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. 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 28, 2022. They will also refer to certain non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures are 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 in 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 28, 2021 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 28, 2022, which will be filed today, July 28, 2022. I'll now turn the call over to RGP's CEO, Kate Duchesne.

Thank you, Operator. Good afternoon, everyone, and thanks for being with us. We're very proud of our recent performance, strongly capping off an outstanding year. We delivered exceptional Q4 results with double-digit revenue growth and the highest margin and profitability levels reached in well over a decade. These results all exceeded the high end of our guidance. Specifically, Q4 revenue was almost 26% higher than prior year. Growth margin increased more than 170 basis points over prior year to 41.3%. Gross profit increased more than 31% quarter over quarter, and adjusted EBITDA margin increased 340 basis points to 15.4% over prior years. We have communicated throughout the year that we are growing top line, improving pricing, and managing costs. We stated at the beginning of fiscal 22 that our goal is to deliver mid-teen adjusted EBITDA margins over the long term. In Q4, we exceeded this goal while also investing in the business and kicking off a major technology modernization project. This performance trend reflects the hard work we have put into the business to continue increasing shareholder value. These financial accomplishments also demonstrate that we're on the right path and our strategies are on point. We have successfully built a business model for agile, diverse, and expert talent WHO WANTS TO WORK AND CONSULT IN A DIFFERENT WAY. MEETING WITH AGILITY IS MORE RELEVANT AND ESSENTIAL THAN EVER IN TODAY'S MACRO ENVIRONMENT. WE WORK ACROSS FIVE CORE AREAS OF EXPERTISE. FINANCE AND ACCOUNTING, RISK AND COMPLIANCE, DIGITAL, SUPPLY CHAIN AND PEOPLE EXPERIENCE. WE ARE THE GO-TO PROJECT EXECUTION FIRM WITH PROJECT MANAGEMENT, CHANGE MANAGEMENT AND SUBJECT MATTER EXPERTISE FOR MANY OF THE WORLD'S MOST BELOVED BRANDS AS THEY TACKLE A MYRIAD OF TRANSFORMATION AND OPTIMIZATION INITIATIVES. WE CONTINUE TO BUILD DEEPER AND BROADER CLIENT RELATIONSHIPS TO GAIN MISSION CRITICAL STATUS AND DRIVE REOCCURRING REVENUE. WE MADE A STRATEGIC DECISION TO DIVEST THE TASK FORCE BUSINESS IN GERMANY AT THE CLOSE Effective May 31, 2022, we sold the business back to senior leadership and task force for two primary reasons. First, as part of our earlier restructuring initiative in Europe, we made the decision to focus on project execution in our strategic client segment, which includes large global enterprises with fulsome transformation agendas. This client focus does not align with the task force middle market client strategy in the interim management space. Second, RGP's consultant engagement, while primarily agile, is built on a suite of benefits and professional development that is different than the task force approach of creating a partner network of independence. Going forward, we will invest in building strategic client account teams in Germany for our healthcare and financial services practices. Next, I want to spend a few minutes outlining our strategic plan for the next three years and how we are breaking the plan down into enterprise objectives for fiscal 23. Our strategic plan has five core pillars spanning digital to brand to operational excellence, which we first outlined at our investor day. The plan is designed to modernize RGC to align to today's workforce and consulting needs for both talent and clients. We began to invest in digital transformation three years ago, and it's only growing in priority. In fiscal 23, we will work to advance three projects, the commercialization of Hugo, which is expanding into the California market this quarter, The execution of Project Phoenix, which is the modernization of our core technology stack, and the continued improvement of consultant experience through digital means. The brand work for fiscal 23 is twofold. We are refreshing our brand voice to align with hybrid workforce experience strategy and where our clients need us most. Execution with subject matter expertise. As we have shared previously, our business model is aligned well to the needs of modern professionals who want more control, choice, and transparency in how, where, when, and on what they work. We empower our talent by giving them access to high-value work on their terms. Our employee brand proposition is built on shared values, empathy, control, and choice. From the client perspective, our business also aligns well with leading companies who need access