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 touchtone phone, 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 second quarter ended November 27th, 2021. They will also refer to certain 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 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 or 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 28, 2021 for a discussion of risk, uncertainties, and other factors that may cause the company's business to 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, Kate Duchesne.

Thank you, Operator, and welcome, everyone, to our second quarter earnings call. Thank you for joining today. I'll cover four topics, starting with a quick review of our outstanding second quarter results. I'll then discuss market trends supporting our sustained performance. what we've done to capitalize on the trends, and our favorable outlook for the balance of the fiscal year. I'll also provide an update on our HUGO initiative and close with the introduction of our newly established advisory board. During our Q1 call, we guided toward 24% growth year over year, and I'm very pleased to say that our results were even stronger. Revenue was again the highest achieved in over 10 years with 31% growth year over year. The growth was delivered in both professional staffing and project consulting and was delivered across nearly all geographies. Our healthcare business grew by 21% year over year and the strategic client account program grew 27% over prior year quarter and both have strong deal flow in the pipeline. Our adjusted EBITDA doubled versus the prior year quarter to nearly 25 million, and our adjusted EBITDA margin improved to 12.5%. This accomplishment is the result of driving sustained revenue growth, creating an improved fixed cost structure, and expanding our gross margin. We've worked hard to increase the profitability of the business by driving greater sales productivity and operating efficiency. Our focus on shareholder return includes delivering low to mid-teen adjusted EBITDA margins while also making the appropriate investments in the business to drive top-line growth over the long term. We remain optimistic about the balance of the fiscal year. At present, two tailwinds are providing more business opportunity than we have experienced in over a decade. First, the great resignation or talent reassessment has caused many of our clients to experience skills gaps or temporary openings in critical operational roles that we can help fill to allow them to bridge the gap to permanent hires. Our GP's model is increasingly attractive to professional talent who want more choice, transparency, and flexibility in their work. This business model is absolutely built for today's knowledge worker. The second tailwind is the growth of project initiatives in our client base. Emerging from COVID lockdowns, many companies have accelerated transformation projects, which provide growing opportunity for our agile talent model. We are staffing and co-executing change projects related to finance, technology and digital, supply chain, and compliance transformation. Often these projects also require program project management expertise and change management support, which are core competencies of our consultant base. Our client base, largely the Fortune 1000, rely on us for agile talent support to run the place and change the place. Neither business challenge shows signs of slowing down, And because we are a trusted partner with a reputation for quality talent and outstanding client service, our pipeline is stronger than ever. We're not, however, simply relying on evolving and favorable trends. We've recently executed the following initiatives to be ready for these favorable market conditions. We've re-engineered our sales process, organization, and account strategy. We've revolutionized our delivery strategy to be borderless to ensure our clients have access to the best talent and our talent has access to the best projects regardless of geography. We've redesigned incentive compensation with a focus on employee return aligned with shareholder value. We've developed technology and digital consulting capabilities to address our clients' most pressing needs. And we've built a new digital pathway for stakeholder engagement. The secular tailwinds coupled with the operational improvements we have made create a fertile operating environment for our GP. Next, I'm happy to provide an update on Hugo, the digital engagement platform we launched in October in the tri-state market to allow finance and accounting professionals to find gig work in a digital world. We've launched with a pilot approach for a designated set of clients and finance and accounting roles. The functionality of the platform is working as planned. Our engagement with both talent and clients is growing as planned, and the early feedback from engagement with Hugo is very positive, with all stakeholders from clients to talent to RGP users describing the ease and fluidity of the designs and interactions. So far, this early feedback is a good indication that our investment and patience and building an enterprise-grade architecture built to scale is the right strategy in this rapidly evolving competitive landscape. Currently, we're building more inventory in terms of registered talent on the platform, and we'll be driving additional client engagement during the second half of the fiscal year with targeted go-to-market and marketing activities. This is a new pathway for engagement with our clients that will deliver results and returns for the business for years to come as technology disruption in the human capital industry marches forward. We believe we are first to market with a fully self-service platform for professional knowledge workers who want the benefits of gig as well as the safety net and community of an employee-employer relationship. Our team continues to plan for our Investor Day at the NASDAQ market site on April 12th. during which we'll share and demonstrate the powerful functionality and client and consultant experience of Hugo. While we eagerly look forward to in-person engagement with the investment community that day, we'll leave open the possibility of a virtual event, depending on the COVID restrictions in place at the time. In closing, I'm pleased to introduce RGP's inaugural advisory board. This board was created with the purpose of gathering valuable strategic insights from senior level executives within the business and professional services industry. These influential executives will provide RGP with independent guidance and advice on market strategies and trends that are defining today's changing workplace and workforce. The advisory board will also support our highest level global business development efforts with broader access to new clients and prospects, by leveraging the deep professional networks of the five well-connected executives who have joined us. We welcome Jeff Gelfand, John Malfitone, Vic Petrie, and Craig Schaefer to the RGP family, along with Ruth Hughes, who will continue to support us in this new role in Europe. Their impressive and diverse bios can be accessed via our website. We believe this group will help us expand our brand awareness at the C-level and will attract new clients who are increasingly looking for an alternative, high-value partner. I'll now turn the call over to Tim for an update on operations.

