Resources Connection, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference call, please press the star key followed by the zero button on your touchstone telephone, and you will be connected to an operator who will assist you. As a reminder, this conference call is being recorded. At this time, I would like to remind everyone that management will be commenting on results for the fourth quarter ended May 29, 2021. They will also refer to non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issued today. Today's press release can be viewed in the investor relations section of RGP's website and was also filed today with the SEC. Also during this call, management may make forward-looking statements regarding plans, initiatives, and strategies and the anticipated financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please see the risk factors section in RGP's report on Form 10-K for the year ended May 30, 2020 for a discussion of risk, uncertainties, and other factors that may cause the company's business results of operations, and financial condition to differ materially from what is expressed or implied by forward-looking statements made during this call. Such discussion will also be included in the risk factors section in RGP's report on Form 10-K for the year ended May 29, 2021, which will be filed on or around July 23, 2021. I'll now turn the call over to RGP CEO, Kate Duchesne.

Thank you, Operator, and welcome to our quarter four fiscal 21 earnings call. Thanks for joining us today. I'll cover three topics during my remarks, starting with a quick review of fourth quarter performance. I'll then outline our enterprise objectives for fiscal 22 to position the company against market opportunity and improve shareholder value. And lastly, I'll comment on positive macro trends that we're watching as the economic recovery unfolds. As we discussed last quarter, we expected Q4 to strengthen, and it did. Q4 revenue came in at $172.3 million, reflecting a sequential improvement of 10%. This improvement returned RGP to year-over-year growth and exceeded the high end of revenue guidance. In analyzing our results, please keep the following important timing comparison in mind. Our GP's fiscal year is June to May. We will not see the full impact of COVID-related recovery in our results until we report performance in Q1 of the current fiscal year. In other words, we did not experience the negative impact of COVID until well into Q4 last year. And that quarter also had an extra week of revenue, which covered some of the impact. Thus, RGP's double-digit revenue bounce back will really be seen when we report on results for the current quarter. One further highlight from the financial results before I move on, we're especially pleased with the improved adjusted EBITDA performance at 20.7 million, or a 12 percent margin in the quarter. That's up 600 basis points sequentially and 160 basis points year over year. We've worked hard to improve the profitability of the business and will continue to do so. We exceeded gross margin guidance and SG&A performance was better than guided. Today, given what we're currently tracking in pipeline and committed revenue, we believe Q1 fiscal 22 will be another strong quarter. especially given the easier comparisons. While COVID numbers seem to be creeping back up in parts of the world, we are better positioned today to execute remotely and virtually than we were 18 months ago. Clients trust us and know we have the quality tools and process to deliver in a disrupted environment. Now I'll outline our enterprise objectives for fiscal 22. These are the main priority items for the management team to accomplish, and they align everyone in our organization for the year. There are five enterprise objectives, and I'll briefly comment on each. First, we've launched a project to elevate the technology infrastructure of our GP globally. This means we're upgrading our core ERP system and our core talent acquisition and management system. This technology initiative will accelerate our efficiency goals and data-led decision-making capabilities. We're eager to accelerate optimized process flow and automation. As a second enterprise objective, we'll be focused on further commercializing our digital strategies. The two areas of activity are driving more digital transformation revenue through our GP channels, both for Veracity and Digital Asia, and the launch of Hugo, RGP's digital engagement platform. In fiscal 21, we grew the Veracity digital consulting business by 36% Q4 21 over Q4 20, despite dealing with a global pandemic. Today, we have improved process and structure to drive that