Resources Connection Inc.
10/07/2026 | Press release | Distributed by Public on 10/07/2026 15:03
Quarterly Report for Quarter Ending August 29, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for three months ended August 29, 2026 should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended May 30, 2026 filed with the Securities and Exchange Commission ("SEC").
Forward-Looking Statements
This discussion and analysis contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to expectations concerning matters that are not historical facts. For example, statements discussing, among other things, expectations regarding our operating segments, expectations regarding our transformation efforts and the macroeconomic environment, expected costs and liabilities, business strategies, growth strategies and initiatives, future revenues and future performance, are forward-looking statements. Such forward-looking statements may be identified by words such as "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "forecast," "future," "intends," "may," "might," "plans," "potential," "predicts," "remain," "should," "strategy," "target," "will," "would," or similar terms, future or conditional tense verbs or the negative of these terms or other comparable terminology. In this Quarterly Report on Form 10-Q, such statements include statements regarding our growth, operational and strategic plans.
Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, these statements and all phases of our 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, but are not limited to, the following: risks related to an economic downturn or deterioration of general macroeconomic conditions, the highly competitive nature of the market for professional services, risks related to the loss of a significant number of our consultants, or an inability to attract and retain new consultants, the possible impact on our business from the loss of the services of one or more key members of our senior management or key sales professionals, risks related to potential significant increases in wages or payroll-related costs, our ability to secure new projects from clients, our ability to achieve or maintain a suitable pay/bill ratio, our ability to compete effectively in the competitive bidding process, risks related to unfavorable provisions in our contracts which may permit our clients to, among other things, terminate the contracts partially or completely at any time prior to completion, our ability to realize the level of benefit that we expect from our restructuring initiatives, risks that our digital expansion and technology transformation efforts may not be successful, our ability to use artificial intelligence ("AI") and machine learning in our business, our ability to build an efficient support structure as our business continues to grow and transform, our ability to grow our business, manage our growth or sustain our current business, our ability to serve clients internationally, additional operational challenges from our international activities, possible disruption of our business from our past and future acquisitions, our potential inability to adequately protect our intellectual property rights, risks that our computer hardware and software and telecommunications systems are damaged, breached or interrupted, risks related to the failure to comply with data privacy laws and regulations and the adverse effect it may have on our reputation, results of operations or financial condition, our ability to comply with governmental, regulatory and legal requirements and company policies, the possible legal liability for damages resulting from the performance of projects by our consultants or for our clients' mistreatment of our personnel, risks arising from changes in applicable tax laws or adverse results in tax audits or interpretations, the possible adverse effect on our business model from the reclassification of our independent contractors by foreign tax and regulatory authorities, the possible difficulty for a third party to acquire us and resulting depression of our stock price, the operating and financial restrictions from our credit facility, risks related to the variable rate of interest in our credit facility, the possible impact of activist shareholders, the possibility that we are unable to or elect not to pay our quarterly dividend payment, our ability to establish and maintain effective internal control over financial reporting, and other factors and uncertainties as are identified in our most recent Annual Report on Form 10-K for the year ended May 30, 2026, which was filed on July 24, 2026 ("Fiscal Year 2026 Form 10-K") and our other public filings made with the Securities and Exchange Commission ("SEC") (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 included herein, which speak only as of the date of this Quarterly Report. We do not intend, and undertake no obligation, to update the forward-looking statements in this filing to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, unless required by law to do so.
References in this filing to "Resources Global Professionals," the "Company," "we," "us," and "our" refer to Resources Connection, Inc. and its subsidiaries.
Overview
Resources Connection, Inc. ("RGP," "we" or "us") is a global professional services firm based in Dallas, Texas (with offices worldwide) with three decades of experience helping the world's top organizations navigate change and seize opportunity. With three integrated offerings - On-Demand Talent, Consulting, and Outsourced Services - we provide CFOs and other C-suite leaders with the flexibility to solve today's most pressing challenges. The Company's principal markets of operations are North America, Europe & Asia Pacific.
We operate under the following reporting units: (i) On-Demand Talent, (ii) Consulting, (iii) Europe & Asia Pacific, and (iv) Outsourced Services. Our previous reportable segments included Sitrick, a crisis communications and public relations firm, which did not individually meet the quantitative thresholds to qualify as a reportable segment (disclosed as "All Other"). On May 2, 2026, we completed the sale of 100% of the membership interests of Sitrick Group, LLC ("Sitrick"), to Sitrick, LLC, an entity owned by one of the original founders of Sitrick Group, LLC. The Company initiated the sale in connection with its broader transformation initiative to simplify its business portfolio. As a result of the sale of Sitrick, the All Other segment was eliminated as of May 30, 2026.
Fiscal 2027 Strategic Focus Areas
The change described above reflects the Company's ongoing transformation efforts and are relevant to the trends affecting our current results. For fiscal 2027, our strategy is organized around the following strategic focus areas:
•Scale Consulting solutions and continue evolving On-Demand Talent offerings to address the evolving needs of our clients;
•Ramp the investments we have made to strengthen go-to-market execution;
•Continue to simplify and optimize our business portfolio and cost structure; and
•Accelerate AI adoption to drive productivity internally and deliver greater value to our clients.
