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Resources Connection (NASDAQ:RGP), which does business as RGP, reported fourth-quarter fiscal 2026 revenue of $106.1 million and said demand conditions appeared broadly stable as the company continues to invest in sales, consulting and artificial intelligence initiatives.
President and CEO Roger Carlile said the company's fourth-quarter results were aligned with the outlook RGP provided for revenue, gross margin and run-rate SG&A expense. Carlile said market conditions were "broadly consistent" with the prior quarter, with North America performing as expected and Asia Pacific in line with both the company's outlook and prior-quarter results. Europe was weaker, which management attributed to client-specific situations rather than broader economic or geopolitical issues.
"I remain optimistic about the future of our business as market conditions appear to be showing some stability," Carlile said.
Revenue Declines Year Over Year, Gross Margin Tops Outlook
CFO Jen Ryu said consolidated revenue declined 18.3% on a same-day constant currency basis from the prior-year quarter. Adjusted EBITDA was negative $0.6 million.
Gross margin was 37.6%, down from 40.2% a year earlier. Ryu said the decrease primarily reflected less favorable leverage of indirect cost of services and lower consultant utilization. Enterprise-wide average bill rate was $120 on a constant currency basis, compared with $125 a year ago, reflecting geographic revenue mix, including a greater contribution from Asia Pacific.
Ryu said bill rates in the North America segments remained strong. On-Demand Talent's average bill rate increased to $145 from $143 a year earlier, while Consulting's average bill rate increased to $163 from $159. In Europe & Asia Pacific, the average bill rate declined to $57 from $64, largely due to a higher proportion of revenue generated in Asia Pacific relative to Europe.
Segment Results Show Pressure in Consulting
RGP reported mixed segment performance, with management noting that the fourth quarter of fiscal 2026 contained one fewer week than the prior-year quarter. Year-over-year revenue comparisons were adjusted for business days and currency impact.
- On-Demand Talent: Revenue was $40.4 million, down 18% from the prior-year quarter. Segment adjusted EBITDA was $3.1 million, or a 7.6% margin, compared with $6.4 million, or a 12.1% margin, a year earlier.
- Consulting: Revenue was $36.6 million, down 23% year over year. Segment adjusted EBITDA was $2.3 million, or a 6.3% margin, compared with $8.3 million, or a 16.3% margin, in the prior-year quarter.
- Europe & Asia Pacific: Revenue was $17.1 million, down 14% year over year. Segment adjusted EBITDA was $0.4 million, or a 2.1% margin, compared with $1.9 million, or a 9% margin, a year earlier.
- Outsourced Services: Revenue was $10.3 million, down 1.6% year over year. Segment adjusted EBITDA was $2.1 million, or a 20.2% margin, compared with $3.1 million, or a 27.8% margin, in the prior-year quarter.
Ryu said Consulting utilization remained under pressure. In response to a question from Baird analyst Mark Marcon, she said utilization for salaried consultants was in the low 60% range, below RGP's target of above 75% to 80%, and potentially above 80%. She said improving utilization to that range could provide roughly 200-plus basis points of gross margin benefit.
Cost Actions Continue as Investments Shift Toward Growth
Run-rate SG&A expense was $40.5 million in the fourth quarter, down 12% from $46.2 million in the prior-year period. Ryu said the improvement reflected cost actions executed over the past fiscal year.
Non-run-rate SG&A expense totaled $14.1 million, including $6.4 million of non-cash expenses and $7.7 million of cash expenditures. Ryu said those costs were primarily related to the divestiture of Sitrick and employee termination costs, including expenses tied to the chief operating officer transition.
Carlile said RGP has largely completed its initially planned investments for fiscal 2027, including the addition of seven sales professionals and senior professionals in Consulting. He said the company expects those investments to begin contributing more meaningfully in the second half of fiscal 2027 after a ramp-up period.
In response to Noble Capital analyst Joe Gomes, Carlile said most of RGP's strategic priorities "never stop," but the company is "for the most part" complete with the investments it planned to support fiscal 2027. Ryu added that additional cost reductions are expected in fiscal 2027, including occupancy-related costs, but said the scale would be less significant than in fiscal 2026.
Customer Survey and AI Remain Strategic Focus Areas
Carlile discussed a recent Voice of the Customer survey of 500 decision-makers and buyers from current and former RGP customers. He said early results indicated RGP was rated stronger than execution- and staffing-focused competitors, though the company still has work to do against larger traditional consultancies.
According to Carlile, clients cited trusted partnership, speed of execution, flexibility of delivery model and quality of people and services as top reasons for choosing RGP. He also said RGP had a strong Net Promoter Score, with 95% of customers indicating an intent to increase or maintain their level of engagement with the company.
AI remains a major strategic priority for RGP. Carlile said the company sees AI changing how work is done across finance, risk, technology and transformation. He said RGP is working to use AI internally to improve productivity while also developing AI-enabled solutions, talent and partnerships for clients.
During the question-and-answer session, Carlile said AI is becoming part of "virtually every conversation" with clients. He said RGP is focused on helping clients prepare data, establish governance, select systems and pursue efficiency opportunities. While acknowledging concerns that AI could disrupt professional services, Carlile said he believes periods of technological change can create demand for consulting support as clients navigate complexity.
Balance Sheet and First-Quarter Outlook
RGP ended the quarter with $82.4 million in cash and cash equivalents and no outstanding debt. Quarterly dividend payments totaled $2.3 million, which Ryu said represented a 6% annualized yield based on the company's stock price at the end of the fourth quarter. The company also had $79.2 million remaining under its share repurchase authorization.
Ryu said RGP replaced its prior credit facility with a new revolving credit facility intended to provide greater flexibility within its covenant structure and better align with capital needs. In response to a question from Marcon, Ryu said the facility includes typical covenants and two main financial covenants: a fixed charge coverage ratio and a minimum liquidity ratio. She said the fixed charge coverage ratio is a springing covenant and that RGP does not expect it to come into play.
For the first quarter of fiscal 2027, RGP expects revenue of $97 million to $102 million, which management said reflects normal summer seasonality and the impact of the Sitrick divestiture. The company expects gross margin of 37% to 38% and run-rate SG&A expense of $41 million to $43 million. Non-run-rate and non-cash expenses are expected to range from $2 million to $3 million, primarily consisting of non-cash stock compensation expense and amortization of capitalized system transformation costs.
Ryu said RGP made "meaningful progress" in fiscal 2026 aligning its cost structure, strengthening the organization and investing in key growth priorities. She said the company believes its balance sheet and operational foundation position it to execute more consistently and create long-term shareholder value.
About Resources Connection (NASDAQ:RGP)
Resources Connection, Inc (NASDAQ: RGP) is a publicly traded professional services firm that specializes in providing independent consulting and project-based teams to help organizations manage critical business challenges. Operating under the RGP brand, the company connects highly skilled consultants with clients seeking support in areas such as finance and accounting, legal and risk management, supply chain optimization, technology implementation, and digital transformation.
RGP's consultants bring specific industry and functional expertise to engagements, working on a flexible basis that allows clients to scale resources up or down as needed.
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