Resources Connection, Inc. Reports Second Quarter Results for Fiscal 2019
IRVINE, Calif.--(BUSINESS WIRE)--Jan 3, 2019--Resources Connection, Inc. (Nasdaq: RECN), a multinational business consulting firm, operating as Resources Global Professionals (the “Company” or “RGP”), today announced its financial results for the second quarter ended November 24, 2018.
Second Quarter 2019 Revenue Financial HighlightsRevenue of $188.8 million, up $32.1 million (20.5%) over the second quarter of fiscal 2018. U.S. revenue* increased 24.7% over the second quarter of fiscal 2018. European revenue* increased 0.9% (4.2% constant currency**) over the second quarter of fiscal 2018; twelfth successive quarter-over-quarter growth. Asia Pacific revenue increased 4.4% (7.4% constant currency**) over the second quarter of fiscal 2018.
“We are extremely pleased by the momentum in our business now,” said Kate Duchene, president and chief executive officer. “I attribute the improving results to three important changes in our Go To Market efforts -- the client service and technical sales teams spend more time in front of clients, we have improved the alignment of our incentive systems to sales growth and velocity in our sales efforts has been delivered by a focused business development team.”
Other Second Quarter 2019 Financial HighlightsGross margin of 38.9% improved from 37.9% in the prior year second quarter due to improvement in the pay rate to bill rate ratio and lower costs in the Company’s self-insured medical program. Selling, general and administrative (“SG&A”) expense of $55.0 million (29.1% of revenue) compared to $47.5 million (30.3% of revenue) in the second quarter of fiscal 2018 shows improvement as a percent of revenue of 120 basis points year-over-year. On a sequential basis, SG&A improved by $1.4 million or 250 basis points as a percent of revenue, reflecting reduced spend as well as improved leverage. Sequentially, transformation expenses decreased in the second quarter by $0.8 million. Tax rate of 33% in the second quarter due primarily to the favorable impact of the Tax Cuts and Jobs Act, partially offset by non-benefit of losses in international operations. The tax rate of 21% in the prior year was favorably impacted by the reversal of valuation allowances of $2.4 million that offset deferred tax assets of certain foreign entities. Pre-tax income increased in the second quarter to $15.7 million compared to $10.3 million in the prior year second quarter; net income increased to $10.6 million compared to $8.1 million in the prior year second quarter. Diluted earnings per common share increased to $0.33 compared to $0.27 in the prior year second quarter. Adjusted EBITDA*** of $20.0 million (10.6% as a percent of revenue) compared to $13.4 million (8.5% as a percent of revenue) in the prior year second quarter. Net cash provided by operating activities for the three months ended November 24, 2018 was $18.3 million compared to $14.8 million in the prior year comparable period. The Board of Directors approved a $0.13 per share dividend to shareholders in the second quarter for $4.1 million (paid in December), compared to a $0.12 per share dividend and $3.6 million in the prior year second quarter; Company share buybacks in the second quarter totaled approximately 339,000 shares for $5.5 million, with $107.0 million remaining for future common stock purchases as of November 24, 2018. Cash and cash equivalents were $40.8 million as of November 24, 2018.
Other First Half Fiscal 2019 Financial HighlightsRevenue of $367.4 million, up $69.5 million (23.3%) over the same period of fiscal 2018. Gross margin of 38.5% improved from 38.0% in the comparable prior year period. SG&A expense of $111.3 million (30.3% of revenue) compared to $94.9 million (31.9% of revenue) for the first six months of the prior year. The increase reflects $10.5 million of additional payroll and benefits from acquisitions and headcount to support growth of critical markets; $5.6 million of bonus and commissions tied to revenue growth; $1.6 of marketing spend; and $1.8 million in other categories; offset by lower spend on severance and acquisition/transformation/integration costs of $3.1 million. Tax rate of 35% compared to 33% in the comparable prior year period. Pre-tax income increased to $24.9 million compared to $15.3 million in the comparable prior year period; net income increased to $16.3 million compared to $10.3 million in the comparable prior year period. Diluted earnings per common share increased to $0.50 compared to $0.34 in the comparable prior year period. Adjusted EBITDA*** of $33.2 million (9.0% as a percent of revenue) compared to $21.3 million (7.1% as a percent of revenue) in the comparable prior year period. Net cash provided by operating activities for the six months ended November 24, 2018 was $1.7 million compared to $1.6 million in the comparable prior year period. Dividends paid during the fiscal year to date of $7.9 million compared to $6.8 million in the comparable prior year period; Company share buybacks year to date of approximately 807,000 shares for $13.0 million.
Today, the Company also announced the planned retirement of its Chief Accounting Officer, John Bower, during the fourth quarter of fiscal 2019. Mr. Bower has been with the Company in various financial roles since 1998. The Company has commenced a search for a Senior Vice President of Finance position.
*The Company completed its integration of the operations of Accretive Solutions, Inc. effective with the start of the first quarter of fiscal 2019. Accretive was acquired December 4, 2017. With the completion of the integration of Accretive, it is not possible to separately identify revenue generated by legacy Accretive operations as opposed to RGP; therefore, the Company is unable to provide a separate organic revenue amount for results during fiscal 2019. The Company’s other acquisition during fiscal 2018, taskforce, remains separate for accounting purposes in Europe and, in order to provide a more comprehensive view of revenue trends in our European business, organic revenue is presented and defined as revenue without the revenue of taskforce for the applicable period. A table is provided below with revenue data on an as-reported basis (GAAP) for the respective periods and revenue without taskforce in the same periods. The table also reports the impact on revenue of exchange rate fluctuations between the United States dollar and currencies in countries in which the Company operates.
**Year over year constant currency results for international revenue are computed using the comparable second quarter fiscal 2018 conversion rates, and the sequential quarter constant currency international revenue is computed using the comparable first quarter fiscal 2019 conversion rates. Additional information is provided below.
***Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before interest, income taxes, depreciation, amortization, contingent consideration adjustments and stock-based compensation. A reconciliation table is provided below.
Conference Call Information
RGP will hold a conference call for analysts and investors at 5:00 p.m., ET today, January 3, 2019. 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 January 10, 2019 at 855-859-2056. The conference ID number for the replay is 7073056. The call will also be archived on the RGP website for 30 days.
RGP, the operating subsidiary of Resources Connection, Inc. (Nasdaq: RECN), is a multinational business consulting firm that helps leaders execute internal initiatives. Partnering with business leaders, we drive internal change across all parts of a global enterprise – accounting; finance; governance, risk and compliance management; corporate advisory, strategic communications and restructuring; information management; human capital; supply chain management; and legal and regulatory.
RGP was founded in 1996 within a Big Four accounting firm. Today, we are a publicly traded company with over 4,300 professionals, annually serving over 2,400 clients around the world from 74 practice offices.
Headquartered in Irvine, California, RGP has served 86 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. (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 statements regarding our expectations for growth, and the impact of our 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, our ability to compete effectively in the highly competitive professional services market and to secure new projects from clients, 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.
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 plus or minus contingent consideration adjustments. 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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CONTACT: Media Contact:
Herb Mueller, Chief Financial Officer
KEYWORD: UNITED STATES NORTH AMERICA CALIFORNIA
INDUSTRY KEYWORD: PROFESSIONAL SERVICES ACCOUNTING CONSULTING
SOURCE: Resources Connection, Inc.
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PUB: 01/03/2019 04:05 PM/DISC: 01/03/2019 04:05 PM