Resources Connection (NASDAQ:RGP), Inc. (NASDAQ:RECN) reported a solid performance for its first quarter ended August 26, 2023, despite an uncertain macroeconomic environment, according to CEO Kate Duchene. The company's pricing initiative led to increased bill rates, and while revenue declined on a same-day constant currency basis, the firm ended the quarter with strong cash flow and no debt.
Key takeaways from the call include:
- Growth was noted in the Northern Californian market through Countsy, while the rest of North America showed a cautious approach to new spending.
- The company's pricing initiative resulted in a 2% increase in bill rates in the US and a 4% increase in Europe.
- A focus on revenue capture is expected in Q2, with the second half of the fiscal year projected to be stronger.
- CFO Jenn Ryu highlighted a decline in revenue due to clients' hesitancy to spend and challenges in their own businesses.
- The company is implementing cost management measures and expects a reduction in annual SG&A run rate of $10-12 million.
- The company ended the quarter with strong cash flow, no debt, and $112.6 million in cash and cash equivalents.
- The second quarter revenue is projected to be in the range of $160-165 million, with a similar gross margin to Q1.
Despite the uncertain macro environment and clients' hesitancy to spend, the company maintains an optimistic outlook about the pipeline and its long-term outlook. Resources Connection reported strong free cash flow of $81 million, representing 130% of EBITDA over the last 12 months. The company plans to invest in critical areas to drive long-term growth and profitability, while returning cash to shareholders through dividends and share repurchases.
The company is also undergoing a technology transformation project, incurring $5 million in costs in the quarter, with $3.1 million capitalized and $1.9 million included as non-run rate operating expense. This new technology platform is expected to improve operating efficiency and drive long-term value.
In terms of organizational structure, Resources Connection currently has three components to its business: the agile model, consulting services, and Countsy, a managed services business for finance and HR. The company will reposition senior leadership positions and emphasized the importance of cross-selling across its assets to its client base. The firm remains focused on serving clients with excellence and value in the current environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.