Scale Consulting solutions and continue evolving On-Demand Talent offerings to address the evolving needs of our clients - As business priorities continue to change, organizations are increasingly seeking support across finance, technology, data, AI and operational transformation initiatives. We continue to align and expand our Consulting and On-Demand Talent capabilities to support these priorities while leveraging the flexibility of our delivery model. Our core solutions include: enterprise resource planning ("ERP") and cloud finance systems modernization, financial planning and analysis enhancement, accounting close process optimization, technical accounting, post acquisitions integration, enterprise risk management, data strategy and analytics, and AI adoption and enterprise digital transformation. We also continue to expand and broaden the skillset of our consultant base to support areas of client demand, particularly in technology and AI-related disciplines.
Ramp the investments we have made to strengthen go-to-market execution - We made targeted investments beginning in the second half of fiscal 2026 to expand sales capacity and to enhance our consulting capabilities in areas including mergers and acquisitions, data analytics and AI. These investments are intended to strengthen our ability to support the evolving needs of our clients, broaden our service capabilities, and improve the effectiveness of our go-to-market efforts across our business.
Continue to simplify and optimize our business portfolio and cost structure - During fiscal 2026, we took action to simplify our operations and align our cost structure with market conditions. As we build on that progress in fiscal 2027, we remain focused on streamlining our operating model, aligning resources with our core service offerings and growth opportunities, and improving scalability across the organization. In May 2026, we completed the sale of the Sitrick practice following a review of our business portfolio. We will continue to improve the functionality, adoption and utilization of our recently implemented technology to drive further operating efficiencies.
Accelerate AI adoption to drive productivity internally and deliver greater value to our clients - During fiscal 2027, we are continuing to invest in AI capabilities that support our operations and client service offerings. Internally, we are continuing to leverage and implement new technology intended to improve productivity and accelerate delivery. Our focus is not only on AI adoption itself, but also on helping clients manage the broader business changes that AI creates. We are doing that through a combination of AI-specific offerings and our existing expertise in transformation, operations, talent, and governance.
Market Trends and Uncertainties
Against this strategic backdrop, the Company continues to operate in a macroeconomic environment characterized by moderate but uneven global growth. While demand for professional services remains resilient, clients are increasingly selective, prioritizing projects with near-term, measurable returns, particularly in areas such as AI, digital transformation, and cost optimization. This selectivity has contributed to variability in demand across service offerings. Additionally, heightened geopolitical tensions, fluctuations in currency exchange rates, recent U.S. government and policy changes, and tariff actions and broader trade-related uncertainty have contributed to economic disruption and uncertainty, which may impact client spending, project timing and overall demand for the Company's services. These factors may continue to negatively affect our financial results and operating cash flows.
Fiscal 2027 Developments
Management Changes
On September 1, 2026, Jennifer Y. Ryu submitted her resignation from her position as Executive Vice President and Chief Financial Officer of the Company effective October 2, 2026. Ms. Ryu will not receive severance benefits in connection with her separation. Effective October 3, 2026, Ms. Jessica Block, currently the Company's Chief AI Officer, assumed the role of the Company's Interim Chief Financial Officer to ensure continuity and continued focus on the Company's strategic priorities. Ms. Block will continue to report to the Company's Chief Executive Officer.
On September 17, 2026, the Board of Directors appointed Ms. Trisha Jenks as the Company's Chief Accounting Officer and principal accounting officer of the Company, effective October 3, 2026.
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Item 8 of Part II of our Fiscal Year 2026 Form 10-K, and in Note 2 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
There have been no material changes in our critical accounting policies, or in the estimates and assumptions underlying those policies, from those described under the heading "Critical Accounting Policies and Estimates" in Item 7 of Part II of our Fiscal Year 2026 Form 10-K.
Non-GAAP Financial Measures
We use certain financial measures that are not calculated in accordance with GAAP to supplement the evaluation of our financial and operating performance. These non-GAAP financial measures should be considered in addition to, and not as substitute for, the most directly comparable measures prepared in accordance with GAAP. A non-GAAP financial measure is 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 Consolidated Statements of Operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented.
The non-GAAP financial measures we use to evaluate our operating results are described below:
•Same-day constant currency revenue adjusts reported revenue for the impact of foreign currency fluctuations and differences in the number of business days between comparable periods:
◦Currency impact. To remove the impact of fluctuations in foreign currency exchange rates, we calculate same-day constant currency revenue, by applying the exchange rates in effect during the comparable prior period to the current period revenue.
◦Business days impact. To remove the effect of fluctuations caused by comparable periods having a different number of business days, we calculate same-day revenue as current period revenue, adjusted for currency impact, divided by the number of business days in the current period and multiplied by the number of business days in the comparable prior period. The number of business days in each respective period is provided in the "Number of Business Days" section in the table below.