opportunity forward even more in fiscal 22. Hugo represents an accretive source of revenue, given it's both a new digital engagement channel as well as a service category we haven't capitalized on yet. As a reminder, Hugo empowers clients and gig workers to engage digitally for project work with a focus on early to mid-career level finance and accounting professionals. Powerfully combining digital with RGP's employment model and tradition of exceptional service, Hugo will continue to put humans first. We're completing soft launch development and will introduce the platform in New York City in the fall. The exact timing will be communicated during Q2 to ensure that the New York marketplace is healthy and is open sufficiently for a successful introduction. Third, we'll grow top-line revenue, leveraging these key strategies among others. For starters, we're broadening the strategic client program, moving 22 additional accounts into the program for fiscal 22 with dedicated client service personnel. We're also adding capability to the healthcare practice in the areas of revenue integrity, clinical trial support, and supply chain optimization. In addition, we're adding personnel to our fast-growing COUNCY business. COUNCY is a finance and HR as a service offering for startup and divested entities that choose strategically to outsource these functions. Finance as a service is a growing opportunity, and we have a bespoke approach built on the NetSuite Oracle platform, proprietary IP, and exceptional fractional CFO talent. As a fourth enterprise objective, we'll continue to improve our adjusted EBITDA performance to deliver even more shareholder value through disciplined management of headcount, business expense, and real estate costs. In fiscal 21, we reduced our cost structure by 26 million or 12% and will continue to eliminate expense in an increasingly digital virtual world. We're also focused on improving both utilization and pricing of salaried consultants in our APS group and other high value segments like Veracity. For example, Veracity increased bill rates by 6% year over year. The competition for talent is heating up and we'll continue to adjust our pricing to keep pace and reflect value delivered. Fifth, we'll strengthen the RGP brand. Our brand is built on the power of human and the world is moving in this direction. This year, we'll focus even more on our human first brand to improve consultant experience. This means creating more digital connection, providing opportunities for upskilling and professional community, and delivering care and wellbeing to our consultants. We can deliver what talent wants today, which is radical flexibility, work with a purpose, and a connection to an employer who cares about them personally and professionally. We're a business model built for the new realities of work. The encouraging signs in the macro client environment also indicate that the time is now for RGP. This month, for example, Chief Executive Magazine issued its July polling. CEO confidence in current business conditions has rebounded to a three-year high. CEOs are forecasting increases in transformation projects and CapEx for the year ahead and anticipate talent needs growing double digits. Simply put, big deals are back, and at the same time, companies are engaged in workforce strategies built for flexibility, speed, and resiliency. Ceridian, a human capital software firm, reported just yesterday in its future of work study that 62% of the 2,000 senior global executives polled during the spring believe that gig workers will substantially replace full-time employees within the next five years. Agile talent needs are rising, whether it's categorized as staffing or project-based work, and business leaders plan to leverage gig workers to increase the size of their teams. All of these factors are converging to make work more modular and time-boxed. RGP is built to deliver on modular work, whether it's onsite, remote, or outsourced. We partner with clients every day to fill skills gaps, and we do so with speed and flexibility. We find the right skills and deploy those skills for the right period. To close my remarks, I'm pleased to invite you to learn more about the macro trends impacting our business and progress against the fiscal 22 objectives during our upcoming investor day to be held at NASDAQ on October 13th in New York City. We've not hosted a Live Investor Day in many, many years, and we're excited to share more during that event. It is an inflection point for RGP. The world has turned in our direction. I'll now turn the call over to Tim for an update on operational trends, initiatives, and opportunities.

