Resources Connection, Inc. Reports Financial Results for Third Quarter Fiscal 2021
04/07/2021 - 04:05 PM
Resources Connection, Inc. (Nasdaq: RGP), a multinational business consulting firm operating as RGP (the “Company”), today announced financial results for its fiscal third quarter ended February 27, 2021.
Third Quarter Fiscal 2021 Highlights:
Revenue up 2.2% sequentially to $156.6 million compared to $153.2 million in the second quarter and as compared to $168.1 million in the prior year quarter
Same day constant currency revenue up 3.4% sequentially and off 10.4% from the prior year quarter
SG&A improved 4.5% to $52.8 million compared to $55.3 million in the prior year quarter
Net income of $0.7 million , or $0.02 diluted earnings per common share, compared to $6.9 million in the prior year quarter, or $0.21 diluted earnings per common share, which included a discrete tax benefit of $6.6 million or $0.18 per diluted share
Adjusted diluted earnings per common share of $0.14 compared to $0.25 in the prior year quarter
Adjusted EBITDA margin of 6.0% , up 200 basis points compared to 4.0% in the prior year quarter
Available financial liquidity of $149.7 million as of February 27, 2021, up from $126.3 million as of May 30, 2020
Cash dividends declared of $0.14 per share, consistent with the prior year quarter
Management Commentary
“We again delivered sequential growth despite the typical holiday impact during our fiscal third quarter,” said Kate W. Duchene, chief executive officer. “I am especially proud of our progress expanding Adjusted EBITDA margin by 200 basis points year over year. As we look forward, we are rapidly strengthening our business reach especially in digital transformation, healthcare and financial advisory services. As the macro environment continues to evolve, we are experiencing increased interest from both new and existing clients around implementing an agile workforce strategy, and we are well-positioned to capture the multitude of opportunities as clients seek more cost flexibility in their human capital requirements and as talent demands more radical flexibility. RGP is truly built for the Now of Work.”
Third Quarter Fiscal 2021 Results
Revenue increased 2.2% sequentially, or 3.4% on a same day constant currency basis, compared to the second quarter of fiscal 2021, and declined 6.8% year-over-year. The sequential revenue improvement was led by strong demand in Technology and Digital solution offerings as well as other key solution offerings within the healthcare industry vertical. With sustained strength in our pipeline, we believe we are well-positioned to capitalize on the positive dynamic of clients resuming engagements and committing to larger spend on initiatives, including initiatives that have been driven by changes to the workforce paradigm as a result of the pandemic.
Gross margin was 36.4% , compared to 36.5% in the prior year quarter. The change was mostly due to a slight reduction in bill/pay spread primarily caused by more opportunistic pricing and lower consultant utilization in our crisis management business, which operates on a bench model. Additionally, lower conversion and professional search revenue in the third quarter of fiscal 2021 further contributed to the change in gross margin. These impacts were partially offset by lower pass-through revenue from client reimbursement and less holiday pay due to Thanksgiving being included in the third quarter of fiscal 2020 but not in the third quarter of fiscal 2021. The Company continues to take a balanced approach to maximize and capture revenue opportunities while supporting gross margin.
SG&A of $52.8 million included the impact of $2.7 million of contingent consideration expense and $0.7 million of restructuring costs. Excluding contingent consideration and restructuring costs, SG&A expense improved $6.7 million , or 11.9% , compared to the third quarter of fiscal 2020. Management compensation and bonus and occupancy costs were reduced by $3.8 million and $0.9 million , or 10.0% and 19.1% , respectively, compared to the prior year quarter, as a result of the restructuring initiatives the Company began at the end of fiscal 2020. In addition, the Company continues to benefit from its virtual work environment and effective cost containment measures, reducing general business expenses by $1.6 million or 72.6% compared to the prior year quarter.
Net income of $0.7 million in the third quarter of fiscal 2021 reflected the impact of the contingent consideration expense and restructuring costs, coupled with a higher effective tax rate. Net income of $6.9 million in the prior year quarter included a discrete tax benefit of $6.6 million as a result of the deduction of the investment basis in four European entities upon their dissolutions. While withstanding continued challenges posed by the COVID-19 pandemic and inclement weather that caused project delays in certain key markets, the Company delivered a 6.0% adjusted EBITDA margin, a year-over-year improvement of 200 basis points.
SUMMARY OF CONSOLIDATED FINANCIAL RESULTS
(Amounts in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
February 27,
November 28,
February 22,
February 27,
February 22,
2021
2020
2020
2021
2020
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue
$
156,631
$
153,222
$
168,052
$
457,199
$
524,784
Direct cost of services
99,584
$
95,044
$
106,632
$
284,078
$
321,484
Gross profit
57,047
58,178
61,420
173,121
203,300
Selling, general and administrative expenses
52,838
54,552
55,299
158,544
166,032
Amortization of intangible assets
1,202
1,393
1,549
4,125
4,153
Depreciation expense
963
984
1,120
2,954
3,913
Operating income
2,044
1,249
3,452
7,498
29,202
Interest expense, net
361
460
493
1,316
1,526
Other income (1)
(64)
(475)
-
(1,069)
(537)
Income before income tax expense (benefit)
1,747
1,264
2,959
7,251
28,213
Income tax expense (benefit) (2)
1,057
2,256
(3,983)
5,270
3,995
Net income (loss)
$
690
$
(992)
$
6,942
$
1,981
$
24,218
Net income (loss) per common share:
Basic
$
0.02
$
(0.03)
$
0.22
$
0.06
$
0.76
Diluted
$
0.02
$
(0.03)
$
0.21
$
0.06
$
0.75
Weighted average common shares outstanding:
Basic
32,520
32,356
32,159
32,353
31,954
Diluted
32,659
32,356
32,498
32,422
32,350
Cash dividends declared per common share
$
0.14
$
0.14
$
0.14
$
0.42
$
0.42
Revenue by Geography
Revenue
North America
$
127,913
$
122,732
$
138,819
$
371,259
$
431,617
Europe
17,751
19,082
18,031
53,125
56,163
Asia Pacific
10,967
11,408
11,202
32,815
37,004
Total revenue
$
156,631
$
153,222
$
168,052
$
457,199
$
524,784
Resources Connection Inc
NASDAQ:RGP
RGP Rankings
#3724 Ranked by Stock Gains
RGP Stock Data
Industry
Payroll Services
Sector
Professional, Scientific, and Technical Services
Tags
Commercial Services, Personnel Services, Professional, Scientific, and Technical Services, Payroll Services
About RGP
we’re all about practical consulting. traditional consultants give you a binder full of suggestions. we give you sound, no-nonsense advice and quality execution—big picture insights and meticulous implementation. we don’t stop at telling clients what needs doing. we help get it done. rgp partners with business leaders to solve problems, implement initiatives, drive change and transfer knowledge. we are proven problem solvers who start adding value as soon as we begin an engagement—accomplished professionals from a wide range of business backgrounds including finance & accounting, human capital, information management, legal, risk & compliance and supply chain. constantly striving to exceed client expectations, our professionals have the talent, integrity, enthusiasm and loyalty to build lasting relationships with the leaders of some of the world's largest, best-known businesses.