•EBITDA is calculated as net income (loss) before amortization expense, depreciation expense, interest and income taxes.
•Adjusted EBITDA is calculated as EBITDA excluding stock-based compensation expense, amortized ERP system costs, acquisition costs, loss (gain) on sale of assets, restructuring costs, and other items we believe are not representative of the Company's core operations. We also present herein Adjusted EBITDA at the segment level as a measure used to assess the performance of our segments. Segment Adjusted EBITDA excludes certain shared corporate administrative costs that are not practical to allocate. See Note 11 - Segment Information and Enterprise Reporting in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for further information.
•Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue.
Same-Day Constant Currency Revenue
We use same-day constant currency revenue to evaluate revenue trends on a more comparable and consistent basis. Revenue performance is primarily driven by change in billable hours and average bill rates. This measure is intended to improve comparability by excluding the effects of foreign currency fluctuations and differences in the number of business days between periods. We believe this measure provides more clarity to our investors in evaluating our core operating performance.
The following table reconciles same-day constant currency revenue, a non-GAAP financial measure, to revenue as reported in the Consolidated Statements of Operations, the most directly comparable GAAP financial measure, by segment (in thousands, except number of business days).
Revenue by Segment
| Three Months Ended | |||||||||||||||||||||||||||||
| August 29, 2026 | August 30, 2025 | ||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||
| As reported (GAAP) | Currency impact | Business days impact | Same-day constant currency revenue | As reported (GAAP) | |||||||||||||||||||||||||
| On-Demand Talent | $ | 38,559 | $ | (73) | $ | - | $ | 38,486 | $ | 44,442 | |||||||||||||||||||
| Consulting | 32,380 | (148) | (5) | 32,227 | 43,641 | ||||||||||||||||||||||||
|
Europe & Asia Pacific
|
17,132 | 466 | (360) | 17,238 | 19,888 | ||||||||||||||||||||||||
| Outsourced Services | 10,015 | - | - | 10,015 | 9,994 | ||||||||||||||||||||||||
| All Other | - | - | - | - | 2,264 | ||||||||||||||||||||||||
| Total Consolidated | $ | 98,086 | $ | 245 | $ | (365) | $ | 97,966 | $ | 120,229 | |||||||||||||||||||
Our fiscal quarters generally consist of 13 weeks each, except in fiscal years that include a 53rd week, during which we have one 14 week quarter. Despite the consistent number of weeks, the number of business days may vary between periods due to holidays. The table below sets forth the number of business days in each period by segment
| Three Months Ended | |||||||||||
| Number of Business Days | August 29, 2026 | August 30, 2025 | |||||||||
| (Unaudited) | (Unaudited) | ||||||||||
|
On-Demand Talent (1)
|
64 | 64 | |||||||||
|
Consulting (1)
|
64 | 64 | |||||||||
|
Europe & Asia Pacific (2)
|
65 | 64 | |||||||||
|
Outsourced Services (1)
|
64 | 64 | |||||||||
|
All Other (1)
|
64 | 64 | |||||||||
(2) The business days in international regions represent the weighted-average number of business days.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
We use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to assess core operating performance. We believe these measures provide investors with useful supplemental information to evaluate our performance across periods. The following table presents EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated and reconciles these measures to net loss and net loss margin, the most directly comparable GAAP financial measures (in thousands, except percentages).
| Three Months Ended | |||||||||||||||||||||||
|
August 29, 2026 |
% of
Revenue (1)
|
August 30, 2025 |
% of
Revenue (1)
|
||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
|
Net loss
|
$ | (7,970) | (8.1 | %) | $ | (2,405) | (2.0 | %) | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Amortization expense | 634 | 0.6 | % | 1,193 | 1.0 | % | |||||||||||||||||
| Depreciation expense | 263 | 0.3 | % | 348 | 0.3 | % | |||||||||||||||||
|
Interest income, net
|
240 | 0.2 | % | 44 | - | % | |||||||||||||||||
|
Income tax expense (benefit)
|
442 | 0.5 | % | 477 | 0.4 | % | |||||||||||||||||
| EBITDA | (6,391) | (6.5 | %) | (343) | (0.3 | %) | |||||||||||||||||
| Stock-based compensation expense | 1,422 | 1.4 | % | 2,281 | 1.9 | % | |||||||||||||||||
|
Amortized ERP system costs (2)
|
702 | 0.7 | % | 702 | 0.6 | % | |||||||||||||||||
|
Acquisition costs (3)
|
150 | 0.2 | % | 425 | 0.4 | % | |||||||||||||||||
|
Gain on sale of assets (4)
|
76 | 0.1 | % | - | - | % | |||||||||||||||||
|
Restructuring costs (5)
|
417 | 0.4 | % | - | - | % | |||||||||||||||||
| Adjusted EBITDA | $ | (3,624) | (3.7 | %) | $ | 3,065 | 2.5 | % | |||||||||||||||
(1)The percentage of revenue may not foot due to rounding.
