Revenue of
Net income of
Diluted
earnings per share of
Company
continues to make progress on strategic initiatives to enhance revenue
and profitability
Revenue for the second quarter of 2018 was
Net income for the quarter was
"I am pleased with our performance this quarter and the continued
progress we have made towards implementing our strategic initiatives,"
said
*Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation.
ACQUISITIONS
On
UPDATE ON STRATEGIC INITIATIVES
RGP continues to make progress against its previously announced strategic initiatives. The Company has advanced its initiative to cultivate a more robust sales culture during the second quarter. The Company launched a new learning and development program to enhance training and accountability across the organization - including providing training on new management techniques and processes. RGP continued to roll out its new compensation programs to drive accountability and profitable growth. The Company's Strategic Client Program is performing well with revenue of this program up 8.0% since the beginning of the fiscal year, and is expected to deliver improved growth in fiscal year 2018. RGP expects to complete substantially all of its sales transformation by the end of the fiscal year.
With regard to the second initiative to redesign the Company's business
model to enhance client offerings, the redesign is close to completion,
with focus on building the Company's integrated solutions capabilities
and delivering multi-disciplinary offerings to its clients in three
areas of focus - Transaction Services, Technical Accounting Services,
and Data & Analytics. In the second quarter, the Company implemented the
new operating model for sales, talent and integrated solutions within
RGP for all of
With respect to the cost containment initiative, the Company continues its efforts to lower selling, general and administrative expenses ("SG&A") as a percentage of revenue. The Company made progress this quarter and will continue to focus on improved leverage and cost synergies in the core business and with the Accretive acquisition. The Company remains committed to managing its cost structure to achieve improved SG&A performance as measured against revenue.
FISCAL SECOND QUARTER REVIEW
Revenue for the second quarter of fiscal 2018 increased by 6.2% (5.3%
constant currency) to
Revenue in the
Net income improved in the second quarter of fiscal 2018 to
Gross margin was 37.9% in the second quarter of fiscal 2018, decreasing 40 basis points from 38.3% in the prior year second quarter. Sequentially, gross margin decreased 10 basis points from 38.0% in the first quarter of fiscal 2018. Both changes are related primarily to the impact of lower gross margin of taskforce, consistent with other European practices' performance.
SG&A expenses for the second quarter of fiscal 2018 were
Cash provided by operations was
In the second 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 revenue trends and financial results, the acquisition of taskforce
and Accretive 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
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CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
|
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
Revenue | $ | 156,738 | $ | 147,558 | $ | 297,924 | $ | 290,947 | ||||||||||||||||
Direct cost of services | 97,319 | 91,048 | 184,807 | 179,910 | ||||||||||||||||||||
Gross margin | 59,419 | 56,510 | 113,117 | 111,037 | ||||||||||||||||||||
Selling, general and administrative expenses (1) | 47,498 | 46,056 | 94,913 | 89,670 | ||||||||||||||||||||
Operating income before amortization and depreciation (1) |
11,921 | 10,454 | 18,204 | 21,367 | ||||||||||||||||||||
Amortization of intangible assets | 322 | - | 322 | - | ||||||||||||||||||||
Depreciation expense | 947 | 808 | 1,887 | 1,602 | ||||||||||||||||||||
Operating income (1) | 10,652 | 9,646 | 15,995 | 19,765 | ||||||||||||||||||||
Interest expense | 397 | 64 | 734 | 64 | ||||||||||||||||||||
Interest income | (32 | ) | (40 | ) | (60 | ) | (110 | ) | ||||||||||||||||
Income before provision for income taxes (1) | 10,287 | 9,622 | 15,321 | 19,811 | ||||||||||||||||||||
Provision for income taxes (2) | 2,149 | 3,930 | 5,071 | 8,481 | ||||||||||||||||||||
Net income (1), (2) | $ | 8,138 | $ | 5,692 | $ | 10,250 | $ | 11,330 | ||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic (1), (2) | $ | 0.27 | $ | 0.16 | $ | 0.34 | $ | 0.31 | ||||||||||||||||
Diluted (1), (2) | $ | 0.27 | $ | 0.16 | $ | 0.34 | $ | 0.31 | ||||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||
Basic | 30,173 | 35,716 | 29,991 | 35,992 | ||||||||||||||||||||
Diluted | 30,579 | 36,248 | 30,319 | 36,533 | ||||||||||||||||||||
Cash dividends declared per common share | $ | 0.12 | $ | 0.11 | $ | 0.24 | $ | 0.22 | ||||||||||||||||
EXPLANATORY NOTES
-
SG&A expenses include non-cash compensation expense for employee stock
option grants, restricted share grants and employee stock purchases of
$1.5 million and$1.9 million for the three months endedNovember 25, 2017 andNovember 26, 2016 , respectively, and$3.1 million and$3.2 million for the six months endedNovember 25, 2017 andNovember 26, 2016 , respectively. The expense for the six months endedNovember 25, 2017 includes approximately$140,000 related to accelerated vesting of stock options as part of the agreement with a departing senior executive; the expense for the three and six months endedNovember 26, 2016 includes approximately$400,000 related to accelerated vesting of stock options as part of the agreement with a departing senior executive. -
The Company's effective tax rate was approximately 21% and
approximately 41% for the three months ended
November 25, 2017 andNovember 26, 2016 , respectively, and approximately 33% and approximately 43% for the six months endedNovember 25, 2017 andNovember 26, 2016 respectively. The three months endedNovember 25, 2017 includes the reversal of approximately$2.4 million of valuation allowances on the deferred tax assets of certain foreign entities and the three and six months endedNovember 26, 2016 include the reversal of approximately$0.2 million of tax valuation allowances. For all periods presented, the Company is unable to benefit from, or has limitations on the benefit of, tax losses in certain foreign jurisdictions. To a lesser extent, the accounting treatment under GAAP for the cost associated with incentive stock options and shares purchased through the Employee Stock Purchase Plan has caused volatility in the Company's effective tax rate.