Thank you, Kate, and good afternoon, everyone. During the second quarter, we saw continued strong revenue and margin growth, as well as fortitude in operating metrics. We saw larger deal sizes, continued penetration into existing accounts, as well as heightened success with new logos. The momentum noted at the end of Q1 relative to revenue and pipeline continued. Enterprise revenue increased by 31% over prior year quarter and 9% sequentially, while top-of-the-funnel activity demonstrated continued strength despite the Thanksgiving holiday, leading to significant increases in qualified opportunities and ultimately to the highest level of closed deals in several years. Strong performance was consistent across our core business in Asia Pacific, Europe, North America, Veracity, and Countsy. While the rising economy and macro trends germane to our business have provided some economic tailwind, our operational focus and tenacity have led to increased opportunity, bigger wins, and growing foundational strengths. The growth we are seeing reflects the speed with which companies are taking on change, but also a broader and more permanent shift in the way workforce plans are built. Code delivery and the use of an agile workforce are here to stay. as much for the fact that companies recognize the benefits of access to talent that can be rapidly deployed for discrete purpose, as the realization that labor trends have changed and a broader swath of people are choosing to work differently. This desire for flexibility is symbiotic and is a powerful economic force that continues to accelerate. We see more candidates seeking flexible employment with more control and have seen declines in attrition rates and increases in hiring in our variable employee base over the last four quarters. The stigma of nontraditional employment, which was prevalent when RGP was founded, has now dissipated. Stability of opportunity, variety of choice, remote delivery optionality, and ultimate control over one's portfolio of experience is a desirable value proposition to an increasingly larger segment of the workforce that simply want to work differently. We will continue to work tirelessly to provide broad opportunity and depth of choice for our existing consultants and those considering joining our platform. We are confident that our demonstrated ability to give people career control, access to professional community, and our strong roster of clients will continue to be an attractive home for the modern worker, despite a tightening labor market, which has more immediately impacted traditional employment. As an example, a new consultant in our Texas practice was considering two traditional employment opportunities, one at Big Consulting and one in the financial services industry. He turned down both opportunities to work for us on a long-term project at a premier client that offered him the ability to make immediate impact without being restricted to a singular industry. Another recent hire joined for the opportunity to work on a large-scale finance transformation at a well-known technology client. She left her job in industry for the opportunity to learn new things, work with varied colleagues, and to gain experience in novel environments. These examples demonstrate a rising desire for our employment model and a durability in the commercial environment to sustain them. Over time, we expect to continue to compete with traditional employers for talent and to win at increasing rates. We are focused on enhancing overall consulting experience and are remaining closely attuned to workforce desires, leading to more employment stickiness to RGP. A hybrid return to work with companies embracing distributed employee bases and utilizing a blend of onsite and virtual teams is the dominant operating model. This allows for flexibility and resilience in the wake of current and future variants impacting the way we all live and work. The ability to tap into a wider array of talent, unbounded by geography, allows us to improve operational efficiency and our own success rate in the matching of supply and demand. A good example of this is a client in the Southeast that is a pre-IPO technology unicorn. Our client service team persistently nurtured relationships through the pandemic and when the opportunity arose, was able to rapidly deploy a team to effectively stand up a finance function and help with the system implementation. Today, that team is close to three dozen, geographically dispersed and working across the enterprise, supporting day-to-day operations with professional staffing and via project consulting on larger initiatives. Our advisory and project services group has had a large footprint with the client since day one and is currently leading a cross-functional program office coupled with change management. This demonstrates how operational tenacity, coupled with strong delivery, intersects with today's macro trends to provide excellent commercial opportunity for RGP. Now let me turn back to our second quarter operation. During the quarter, we saw continued strength in the pipeline and top-of-the-funnel activity. Average weekly revenue grew by approximately 11% from the first weeks of the quarter to the last. In fact, average daily revenue rates ended the quarter at the highest they've been in over a decade, and pipeline and book revenue are the strongest they've been in several years. Pricing continues to be a big opportunity across all sectors, and we will continue to be very focused on pricing, as we know there is upside and leverage to be gained. Lead generation and opportunity identification continue to be strong into Q3, and the early weeks of the quarter have shown strong positive trends in revenue pipeline and closed deals. In fact, the early quarter weekly revenue trends have built on the last weeks of Q2, which were very strong. With the holiday season falling in the quarter, we will be impacted, but expect to return strong in early January. Finally, let me touch on operating leverage. As in prior quarters, in Q2, we focused on making strides in controlling fixed costs and focusing on efficiency. Adjusted EBITDA margin improved both sequentially and from prior year quarter. We will continue to sell, deliver, and operate in a more hybrid fashion, look for opportunities to reduce our fixed real estate footprint, and utilize technology to improve the way we operate and provide a better experience for our stakeholders. I will now turn the call over to Jen for a more detailed review of our second quarter results.