(2)Amortized ERP system costs represent the amortization of capitalized technology transformation costs related to a newly implemented ERP system, which was recorded within selling, general, and administrative ("SG&A") expenses on the Consolidated Statements of Operations.
(3)Acquisition costs primarily represent costs included in net loss related to the Company's business acquisition of Reference Point. These costs include transaction bonuses and cash retention bonus accruals.
(4) Gain on sale of assets was related to the Company's sale of Sitrick.
(5)Restructuring costs during the three months ended August 29, 2026 include employee termination costs incurred in connection with the reduction in force associated with the 2026 Transformation Initiative.
These non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or as substitutes for revenue, net income (loss) or other measures of financial performance or financial condition prepared in accordance with GAAP for purposes of analyzing our revenue, profitability or liquidity. These measures have limitations because they exclude items that affect our GAAP results and other companies may calculate these non-GAAP financial measures differently, which may limit their comparative measure. Because of these limitations, these non-GAAP financial measures should not be considered a substitute but supplemental to performance measures calculated in accordance with GAAP.
Results of Operations
Comparability of Quarterly Results. Our quarterly results have fluctuated in the past and we believe they will continue to do so in the future. Certain factors that could affect our quarterly operating results are described in Item 1A of Part I of our Fiscal Year 2026 Form 10-K and our other public filings made with the SEC. Due to these and other factors, we believe quarter-to-quarter comparisons of our results of operations may not be meaningful indicators of future performance.
The following table sets forth, for the periods indicated, our Consolidated Statements of Operations data. These historical results are not necessarily indicative of future results. Our operating results for the periods indicated are expressed as a percentage of revenue below (in thousands, except percentages).
|
Three Months Ended
|
|||||||||||||||||||||||
|
August 29, 2026 |
% of
Revenue (1)
|
August 30, 2025 |
% of
Revenue (1)
|
||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Revenue | $ | 98,086 | 100.0 | % | $ | 120,229 | 100.0 | % | |||||||||||||||
| Cost of services | 61,420 | 62.6 | % | 72,760 | 60.5 | % | |||||||||||||||||
| Gross profit | 36,666 | 37.4 | % | 47,469 | 39.5 | % | |||||||||||||||||
| Selling, general and administrative expenses | 43,076 | 43.9 | % | 47,916 | 39.9 | % | |||||||||||||||||
| Amortization expense | 634 | 0.6 | % | 1,193 | 1.0 | % | |||||||||||||||||
| Depreciation expense | 263 | 0.3 | % | 348 | 0.3 | % | |||||||||||||||||
| Loss from operations | (7,307) | (7.4 | %) | (1,988) | (1.7 | %) | |||||||||||||||||
| Interest expense, net | 240 | 0.3 | % | 44 | 0.1 | % | |||||||||||||||||
| Other income | (19) | - | % | (104) | - | % | |||||||||||||||||
| Loss before income tax expense | (7,528) | (7.7 | %) | (1,928) | (1.6 | %) | |||||||||||||||||
| Income tax expense | 442 | 0.5 | % | 477 | 0.4 | % | |||||||||||||||||
| Net loss | $ | (7,970) | (8.1 | %) | $ | (2,405) | (2.0 | %) | |||||||||||||||
(1)The percentage of revenue may not foot due to rounding.
Consolidated Operating Results - Three Months Ended August 29, 2026 Compared to Three Months Ended August 30, 2025
Revenue
Revenue decreased $22.1 million, or 18.4%, to $98.1 million in the first quarter of fiscal 2027 from $120.2 million in the first quarter of fiscal 2026. On a same-day constant currency basis, revenue decreased by $22.3 million, or 18.5%. Billable hours decreased 13.2% year-over-year and the average bill rate for the first quarter of fiscal 2027 decreased 5.8% year over year, or 5.6% on a constant currency basis. The decline in billable hours reflects longer client decision-making timelines, delayed project starts, and lower project volume in Consulting, together with On-Demand Talent demand that remained below prior year levels but continued to show signs of stabilization. The average bill rate reflects a continued shift in the geographic revenue mix towards regions with lower bill rates and the May 2026 sale of Sitrick Group, LLC ("Sitrick").
Cost of Services
Cost of services decreased $11.3 million, or 15.6%, to $61.4 million for the first quarter of fiscal 2027 from $72.8 million in the first quarter of fiscal 2026. The decrease in cost of services was primarily attributable to a 13.2% decline in billable hours and a 5.1% decline in average pay rate.
Cost of services as a percentage of revenue was 62.6% for the first quarter of fiscal 2027 compared to 60.5% for the first quarter of fiscal 2026. The increase was primarily driven by lower utilization of salaried consultants, and to a lesser extent, a 0.2 percentage point increase in pay/bill ratio to 47.4% in the first quarter of fiscal 2027 from 47.2% in the first fiscal quarter of 2026.
