Resources Connection, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. conference call. At this time, all participants are on a listen-only mode. Later, we'll 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 call is being recorded. At this time, I'd like to remind everyone that management will be commenting on results for the first quarter ended August 21. They will also refer to certain non-GAAP financial measures. An explanation and reconciliation of the measures to the most comparable GAAP financial measure 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 the call, management may make forward-looking statements regarding plans, initiatives, and strategies at the anticipated financial performance of the company. predictions and actual event or results may differ materially. Please see the risk factor section in the RGP's report on Form 10-K for the year ended May 28, 2021 for discussion of risk, uncertainties, and other factors that may cause the company's business results of operations and financial conditions to differ materially from what is expressed or implied by forward-looking statements made during this call. I'll now turn the call over to RGP's CEO,

Thank you, Operator. Welcome to our Q1 earnings call, and thank you for joining us today. I'll cover three topics, starting with a quick review of our strong first quarter performance. I'll then discuss progress against our digital agenda, followed by comments relevant to macro trends and original research we just completed within our current and target client base. On our Q4 call, we previewed stronger growth coming in Q1, and it did. Revenue was the highest achieved in over 10 years during a fiscal first quarter, and at 183.1 million, exceeded our guidance and represented 25% growth year over year. We also grew sequentially by 8.5%. We're pleased by the strength across many markets and industry verticals, driven by sustained improvement in operational execution and delivery, and macro trends such as workforce agility and digital transformation. Revenue in every major market was up double digits and our strategic client accounts delivered 26% growth. Disciplined account planning and client centricity are paying dividends. Adjusted EBITDA performance is a further highlight from Q1 results. As we expected, adjusted EBITDA margin improved to 12.2%, up 530 basis points from first quarter last year. This accomplishment is a result of operating with an improved fixed cost structure and strong gross margin performance. We've worked hard to increase the profitability of the business by achieving top-line growth, lowering headcount and real estate expense, and driving efficiency with technology and digital tools. We'll continue to do so. We're also focused on pricing the value and increasing bill rates appropriately. Consistent with our fiscal year goal, this is the second quarter in a row we've achieved 12% plus adjusted EBITDA margin. The management team set this trajectory when we began working together three years ago. While COVID sidetracked our progress as clients put new projects on hold for a time, we have more than fully recovered to exceed Q1 fiscal 19 levels and remain optimistic about the path forward. This optimism is fueled by two fundamental macro trends. The first centers on digital transformation, both internally and throughout our client base. The second is a tangible and meaningful shift toward organizational agility and specifically how work gets done. This trend equally impacts client strategy and talent preference. As I've shared many times, RGP's digital transformation is both internal and external. First, we are transforming how we deliver our services to clients and our gig opportunities to consultants through digital transformation initiatives. The best current example of this effort is Hugo, our soon-to-be-launched digital engagement platform to allow clients and talent to interact through a self-service marketplace for finance and accounting talent. Our differentiator is launching a technology platform with the trust, quality, and high-touch experience of our GP and the safety net of employment benefits and community, which we believe professional talent wants. As evidenced by discussion and research shared at the SIA conference on collaboration in the gig economy, platforms are coming to all corners of this industry. While we've seen such marketplaces like AYA Healthcare, Upwork, and Jobstack for nursing, creative, coding, light industrial, and hospitality gig work, we've not seen a dominant player in the professional gig arena. We intend to be the dominant player for knowledge workers engaging with enterprise business. I'm very pleased to share that Hugo will go live the week of October 18th in the tri-state market of New York, New Jersey, and Connecticut. We're launching with a pilot for a designated set of clients and finance and accounting roles. The team is ready, the product is ready for MVP launch, and we believe the macro environment is now conducive. Following our launch in Tri-State, we will extend the capability to the Dallas market and then Northern California within the next fiscal year. We'd hope to share more about the functionality of the product during an in-person investor day at NASDAQ on