to critical, expert talent to accelerate projects with efficiency and better outcomes. Through fiscal 23, we will also be refining our brand architecture to make our services easier to buy and sell. Within our five core areas of expertise, we engage with our clients in two primary ways. Project consulting and on-demand talent. Within project consulting, we engage as management consultants, scoping and leading projects, and we co-execute project deliverables defined by our client strategy team. With respect to project consulting, we are working to better focus our delivery capabilities so we can move faster in closing business. We will continue improving our go-to-market design and strategic pursuits to deepen client centricity. WE HAVE TRUSTED RELATIONSHIPS WITH OUR LARGEST CLIENTS, AND THE GOAL IS TO DEEPEN AND BROADEN THEM THROUGH EXPANDED MARKET ACCOUNT AND INDUSTRY VERTICAL PROGRAMS. WE HAVE ESTABLISHED A NEW EMERGING ACCOUNT SEGMENTATION TO SERVE THE LONG TAIL OF THE BUSINESS IN MORE EFFICIENT WAYS, INCLUDING AN OMNICHANNEL APPROACH WITH HUGO. FOR FISCAL YEAR 23, WE HAVE ESTABLISHED A STRATEGIC PRICING TEAM WITH INXOTA MARKETS to ensure we are applying a value-based approach to pricing. As the business has transformed over the last 10 years from primarily on-demand talent support to primarily project consulting, pricing strategies still have ample room to evolve. Finally, as we reviewed in our investor day, we will pursue strategic and disciplined tech in M&A to strengthen areas of practice where we see enhanced market opportunities. We believe we have compelling opportunities in certain areas, including digital, people experience, and finance and accounting advisory services. These strategies and enterprise objectives I've outlined will serve to strengthen our business in the face of high inflation and recessionary pressures in the macro environment. RGP's business today is much more diverse than during the great financial crisis of 2008 and 9, WHEN WE FOCUS PREDOMINANTLY ON FINANCE AND ACCOUNTING STAFFING WORK, INCLUDING STOCKS. TODAY WE SERVE THE NEEDS OF LARGE AND MID-SIZED ORGANIZATIONS TO CONTINUE TO MOVE FORWARD WITH MULTIFUNCTIONAL TRANSFORMATIONAL INITIATIVES EVEN AS THEY ENTER TROPEO WATERS. OUR GROWING PIPELINE DEMONSTRATES THAT TRANSFORMATION AND OPERATIONAL EXCELLENCE INITIATIVES REMAIN IMPERATIVE FOR OUR CLIENTS. IN ADDITION, FOR CLIENTS FACING MACRO INCERTAINTY AND RELUCTANCE TO INCREASE PERMANENT HEAD COUNTS, OUR MODEL PRESENTS AN ATTRACTIVE ALTERNATIVE TO EXECUTE OUR MISSION CRITICAL WORK. RECENT HEADLINES DECLARE THAT WELL-KNOWN COMPANIES ARE PUTTING THE BRAKES ON FULL-TIME EQUIVALENT HIRING AND BRINGING MORE AGILITY INTO THEIR WORKFORCE. THIS FOUNDATIONAL SHIFT IN TALENT STRATEGIES FOR GREATER RESILIENCY is a favorable tailwind for our business. Our growing pipeline metrics and improving win rates reinforce the relevancy of our business model in today's economic environment. It's also worth noting that even for clients that don't alter their hiring plans in response to recessionary pressures, the persistence of a tight labor market alone favors our GPs model, which allows clients access TO HIGH-QUALITY TALENT ON A PROJECT OR ON-DEMAND BASIS. I WILL CLOSE WITH A STORY OF RESILIENCY FROM ONE OF OUR CONSULTANTS THAT HELPS EXPLAIN OUR CONTINUED STRONG PERFORMANCE. IT REINFORCES WHY WE DESCRIBE OUR CULTURE AT RGP AS HUMAN FIRST, SHOWCASING HOW OUR PEOPLE LEAD WITH EMPATHY AND CARE IN A TROUBLED WORLD. GRACE ADAHUN, A LONG-TERM CONSULTANT FROM THE CHICAGO experienced a very serious medical emergency in her family. Her husband was suddenly diagnosed with a rare illness that required emergency brain and heart surgery. Grace needed time off with financial protection to continue to care for him and their young son. The RGP team mobilized right away, coordinating a PTO donation program that afforded Grace the time off and peace of mind to care for her family. Her husband is now recovering very well And Grace had this to say about her RGP experience at the first post-pandemic in-person Chicago consultant event last week. I quote, one of the theme topics from yesterday was the value of RGP. From a consultant perspective, every single one of us is screaming from the mountaintop how much we are valued here. Not just us, but our entire family unit feels it too. To be heard, supported, and cared for is truly a gift. So I am never leaving. Thank you for opening your hearts in so many ways I cannot begin to express. End quote. This story exemplifies why we are attracting the best talent in the marketplace by taking great care of our people who are then able to take great care of our clients and one another. Getting stickier with exceptional clients and consultants is our goal. I'LL NOW TURN THE CALL OVER TO TIM FOR AN UPDATE ON OPERATIONS.