The number of agile consultants on assignment during the first quarter of fiscal 2027 was 1,976 compared to 2,231 during the first quarter of fiscal 2026. The average number of salaried consultants during the first quarter of fiscal 2027 was 373 compared to 418 during the first quarter of fiscal 2026.
Selling, General and Administrative Expenses
SG&A expenses were $43.1 million, or 43.9% of revenue, for the first quarter of fiscal 2027 compared to $47.9 million, or 39.9% of revenue, for the first quarter of fiscal 2026. The $4.8 million improvement in SG&A expenses year-over-year was primarily driven by a $2.5 million decrease in employee compensation and benefits costs following the reductions in force in fiscal 2026, a $0.9 million decrease in stock-based compensation due to executive separations in fiscal 2026 that resulted in equity acceleration expenses, a $1.2 million decrease in the use of external and internal consultants that supported various internal business initiatives, and a $0.5 million decrease in facilities costs as a result of exiting certain offices, together with $0.6 million from other items, variable compensation and acquisition costs. These improvements were partially offset by a $0.6 million increase in business meeting expenses and a $0.4 million increase in restructuring costs related to ongoing activity associated with our efforts to achieve an improved cost structure.
Management and administrative headcount was 601 at the end of the first quarter of fiscal 2027 and 667 at the end of the first quarter of fiscal 2026.
The year-over-year decline in both SG&A expense and headcount primarily reflects the impact of workforce reductions and other restructuring actions initiated in fiscal 2026 and is not fully indicative of the Company's fiscal 2027 targeted investments to expand sales capacity and strengthen its consulting capabilities. These investments are being implemented in phases, and as a result, the quarter reflects only a partial-period impact of the related incremental costs.
Income Taxes
Income tax expense was $0.4 million for the first quarter of fiscal 2027, reflecting an effective tax rate of 5.9%, compared to an income tax expense of $0.5 million, or an effective tax rate of 24.7%, for the first quarter of fiscal 2026. The income tax expense in both quarters ended August 29, 2026 and August 30, 2025 was primarily attributable to income tax expense from profitable foreign jurisdictions, while losses in certain domestic and foreign jurisdictions did not result in a tax benefit due to the existence of valuation allowances.
Due to the sensitivity of the estimated annual effective tax rate to minor changes in estimated annual pretax results, the Company determined that the discrete method, whereby the year-to-date actual effective tax rate is applied, is the appropriate approach in its current computation of the interim tax provision, as the use of the estimated annual effective tax rate would provide a distortive result.
There can be no assurance that our effective tax rate will remain constant in the future because of factors such as changes in valuation allowance positions of our deferred tax assets and liabilities or changes in tax law or tax rates in jurisdictions that we operate in. Based upon future economic outlook and operating results of certain jurisdictions, it is reasonably possible that the current valuation allowance positions of certain jurisdictions could be adjusted within the next 12 months.
Operating Results of Segments
The Company's operating segments as of August 29, 2026 are as follows:
•On-Demand Talent - provides businesses with a go-to source for bringing in experts when they need them, serving predominately the office of the CFO.
•Consulting - drives transformation across people, processes and technology in areas including finance, technology, digital and AI, risk and compliance, and operational performance.
•Europe & Asia Pacific - is a geographically defined segment that offers both on-demand and consulting services (excluding the digital consulting business, which is included in our Consulting segment) to clients throughout Europe & Asia Pacific.
•Outsourced Services - operating under the Countsy by RGP™ brand, this segment offers finance, accounting and human resource services provided to startups, spinouts and scale-up enterprises, utilizing a technology platform and fractional team.
Each of these segments reports through separate segment managers to the Company's Chief Executive Officer, who is designated as the Chief Operating Decision Maker for segment reporting purposes. The Company's reportable segments are comprised of On-Demand Talent, Consulting, Europe & Asia Pacific, and Outsourced Services. Each of these segments represents a reporting unit for the purposes of assessing goodwill for impairment.
During fiscal 2026, the Company had a Sitrick operating segment that did not individually meet the quantitative thresholds to qualify as a reportable segment. Therefore, Sitrick was disclosed under the "All Other" segment in fiscal 2026. On April 7, 2026, the Company entered into a Membership Interest Purchase Agreement with Sitrick and Sitrick, LLC (the "Buyer"), pursuant to which the Company agreed to sell 100% of the membership interests of Sitrick to the Buyer. The sale was completed on May 2, 2026. As a result of the sale of Sitrick, the "All Other" segment was eliminated as of May 30, 2026.