October 13th. However, given continued restrictions at NASDAQ due to the COVID Delta variant, we've decided to move the investor day to April 12th, 2022. We look forward to engaging in person and sharing client experience with Hugo at that time. Externally, the trend toward digital transformation in our client base continues to accelerate. We added Veracity's capabilities to our suite of services at just the right time two years ago. Clients continue to fund projects to digitize core processes for automation and collaboration and create digital tools to drive growth. The need spans our client base from healthcare providers to technology to big pharma. We know this concrete shift in corporate priorities is real as Veracity grew by an impressive 45% year over year with nice growth in revenue and pipeline coming from RGP's core client base. Please review our updated investor deck for new case studies and further color around Veracity's project work. As an important tailwind for our business, the macro trends creating today's opportunity rich environment come from both the demand and supply side. These trends have been confirmed by original research we recently gathered from our current and target client base. We will be releasing the human agility research this month prominently on our website as it confirms how post-pandemic behaviors favorable to our business model are here to stay. On the demand side, clients are committed to operating in a different paradigm with agility at the core. This means companies are building more distributed leadership, nimble finances, and new workforce strategies centered on agile talent. We're increasingly engaged with clients who want RGP formally on the org chart as a talent provider to match critical project-based skill sets to business imperatives. Decisions can then be made throughout the business to achieve speed and resiliency. On the talent side, our research confirms that control, choice, and diversity of experience matter more in a changed world. Where to work, when to work, and on what to work are increasingly vital considerations for professionals. Talent also wants to align with organization on shared values, empathy, and flexibility. Our business model beautifully meets the preferences of today's modern professional. While other firms are facing the harsh realities of the great resignation, we are increasingly an employer of choice. In closing, I want to express my enthusiasm about a new executive appointment we announced this week. Badresh Patel has been named our new chief digital officer effective immediately. As the CEO of Veracity, Badresh has been consulting on our digital and technology transformation efforts informally. We're now ready to formalize his role and remit. During the next year, he will stay close to Veracity sales and strategy while developing his leadership role over our enterprise digital roadmap, priorities, and alignments. We're delighted to welcome him into the C-suite and further bond Veracity and RGP as we pursue digital transformation work in all corners of the business. I'll now turn the call over to Tim for an update on operations.

Thank you, Kate, and good afternoon, everyone. During the first quarter, we saw continued strong progress in our revenue and operating metrics despite pandemic flare-ups and vacation effects typical of the summer months. Larger deal size and longer project duration exemplified the commercial environment as clients continued to take on significant and transformational initiatives. The momentum noted at the end of Q4 relative to revenue and pipeline continued. Enterprise revenue increased by 25% over the prior year quarter and 8.5% sequentially, while top-of-the-funnel activity was strong, leading to increases in qualified opportunity and ultimately to the highest level of closed deals since 2019. Revenue growth and pipeline strength was consistent across our core business in Asia Pacific, Europe, North America, Veracity, and County. Operational effectiveness, a strengthening economy, and macroeconomic trends favoring co-delivery provide a powerful combination for growth. As Kate noted, our first quarter results exceeded the high end of our revenue guidance. We have seen growth in both project staffing and professional consulting that is part of a broader market shift away from a fixed traditional workforce to a more liquid workforce that can be marshaled quickly and molded instantly into fit-for-purpose solutions. As companies start new initiatives or resume and accelerate existing ones, utilization of agile co-delivery is becoming a potent force. Clients are prioritizing flexibility and labor is demanding it. While elements of this dynamic started before the outset of COVID, the last 18 months have provided a significant and meaningful acceleration, leading to a palpable tightening of the traditional labor market and a higher reliance on a more fluid workforce solution. We continue to see more candidates seeking nontraditional employment and have seen declines in attrition rates and increases in hiring in our variable employee base over the last three quarters. As opportunities rise, project durations lengthen, and the ability to work unconstrained by locality becomes more prevalent, we are seeing more