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RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
Net income | $ | 8,138 | $ | 5,692 | $ | 10,250 | $ | 11,330 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Amortization of intangible assets | 322 | - | 322 | - | ||||||||||||||||||||
Depreciation expense | 947 | 808 | 1,887 | 1,602 | ||||||||||||||||||||
Interest expense | 397 | 64 | 734 | 64 | ||||||||||||||||||||
Interest income | (32 | ) | (40 | ) | (60 | ) | (110 | ) | ||||||||||||||||
Provision for income taxes | 2,149 | 3,930 | 5,071 | 8,481 | ||||||||||||||||||||
EBITDA | 11,921 | 10,454 | 18,204 | 21,367 | ||||||||||||||||||||
Stock-based compensation expense | 1,450 | 1,855 | 3,062 | 3,150 | ||||||||||||||||||||
Adjusted EBITDA | $ | 13,371 | $ | 12,309 | $ | 21,266 | $ | 24,517 | ||||||||||||||||
Revenue | $ | 156,738 | $ | 147,558 | $ | 297,924 | $ | 290,947 | ||||||||||||||||
Adjusted EBITDA Margin | 8.5 | % | 8.3 | % | 7.1 | % | 8.4 | % | ||||||||||||||||
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 | |||||||||||||||||||||||||
% Increase | % Increase | ||||||||||||||||||||||||
% Increase |
|
% Increase |
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|
2017 |
|
2017 | ||||||||||||||||||||||
2017 | vs. | 2017 | vs. | ||||||||||||||||||||||
vs. |
|
vs. |
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2016 |
|
2017 | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | Constant | 2017 | Constant | |||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | Currency (1) | GAAP | Currency (2) | |||||||||||||||||||
$ | 156,738 | $ | 147,558 | $ | 141,186 | 6.2 | % | 5.3 | % | 11.0 | % | 10.6 | % | ||||||||||||
(1) The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the second quarter of fiscal 2017 and applying those rates to foreign-denominated revenue in the second 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 first quarter of fiscal 2018 and applying those rates to foreign-denominated revenue in the second 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 | $ | 56,284 | $ | 62,329 | ||||||||
Accounts receivable, less allowances | $ | 109,025 | $ | 98,222 | ||||||||
Total assets | $ | 382,318 | $ | 364,128 | ||||||||
Current liabilities | $ | 72,339 | $ | 71,771 | ||||||||
Total stockholders' equity | $ | 252,846 | $ | 238,142 | ||||||||
Consultant headcount, end of period | 2,746 | 2,569 | ||||||||||
Shares outstanding, end of period | 30,300 | 29,662 | ||||||||||
Six Months Ended | ||||||||||||
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2017 | 2016 | |||||||||||
(Unaudited) | ||||||||||||
Cash flow from operating activities | $ | 1,640 | $ | 8,137 | ||||||||
Cash flow from investing activities | $ | (4,206 | ) | $ | 17,833 | |||||||
Cash flow from financing activities | $ | (2,907 | ) | $ | (57,426 | ) | ||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20180103006201/en/
For
Media Contact:
(US+) 1-310-788-2850
mike_sitrick@sitrick.com
or
Analyst
Contact:
(US+)
1-714-430-6500
herb.mueller@rgp.com
Source:
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