The following table presents our operating results by segment for the three months ended August 29, 2026 and August 30, 2025 (in thousands). Revenue information by segment, on a GAAP basis and on a same-day constant currency basis, is set forth above under "Non-GAAP Financial Measures - Same-Day Constant Currency Revenue."
| Three Months Ended | |||||||||||
|
August 29, 2026 |
August 30, 2025 |
||||||||||
| Adjusted EBITDA: | (Unaudited) | (Unaudited) | |||||||||
|
On-Demand Talent
|
$ | 2,057 | $ | 4,422 | |||||||
| Consulting | 1,661 | 5,045 | |||||||||
| Europe & Asia Pacific | (119) | 837 | |||||||||
| Outsourced Services | 1,533 | 2,330 | |||||||||
| All Other | - | 183 | |||||||||
|
Unallocated items (1)
|
(8,756) | (9,752) | |||||||||
| Adjustments: | |||||||||||
| Stock-based compensation expense | (1,422) | (2,281) | |||||||||
|
Amortized ERP system costs (2)
|
(702) | (702) | |||||||||
|
Acquisition costs (3)
|
(150) | (425) | |||||||||
|
Gain on sale of assets (4)
|
(76) | - | |||||||||
|
Restructuring cost (5)
|
(417) | - | |||||||||
| Amortization expense | (634) | (1,193) | |||||||||
| Depreciation expense | (263) | (348) | |||||||||
| Interest expense | (240) | (44) | |||||||||
| Loss before income tax expense | (7,528) | (1,928) | |||||||||
| Income tax expense | (442) | (477) | |||||||||
|
Net loss
|
$ | (7,970) | $ | (2,405) | |||||||
(1) Unallocated items are generally comprised of unallocated corporate administrative costs, including management and board compensation, corporate support function costs and other general corporate costs that are not allocated to segments.
(2) Amortized ERP system costs represent the amortization of capitalized technology transformation costs related to a newly implemented ERP system, which was recorded within selling, general, and administrative expenses on the Consolidated Statements of Operations.
(3) Acquisition costs primarily represent costs included in net loss related to the Company's business acquisition of Reference Point. These costs include transaction bonuses and cash retention bonus accruals.
(4) Gain on sale of assets was related to the Company's sale of Sitrick.
(5) Restructuring costs during the three months ended August 29, 2026 include employee termination costs incurred in connection with the reduction in force associated with the 2026 Transformation Initiative.
Revenue by Segment
On-Demand Talent - Revenue in the On-Demand Talent segment declined by $5.9 million or 13.2% (13.4% on a constant currency basis), to $38.6 million in the first quarter of fiscal 2027 compared to $44.4 million in the first quarter of fiscal 2026 due primarily to a decrease in billable hours of 16.4%, partially offset by an increase in the average bill rate of 4.1% (or 3.9% on a constant currency basis). The decline in billable hours reflects reduced demand for operational accounting roles compared to a year ago, although we are seeing stabilization. The improvement in average bill rate is the result of the Company's continued pricing discipline.
Consulting - Revenue in the Consulting segment declined by $11.3 million or 25.8% (26.2% on a constant currency basis), to $32.4 million in the first quarter of fiscal 2027 compared to $43.6 million in the first quarter of fiscal 2026 due to a 27.1% decrease in billable hours, partially offset by a 2.2% (or 1.7% on a constant currency basis) increase in the average bill rate. The decline in billable hours was primarily due to lower project activity as clients remained cautious about committing to new projects, which led to longer decision cycles and delayed project starts. We continue to invest in consulting leadership and business development talent to strengthen our capabilities and go-to-market execution as client demand evolves.
Europe & Asia Pacific - Revenue in the Europe & Asia Pacific segment decreased by $2.8 million or 13.9% (13.3% on a constant currency basis), to $17.1 million in the first quarter of fiscal 2027 compared to $19.9 million in the first quarter of fiscal 2026. The decrease was primarily due to a 12.2% decrease in the average bill rate (or 9.8% on a constant currency basis) and a 1.3% decrease in billable hours. The decline in the average bill rate was due to a mix shift to lower cost markets in the Asia Pacific region.
Outsourced Services - Revenue in the Outsourced Services segment remained flat year over year. Billable hours increased 4.9%, and the average bill rate declined 1.0%.
All Other - Revenue in the All Other segment decreased by $2.3 million or 100.0% in the first quarter of fiscal 2027 due to the sale of Sitrick and the elimination of the segment as of May 30, 2026.
Adjusted EBITDA by Segment
On-Demand Talent - The On-Demand Talent segment's Adjusted EBITDA decreased by $2.4 million or 53.5%, to $2.1 million for the first quarter of fiscal 2027, compared to $4.4 million for the first quarter of fiscal 2026. The decrease was primarily attributable to a $2.6 million decrease in gross profit, partially offset by a $0.3 million decrease in segment expenses primarily related to a reduction in management compensation reflecting the substantial completion of fiscal 2026 restructuring actions and only a partial-period impact of phased go-to-market investments.
Consulting - The Consulting segment's Adjusted EBITDA decreased by $3.4 million or 67.1%, to $1.7 million for the first quarter of fiscal 2027, compared to $5.0 million for the first quarter of fiscal 2026. The decrease is primarily attributed to a decrease in gross profit of $5.2 million, which was partially offset by a reduction in segment expenses of $1.8 million primarily related to a reduction in management compensation, variable compensation and occupancy costs, reflecting the same restructuring and go-to-market investment activities noted above.