GOOD AFTERNOON, EVERYONE. DURING THE FOURTH QUARTER, WE SAW CONTINUED STRONG REVENUE GROWTH, OPERATIONAL METRICS AND MARGIN PERFORMANCE. IN FACT, THIS MARKED THE SEVENTH PROSECUTIVE QUARTER OF POTENTIAL GROWTH. THE MOMENTUM WE HAVE NOTED AT THE END OF THE THIRD QUARTER CONTINUES THROUGHOUT THE FOURTH QUARTER AND INTO JUNE AND JULY. Revenue increased by 27.5% over prior year quarter on a same-day constant currency basis, while top-of-the-funnel activity was strong, fortifying the pipeline going into fiscal 23. Huge asset performance in the quarter was consistently strong across our core business, with strategic accounts, Asia Pacific, Europe, North America, healthcare, county, and veracity also forming one. Despite some of the recessionary worries in the current macro environment, we continue to encounter strong demand profiles across our portfolio, propelled by tenacious operational focus and the continued shift to co-delivery on important initiatives. We see this continually in our client base, both with new and existing clients who are undertaking transformational projects at a faster and faster pace. This change and the desire to partner with an agile project institution firm has provided the backdrop for increased opportunities, including expanding work within the same initiative, winning adjacent work based on delivery power, and being utilized in new ways despite longstanding, albeit previously narrow, relationships. In the third quarter, I highlighted a large technology client undergoing a transformation, which included a carve-out and stand-up of an entity. The initial deployment of the project was to implement an ERP and related applications utilizing a blended team comprised of client and RGP personnel at the functional and technical program level. That work continues, and our footprint has increased to support the documentation and optimization of key global business processes, as well as functional execution within the supply chain organization. As the RGP team has continued to demonstrate true partnership and capability, the team continues to grow, and we see further opportunity to assist in other key functional areas. This was a new client that has continued to embrace co-delivery and fully understands the value of RGP in helping them quickly meet their objectives. Similarly, at a new Midwestern financial services client, we closed an initial veracity engagement focused on workforce experience and the relaunch of an intranet earlier this year. That project has since increased in scope to nearly double the initial proposal, and the relationship has rapidly expanded, leading to new veracity engagements focused on redesign of existing technology implementation. Additionally, we have begun to identify more core RGP work leveraging this initial breakthrough with veracity. We have another client example is a long-time energy client, which has traditionally utilized RTP for on-demand talent, but has recently started to migrate their workforce strategy to utilize partners in co-delivery of important projects. They have always appreciated our ability to solution expediently and decided to widen their aperture to work with us on a delivery of a key technology implementation. Today, we have a team of nearly 2,000 deployed in North America, Europe, and Asia, providing project management and functional expertise. On the candidate side, we continue to attract strong talent to our company and have driven down attrition significantly during the year. As Kate mentioned, we compete successfully with traditional employers, both in industry and at other professional services firms, because we offer flexibility and control while retaining financial security, community, learning pathways, and other professions that have been the hallmark of traditional employment. While the labor market continues to be tight, our teams that are focused on talent acquisition and consultant engagement have done an incredible job attracting and retaining talent. We've seen strong hiring trends that continue throughout this quarter, and our consultant count remains at the highest level in many years. We expect this trend to continue given a shift in the way people want to work and live, and we are rapidly becoming the premier destination for professional talent that is demanding flexibility and daring to work differently. Included in our overall consultant count are many boomerangs, and affectionately used for alumni who returned to life, many of whom left with a little promise of something that didn't materialize. As an example, one of our consultants joined RGP in the fall of 2020. He immediately hit the ground running, demonstrating failing experience, a take charge style, and the ability to build teams. The client took notice and elevated her to an even more prominent role in their finance transformation. During her time on the project, she continued to be approached by both the client and other companies about joining their team. And finally, in the spring of 2021, she relented, joining a fast-growing startup. Six months later, she returned to RGP as she missed RGP's flexible model, the support of her RGP team, the challenge of new assignments, and her ability to work a hybrid schedule. This example shows how powerfully the desire for flexibility and control has shifted the mindset of the workforce at large. Clients and consultants demand agility and will move quickly to get it. Over time, we expect this shift to broaden and accelerate, increasing the number of roles and functions that are full-time agile. Now let me turn back to our first quarter operations. During the quarter, we saw continued pipeline growth and velocity, building on an exceptionally strong first quarter. Pipeline and budget revenue continue to be very strong. Also, while we made progress with respect to pricing, increasing bill rates by 4% compared to prior year quarter and 2% sequentially, we continue to see pricing leverage as an opportunity across the enterprise and remain focused on this strategic objective. New generation and opportunity identification continue to be strong in the Q1, and the early weeks of the new fiscal year have shown strong positive trends in revenue pipeline and close deals. While we are cognizant of potentially broader macro conditions, early revenue trends remain consistent with Q4 and seasonal patterns typical of the summer months prior to the pandemic. Finally, let me touch on operational leverage. As in prior quarters, in Q4, we continue to focus on controlling fixed costs and operating efficiency. Adjusted EBITDA margin improved significantly both sequentially and with compared to prior year reports. We continue to operate in a hybrid fashion but are committed to serving our clients based on what the situation dictates. I will now turn the call over to Jen for a more detailed review of our fourth quarter results.