% quarter-over-quarter and 11.5% sequentially on a constant dollar basis).
The Company's net income for the third quarter of fiscal 2014 was $2.3 million, or $0.06 per diluted share, compared to net income for the third quarter of fiscal 2013 of $4.5 million, or $0.11 per diluted share.
"While our revenues for the third quarter were clearly impacted by the additional major holiday (Thanksgiving) and severe winter weather in the U.S., they were also hurt by continued weakness in Europe," said Tony Cherbak, president and chief executive officer of RGP. "As a result, we will take a charge for severance, estimated at $2.8 million or $0.07 per share, in our fourth quarter. We expect these headcount reductions to result in annual savings of $4.5 million or $0.12 per share beginning in fiscal 2015."
Gross margin decreased 110 basis points quarter-over-quarter to 36.0% in the third quarter of fiscal 2014 and 330 basis points sequentially. The decrease in sequential gross margin was primarily attributable to the reset of payroll taxes in the third quarter, three paid holidays in the U.S. as compared to only one paid holiday in the second quarter and decreased leverage on other fixed expenses. The third quarter gross margin quarter-over-quarter decline was attributable to the Thanksgiving holiday falling in the third quarter in fiscal 2014 (the holiday fell in the second quarter in fiscal 2013) and a slight decrease in the current quarter's bill rate/pay rate ratio.
Selling, general and administrative expenses for the third quarter of fiscal 2014 were $41.6 million (31.3% of revenue), the same as the prior year quarter dollar amount (30.1% of revenue) and a decrease of $1.5 million sequentially (from $43.1 million or 29.5% of revenue).
Cash flow from operations and Adjusted EBITDA (Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, stock-based compensation and contingent consideration adjustments, if any) were $5.2 million and $7.8 million (5.8% of revenue), respectively, for the third quarter of fiscal 2014 compared to $13.0 million and $11.4 million (8.3% of revenue), respectively, for the third quarter of fiscal 2013.
"U.S. weekly revenues the first four weeks of our fourth quarter have trended 4.4% higher than the comparable weeks a year ago," said Don Murray, executive chairman of RGP. "We are pleased with the traction we are getting in the U.S. and hope that, over time, this momentum will expand internationally."
The Company's revenue for the nine months ended February 22, 2014 was $410.4 million compared to $416.2 million for the nine months ended February 23, 2013. The Company's net income for the nine months ended February 22, 2014 was $13.0 million, or $0.33 per diluted share. This compares to net income in the nine months ended February 23, 2013 of $15.2 million, or $0.37 per diluted share.
During the third quarter of fiscal 2014, the Company repurchased 522,200 shares of common stock for $7.4 million. As of April 2, 2014, the Company has approximately $50.9 million remaining under its board authorized stock buyback program. On March 20, 2014, the Company paid a quarterly dividend totaling $2.7 million ($0.07 per share) to shareholders. As of February 22, 2014, the Company's cash, cash equivalents and short-term investments were $107.3 million compared to $119.0 million at fiscal year-end May 25, 2013.
RGP, the operating subsidiary of Resources Connection, Inc. (NASDAQ: RECN), is a multinational professional services firm that helps business leaders execute internal initiatives. Partnering with business leaders, we drive internal change across all parts of a global enterprise - accounting, finance, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, healthcare solutions, and legal and regulatory services.
RGP was founded in 1996 within a Big Four accounting firm. Today, we are a publicly traded company with over 3,000 professionals, annually serving over 1,800 clients around the world from more than 70 practice offices.
Headquartered in Irvine, California, RGP has served 87 of the Fortune 100 companies.
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.
RGP will hold a conference call for interested analysts and investors at 5:00 p.m., ET today, April 2, 2014. This conference call will be available for listening via a webcast on the Company's website: http://www.rgp.com. An audio replay of the conference call will be available through April 9, 2014 at 855-859-2056. The conference ID number for the replay is 5184967. The call will also be archived on the RGP website for 30 days._______________________________________________________________________________________________________
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 the estimated amount of severance costs to be incurred in the fourth quarter and expectations about our revenues in the U.S. and internationally. 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 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 Securities and Exchange Commission (File No. 0-32113). Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business or operating results. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not intend, and undertakes no obligation, to update the forward-looking statements in this press release to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, unless required by law to do so.
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