Thank you, Kate, and good afternoon, everyone. During the quarter, we saw good progress in our revenue and operating metrics as the economy recovers. A combination of client and prospect nurturing, coupled with the release of pent-up demand, resulted in increased momentum in revenue and pipeline growth. Lead generation and opportunity identification have reached pre-pandemic levels as new and existing buyers look to launch initiatives quickly in a competitive labor market. Enhanced outreach throughout the year is paying dividends, as closed engagements in our core business in Asia Pacific, Europe, and North America reached fiscal 2019 levels and pipeline continues to be strong. In sum, the strengthening of the economic environment combined with operational effectiveness has led to improved results. As Kate touched on, our fourth quarter results exceeded the high end of our revenue guidance. We continue to see the positive dynamic of clients resuming engagements that have been paused, initiating projects that were delayed, and generally looking at their project portfolio through a broader and longer-term lens as commercial confidence rises. This has led to increased demand for both professional staffing and project consulting, which we believe will continue as a permanent workforce shift around the use of variable workforce solutions for project co-delivery. This change predated the pandemic, but was clearly accelerated in the last 18 months as clients and talent increasingly embraced flexibility, initially out of necessity, but now by design. While there are lingering effects of the pandemic and we're not yet completely out of the woods, they do not dominate how we operate. We continue to deliver successfully using a blend of on-prem and off-site resources, a trend that plays to our strengths and will continue with increased prevalence as companies have learned to care more about resourcing based on fit for purpose versus proximity. This sets the table for better matching of supply and demand, which leads to elevated operational efficiency for RGP. While there have been some increased calls for on-prem resourcing, most companies are utilizing a hybrid workforce themselves and are comfortable engaging with us in the same manner. As an example, this quarter we began in earnest a complex financial transformation and compliance project with a financial services client that will require a large and distributed cadre of project consulting support for a number of months. Geography is important for some aspects of the project, but in other cases, mostly virtual delivery will suffice. Another illustration is engagement our healthcare practice won to stand up a project management office for an R&D transformation initiative for a top life sciences company, leading program and change management and supporting organizational redesign. The multi-year project consists of nearly a dozen work streams spanning multiple functional areas. Our delivery team for this project is delivering both on-site and remotely, working with our client in the way that is most effective for successfully delivering project outcomes. These engagements punctuate the fact that project delivery has to be more flexible and unconstrained in an environment that requires it. These are demand trends that will continue and play to our core strengths of rapid deployment, pristine delivery, and strong project and change management. Reported economic trends note a significant constriction in the labor market, and while we continually monitor for potential operational impacts, we haven't noted any material effects to date. With our broad geographic network, we're able to utilize borderless talent deployment to our advantage and as a differentiator. We work seamlessly as one RGP, and in working this way, consultants have been deployed more quickly on engagements with longer durations. In fact, given the tight labor market and the increased demand for co-delivery on strategic initiatives, we have also seen clients leaning into the concept of captive labor pools to ensure they have the ability to complete key projects while accepting, and in many cases asking for, distributed support. We have had several discussions with key clients in this arena, and this is a burgeoning trend and opportunity. Working in a more flexible fashion and maintaining control over key career decisions is the hallmark of employment choice in the new economy. This agility, combined with membership in our professional community, is an RGP core tenet, which allows us to produce an average consultant tenure of nearly three years. We believe that in the near term, as more professionals assess their career objectives and opt for more flexible work, The powerful combination of A-list clients, career control, flexible delivery, and professional community will make us an employer of choice. While we feel that trends are broadly favorable to our model, we will continue to focus on operational discipline, prioritization and resource allocation, and pricing governance. Now let me turn to our fourth quarter operations. During the quarter, we saw continued growth in the pipeline, and average daily revenue grew by approximately 6% from the first weeks of the quarter to the last. In fact, average daily revenue rates ended the quarter at the highest they have been since early FY20, and pipeline and book revenue have reached pre-pandemic levels. The majority of markets demonstrated sequential progress, while several markets, including Tri-State, Los Angeles, Chicago, UK, Cleveland, Portland, Japan, Hawaii, and Mexico demonstrated growth both sequentially and over prior year quarter. Finally, Veracity and County both grew sequentially and over prior year quarter, tenaciously ending the year as they began it, with strong growth. While we remain focused on revenue expansion, we target profitable growth through operational leverage. Throughout this year and in the quarter, we continue to make strides in controlling fixed costs and improving efficiency. We will remain balanced with respect to expense going forward, knowing the importance of in-person interaction, but heeding lessons learned during the last 18 months. To that end, we will continue to sell, deliver, and operate in a more borderless fashion, look for opportunities to reduce real estate footprint, and utilize technology to extend and strengthen our community. Before handing over to Jen, I want to provide some additional insight on early first quarter trends. The early weeks of Q1 have shown a strong continuation of positive trends in both revenue and growing pipelines. We will be watching for vacation trends this summer coming out of the pandemic, but to date, there is no unusual pattern of news. I will now turn the call over to Jen for a more detailed review of our fourth quarter results.