Resources Connection Reports 19.5% Revenue Decline, Net Loss in Q3 2024

Resources Connection, Inc. (RGP) reported a significant decline in financial performance for the three months ended August 24, 2024, compared to the same period in the previous year. Revenue decreased by 19.5% to $136.9 million from $170.2 million, primarily driven by a substantial drop in the On-Demand Talent segment, which saw revenue fall to $52.5 million, down 32.7% from $78.0 million. The Consulting segment also experienced a slight decline, with revenue of $55.0 million, a decrease of 3.2% year-over-year.

The company's gross profit for the quarter was $50.0 million, representing 36.5% of revenue, down from 39.4% in the prior year. RGP reported a net loss of $5.7 million, compared to a net income of $3.1 million in the same quarter of 2023. This loss was attributed to a combination of reduced revenue, a goodwill impairment charge of $3.9 million related to the Europe and Asia Pacific segment, and increased direct costs of services, which accounted for 63.5% of revenue.

Selling, general, and administrative (SG&A) expenses improved to $48.9 million, down from $59.9 million, reflecting a reduction in management compensation due to a U.S. restructuring plan that resulted in a 12% workforce reduction. The company also benefited from a $3.4 million gain from the sale of its Irvine office building, which closed on August 15, 2024, for $13.0 million.

RGP's total assets increased slightly to $512.9 million as of August 24, 2024, from $510.9 million at the end of the previous quarter. However, total liabilities rose to $105.7 million from $92.2 million, leading to a decrease in stockholders' equity to $407.2 million from $418.8 million.

The company completed the acquisition of Reference Point LLC on July 1, 2024, for an initial cash consideration of $23.0 million, which is expected to enhance its consulting capabilities. The acquisition contributed $2.7 million in revenue during the quarter.

RGP's cash and cash equivalents decreased to $89.6 million from $108.9 million, with a net cash used in investing activities of $10.9 million primarily due to the acquisition of Reference Point. The company also repurchased 430,284 shares of its common stock for approximately $5.0 million during the quarter.

Looking ahead, RGP aims to enhance its digital and AI capabilities and has reorganized its business segments to align with its strategic focus areas for fiscal 2025. The company is also addressing a material weakness in internal controls related to financial reporting, specifically concerning goodwill impairment analysis.