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Resources Connection Reports Financial Results for Third Quarter Fiscal 2025<\/b><\/p>\n
DALLAS–(BUSINESS WIRE<\/a>)– Third Quarter Fiscal 2025 Highlights Compared to Prior Year Quarter:<\/span><\/p>\n Management Commentary<\/b><\/p>\n \n\u201cWe delivered results in line or better than our outlook, even though mid-week holiday impact was deeper than expected and the second half of Q3 became more disrupted in the US,\u201d said Kate W. Duchene, Chief Executive Officer. \u201cThis quarter, we\u2019ve made notable progress driving stronger pricing, larger average deal size and better win ratios, while also improving efficiency in our cost structure. While the volume of new opportunities was soft in the third quarter, our pipeline quality has meaningfully improved to include higher value and larger deals. Our client relationships remain strong despite the uncertainty in the macroenvironment, which will enable us to continue to grow into new buying centers. We remain disciplined and focused on executing our diversification strategy which, along with our refreshed brand positioning has been well received by our client base. I want to thank our employees for their strength and resilience working in a disrupted operating environment.\u201d\n<\/p>\n Third Quarter Fiscal 2025 Results<\/b><\/p>\n \nRevenue was $129.4 million (or $134.4 million on a constant currency basis), declining 14.5% (or 11.2% on a constant currency basis) compared to $151.3 million in the third quarter of fiscal 2024. The demand environment remains choppy and has not shown consistent signs of improving. Clients continued to be cautious and selective about moving forward with transformation projects or filling professional interim roles. In addition, the mid-week timing of both the Christmas and New Year’s holidays caused a more significant impact on the third quarter revenue compared to the prior fiscal quarter. Compared to the prior year quarter, billable hours decreased by 17.0%, while the average bill rate increased by 3.4% (or 4.2% on a constant currency basis). The year-over-year improvement in average bill rate is attributable to an ongoing focus on value-based pricing and a shift in revenue mix towards higher value consulting projects. Additionally, average bill rates continue to reflect the global revenue mix, which currently includes a higher proportion of revenue generated in Asia Pacific, where bill rates are significantly lower than in the United States (\u201cU.S.\u201d) and Europe.\n<\/p>\n \nGross margin in the third quarter of fiscal 2025 was 35.1% compared to 37.0% in the third quarter of fiscal 2024. The decline was primarily due to additional holiday pay on Thanksgiving in the third quarter of fiscal 2025. In addition, the mid-week timing of both the Christmas and New Year\u2019s holidays caused lower utilization of our salaried consultants. These adverse impact was partially offset by an improved pay\/bill ratio.\n<\/p>\n \nSG&A for the third quarter of fiscal 2025 was $51.2 million, or 39.5% of revenue, compared to $49.6 million, or 32.8% of revenue, for the third quarter of fiscal 2024. The year-over-year increase was primarily driven by a $1.3 million increase in employee termination benefits associated with the December 2024 reduction in force, intended to enhance efficiencies through reduced costs and streamlined operations (the \u201c2025 Restructuring Plan\u201d), and a $1.1 million increase in computer software expenses primarily associated with our technology transformation initiative. These increases were partially offset by a $1.2 million decrease in employee compensation expense partially as a result of the reduction in force.\n<\/p>\n \nGiven the slow recovery in the On-Demand and Consulting business segments, the Company conducted a goodwill impairment analysis during the third quarter of fiscal 2025 and recorded a non-cash goodwill impairment charge of $42.0 million ($12.4 million was recorded in the On-Demand Talent segment and $29.6 million was recorded in the Consulting segment).\n<\/p>\n \nIncome tax benefit for the third quarter of fiscal 2025 was $5.6 million, or an effective tax rate of 11.3%, compared to an income tax expense of $1.9 million, or an effective tax rate of 43.2%, for the third quarter of fiscal 2024. The income tax benefit in the third quarter of fiscal 2025 was primarily attributed to the Company\u2019s pretax loss. The lower effective tax rate in the third quarter of fiscal 2025 was due to the non-deductible portion of the goodwill impairment, coupled with the $2.2 million establishment of a valuation allowance for the Company\u2019s UK entity. The higher effective tax rate in the third quarter of fiscal 2024 resulted largely from a lower pretax income base increasing the tax expense ratio.\n<\/p>\n \nNet loss for the third quarter of fiscal 2025 was $44.1 million (net loss margin of 34.0%), compared to net income of $2.6 million (net income margin of 1.7%) in the prior year quarter, a difference of $46.6 million, which was primarily due to the non-cash goodwill impairment charge in the third quarter of fiscal 2025. The Company delivered an Adjusted EBITDA margin of 1.3% in the third quarter of fiscal 2025 compared to 7.1% in the prior year quarter.\n<\/p>\n Third Quarter Fiscal 2025 Segment Results<\/b><\/p>\n On-Demand Talent<\/i><\/b>\u2013 Revenue in the On-Demand Talent segment declined by $17.1 million or 26.6%, to $47.1 million in the third quarter of fiscal 2025 compared to $64.2 million in the third quarter of fiscal 2024 primarily due to a 24.8% decrease in billable hours and a 2.1% decline in average bill rate (or 1.4% on a constant currency basis). Demand for interim support remained challenged in the third quarter due in part to the labor market trend with less talent movement across employers, which has historically been a generator for demand in this segment.\n<\/p>\n Consulting<\/i><\/b>\u2013 Revenue in the Consulting segment declined by $3.2 million or 5.8%, to $52.6 million in the third quarter of fiscal 2025 compared to $55.8 million in the third quarter of fiscal 2024. The decline was primarily due to an 18.8% decrease in billable hours, which was partially offset by a 12.8% (or 13.5% on a constant currency basis) increase in the average bill rate largely as a result of the Company\u2019s value-based pricing initiative as well as a change in geographic revenue mix. Additionally, the current quarter results include the addition of Reference Point (acquired in the first quarter of fiscal 2025) which carries a significantly higher average bill rate. Reference Point contributed $4.0 million of revenue during the third fiscal quarter.\n<\/p>\n Europe and Asia Pacific<\/i><\/b>\u2013 Revenue in the Europe and Asia Pacific segment declined by $1.1 million or 5.4%, to $18.6 million in the third quarter of fiscal 2025 compared to $19.6 million in the third quarter of fiscal 2024. Billable hours decreased by 5.5% and were partially offset by a 1.7% (or 5.2% on a constant currency basis) increase in the average bill rate as a result of the Company\u2019s value-based pricing initiative.\n<\/p>\n Outsourced Services<\/i><\/b> \u2013 Revenue in the Outsourced services segment remained at $9.4 million consistent with the prior year quarter. Both billable hours and average bill rates remained steady.\n<\/p>\n All Other<\/i><\/b>\u2013 Revenue in the All Other segment declined by $0.5 million or 21.7% to $1.8 million in the third quarter of fiscal 2025 compared to $2.3 million the prior year quarter. The billable hours decreased by 31.9% partially offset by an increase in average bill rate of 6.1% (or 6.1% on a constant currency basis).\n<\/p>\n
\nResources Connection, Inc. (Nasdaq: RGP<\/a>) (the \u201cCompany\u201d), a professional services firm, today announced its financial results for its third quarter of fiscal 2025 ended February 22, 2025.\n<\/p>\n\n