talent attracted to our platform. We continue to work seamlessly as one RGP, providing a diverse portfolio of experience for our consultants and demonstrating a durability and employment opportunity for new applicants. While we recognize that a tight labor market could impact us more broadly in the future, we believe that as more professionals assess their career objectives and opt for more flexible work, our ability to offer a blue chip client roster, career control, borderless delivery, and professional community will continue to be an attractive proposition for a more mobile workforce. As an example, a new West Coast consultant wanted an opportunity to lead strategic projects as his traditional role was not providing challenge and growth opportunities. He chose to come to RGP as a project lead for one of our premier healthcare clients. His positive experience with us proved to be the impetus to refer his sister to RGP. She was enduring a reorganization and felt like her current employer had misaligned values from her own. After hearing about RGP's model and culture, she came aboard and is now also working remotely and project managing a transformation at another healthcare client. Over time, we see workforce desires and our ability to meet them leading to more employment stickiness to RGP and an upward trend to our existing tenure of approximately three years, which is a strong statistic given industry trends and our flexible employment model. While we feel that general workforce shifts are already favorable to our model, we will continue to focus on operational discipline and providing an excellent consultant experience. As we've noted in previous quarters, a hybrid return to work continues with companies embracing distributed employee bases and utilizing a blend of on-site and virtual teams to drive projects. This shift is very much in line with RGP's value proposition of fashioning the right composition of skill sets within teams to deliver successful outcomes. In fact, the blend of on-prem and off-site resources allows for better matching of supply and demand and improved operational efficiency when responding to client opportunities. The pandemic has educated the market about the virtues of remote delivery, and a tight labor market with distributed workforces means that hybrid and modular resourcing is likely a permanent shift. We see some increased calls for on-prem engagements, but significantly less requiring a full-time on-site presence, as most companies are utilizing a hybrid workforce themselves and are comfortable engaging with us in the same manner. As an example, we are currently engaged with a technology company that is working on a number of initiatives concurrently as their rapid growth has begun to strain their infrastructure. They recognized early on that the scope of work contemplated would require a high reliance on external talent to help deliver the desired outcome. Noting the difficulty in attracting traditional employees and recognizing the competition for variable resources, they made a significant commitment to ring-fence RGP talent, knowing they had both immediate and future gaps to fill. Our team will work on-prem and remotely as required and will be staffed for multiple locations. We are in discussions with other clients who are interested in ensuring they have access to captive talent pool for immediate and future initiatives. Now let me turn back to our first quarter operations. During the quarter, we saw continued strength in pipeline and top-of-the-funnel activity. Average weekly revenue grew by approximately 4% 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 FY19, and pipeline and booked revenue continue to demonstrate pre-pandemic fortitude. The majority of markets demonstrated growth over prior year quarter, while several markets, strategic client account, healthcare, veracity, and county, demonstrated growth both sequentially and over prior year quarter. Lead generation and opportunity identification continue to be strong into Q2, as clients grapple with the pace of change coupled with a tight labor market. The early weeks of Q2 have shown a strong continuation of positive trends in both revenue and pipeline. In fact, the early quarter revenue trends are some of the highest we've seen since 2019. While the holidays started this quarter, we don't expect to be inordinately impacted. Revenue expansion is the core objective. However, we continue to target profitable growth through increased operational leverage. As in prior quarters in Q1, we continue to make strides in controlling fixed costs and focusing on efficiencies. yielding an over 500 basis point improvement in enterprise EBITDA margin. We understand the importance of in-person meetings and will not shy away from face-to-face interaction. However, the lessons learned during the last 18 months stay with us as we transition into a new normal. To that end, we will continue to sell, deliver, and operate in a more hybrid fashion, look for opportunities to reduce real estate, and utilize technology to extend and strengthen the experience of our clients and consultants in our quest to increase shareholder value. I will now turn the call over to Jen for a more detailed review of our first quarter results.