Europe & Asia Pacific - The Europe & Asia Pacific segment's Adjusted EBITDA decreased by approximately $1.0 million or 114.2%, to $(0.1) million for the first quarter of fiscal 2027, compared to $0.8 million for the first quarter of fiscal 2026. The decrease was primarily attributable to a $1.3 million decrease in gross profit, partially offset by a $0.3 million decrease in segment expenses related to a reduction in management compensation.
Outsourced Services - The Outsourced Services segment's Adjusted EBITDA decreased by $0.8 million, or 34.2% to $1.5 million in the first quarter of fiscal 2027 compared to $2.3 million for the first quarter of fiscal 2026. The decrease was primarily attributable to a $0.5 million decrease in gross profit and a $0.3 million increase in segment expenses.
All Other - The All Other segment's Adjusted EBITDA decreased by $0.2 million or 100.0% for the first quarter of fiscal 2027 compared to $0.2 million for the first quarter of fiscal 2026. The decline was attributable to the sale of Sitrick, which resulted in the elimination of the All Other segment as of May 30, 2026.
Liquidity and Capital Resources
Our primary sources of liquidity are cash provided by operating activities, our senior secured revolving credit facility (as discussed further below) and historically, to a lesser extent, stock option exercises and purchases under the Company's ESPP. While during the three months ended August 29, 2026, we did not generate positive cash flow from operations, we have generated positive cash flows from operations on an annual basis since inception. Our ability to generate positive cash flows from operations in the future will depend, at least in part, on customer demand and global economic conditions and our ability to remain resilient during periods of deteriorating macroeconomic conditions and any economic downturns. In fiscal 2026, the Company began its transformation initiative to redesign and streamline its operating model to achieve a reduced cost structure (the "2026 Transformation Initiative"). The Company executed workforce reductions affecting management and administrative roles, aimed at improving efficiency, reducing costs and streamlining operations. The 2026 Transformation Initiative is expected to significantly improve the Company's annual SG&A expenses and improve operating cash flows. As of August 29, 2026, we had $61.2 million of cash and cash equivalents, including $25.6 million held in international operations.
From November 12, 2021 to July 2, 2025, the Company had a revolving credit facility with Bank of America, N.A., pursuant to the terms of the credit agreement dated November 12, 2021 by the Company and Resources Connection LLC, as borrowers, and all of the Company's domestic subsidiaries, as guarantors, with the lenders that are party thereto and Bank of America, N.A. as administrative agent for the lenders (the "2021 Credit Facility"). The Company terminated the 2021 Credit Facility on July 2, 2025 and entered into a new credit agreement dated July 2, 2025 by and among the Company and Resources Connection LLC, as borrowers, and all of the Company's domestic subsidiaries, as guarantors, with the lenders that are party thereto and Bank of America, N.A. as administrative agent, L/C issuer and swingline lender (the "2025 Credit Facility").
The Company terminated the 2025 Credit Facility on July 13, 2026 and on July 15, 2026, the Company and Resources Connection LLC, as borrowers, and all of the Company's other domestic subsidiaries, as guarantors, entered into a Revolving Credit, Guaranty and Security Agreement with the lenders that are party thereto and PNC Bank, National Association, as agent for the Lenders (the "2026 Credit Facility"). See Note 4 - Long-Term Debt in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for further information regarding the 2026 Credit Facility. As of August 29, 2026, the Company had no debt outstanding under the 2026 Credit Facility.
As of May 29,2026, Resources Global Enterprise Consulting (Beijing) Co., Ltd, (a wholly owned subsidiary of the Company), as borrower, and the Company, as guarantor, had another revolving credit facility with Bank of America, N.A. (Beijing) as the lender (the "Beijing Revolver"). The Company terminated the Beijing Revolver on July 13, 2026.
In addition to cash needs for ongoing business operations, from time to time, we have strategic initiatives that could generate significant additional cash requirements. Such costs primarily include software licensing fees and other costs in areas including change management and training. We believe our current cash, ongoing cash flows from our operations and funding available under our 2026 Credit Facility will provide sufficient funds for these initiatives. As of August 29, 2026, we have non-cancellable purchase obligations totaling $8.7 million, which primarily consists of payments pursuant to the licensing arrangements that we have entered into: $2.6 million due during the remainder of fiscal 2027; $4.6 million due during fiscal 2028; $1.4 million due during fiscal 2029; and a nominal amount due thereafter. We lease office space under non-cancelable operating leases with various expiration dates.
We pay a regular quarterly dividend to our stockholders, subject to approval each quarter by our Board of Directors. Most recently, on August 6, 2026, our Board of Directors approved a cash dividend of $0.07 per share of our common stock, payable on October 1, 2026 to stockholders of record at the close of business on September 3, 2026. Continuation of the quarterly dividend is at the discretion of the Board of Directors and depends upon our financial condition, results of operations, capital requirements, general business condition, contractual restrictions contained in the 2026 Credit Facility and other agreements, and other factors deemed relevant by our Board of Directors.
As described under "Market Trends and Uncertainties" above, demand for professional services has become increasingly selective, which has resulted in variability in demand across service offerings, and uncertain macroeconomic conditions, including heightened geopolitical tensions, fluctuations in currency exchange rates, recent government and policy changes implemented in the United States, and tariff actions and uncertainties related to trade wars have created significant uncertainty in the global economy, which have adversely impacted, and may continue to adversely impact, demand for our services and our financial results, operating cash flows and liquidity needs. If we are required to raise
additional capital or incur additional indebtedness for our operations or to invest in our business, we can provide no assurances that we would be able to do so on acceptable terms or at all. Our ongoing operations and growth strategy may require us to continue to make investments in critical markets and further expand our internal technology and digital capabilities. In addition, we may consider making additional strategic acquisitions or dispositions or initiating additional restructuring initiatives, which could require significant liquidity and adversely impact our financial results due to higher cost of borrowings. We believe that our current cash, ongoing cash flows from our operations and funding available under our 2026 Credit Facility will be adequate to meet our working capital and capital expenditure needs for at least the next 12 months.
Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisitions, we may seek to sell additional equity securities, increase the use of our 2026 Credit Facility, expand the size of our 2026 Credit Facility or raise additional debt. In addition, if we decide to make additional share repurchases, we may fund these through existing cash balances or the use of our 2026 Credit Facility. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. Our ability to secure additional financing in the future, if needed, will depend on several factors. These include our future profitability and the overall condition of the credit markets. Notwithstanding these considerations, we expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.
Other than as described herein, there have been no material changes to our material cash requirements, including commitments for capital expenditures, described under the heading "Liquidity and Capital Resources" in Item 7 of Part II of our Fiscal Year 2026 Form 10-K.
Operating Activities
Operating activities for the first three months of fiscal 2027 used cash of $18.9 million compared to $7.8 million of cash used in the first three months of fiscal 2026. The cash used in operations for the three months ended August 29, 2026 included a net loss of $8.0 million, offset by non-cash adjustments of $2.9 million. The cash used in operations was primarily due to changes in operating assets and liabilities, which amounted to a net cash outflow of $13.8 million, including a $12.0 million payout of annual incentive compensation in July. The changes in operating assets and liabilities also included a $3.9 million decrease in other liabilities related to payments made in connection with executive transition and restructuring activities. A $1.6 million decrease in accounts payable and other accrued expenses further contributed to the decrease in operating assets and liabilities. These changes were partially offset by non-cash adjustments of $2.9 million (resulting primarily from a $1.4 million adjustment in non-cash stock-based compensation) and a $2.1 million decrease in trade accounts receivable.
Net cash used in operating activities was $7.8 million for the three months ended August 30, 2025. The cash used in operations for the three months ended August 30, 2025 included a net loss of $2.4 million, offset by non-cash adjustments of $5.3 million. The cash used in operations was primarily due to changes in operating assets and liabilities, which amounted to a net cash outflow of $10.8 million, driven by the timing of our pay cycle and the payout of annual incentive compensation resulting in a $15.8 million decrease in accrued bonuses, salaries and related obligations, a $1.5 million decrease in accounts payable and other accrued expenses and a $0.6 million decrease in other liabilities. These decreases were offset by a $5.7 million decrease in trade accounts receivable, a $0.8 million decrease in prepaid expenses and other current assets, a $0.6 million decrease in other assets, and a $0.2 million increase in prepaid income taxes.
Investing Activities
Net cash used in investing activities was $0.3 million for the first three months of fiscal 2027 compared to $0.1 million for the first three months of fiscal 2026. Net cash used in investing activities for the first three months of fiscal 2027 was primarily related to $0.3 million of cash used for leasehold improvements and the acquisition of computer equipment, which was partially offset by a nominal amount of sale proceeds.
Net cash used in investing activities was $0.1 million for the three months ended August 30, 2025. Net cash used in investing activities for the three months ended August 30, 2025 was primarily related to $0.1 million of cash used for the development of internal-use software and acquisition of property and equipment.
Financing Activities
Net cash used in financing activities was $1.9 million for the first three months of fiscal 2027 compared to $1.6 million for the first three months of fiscal 2026. Net cash used in financing activities during the first three months of
fiscal 2027 consisted of cash dividend payments of $2.4 million and $0.3 million of debt issuance costs related to entry into the 2026 Credit Facility. These payments were partially offset by $0.9 million in proceeds received from ESPP share purchases.
Net cash used in financing activities totaled $1.6 million for the three months ended August 30, 2025. Net cash used in financing activities during the three months ended August 30, 2025 consisted of cash dividend payments of $2.3 million, which were partially offset by $1.1 million in proceeds received from ESPP share purchases.
Resources Connection Inc. published this content on October 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 07, 2026 at 21:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]