Resources Connection, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. conference call. Currently, 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 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 27th, 2023. 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 at RGP's website and also filed today with the SEC. Also during this call, management will 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, 2022 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 factor section in RGP's report on Form 10-K for the year ended May 27, 2023, which will be filed on July 25, 2023.

I'll now turn the call over to RGP CEO, Kate Duchesne.

Thank you, Operator. Good afternoon, everyone, and thanks for being with us. We are proud of our performance during the fourth quarter and throughout fiscal 23, a year in which we delivered growth and improved profitability despite the choppiness of the macro environment. We strengthened the company financially and improved consultant and client retention. We are continuing to change the way the world works. Coming out of the pandemic, we have seen fundamental and lasting shifts in how professionals want to work and how companies want to get work done. we are delivering agile consulting to clients with experts who execute. Without the constraints of a bench model, we give experts choice and control over their projects so that when they engage on a project, it is because they want to deliver impact in the client's business. They are engaging in work that they want to accomplish. This resonates with clients who are weary of the traditional partnership model in which swarms of junior consultants with high bill rates get assigned to engagements without choice, and often learn on the client's dime. We know there's a better way of getting consulting work done and are delivering that approach to the world's biggest and best brands. Turning to the numbers, in Q4, we achieved $184.4 million in revenue, which exceeded the high end of guidance. Gross margin remained strong at 41.1%, again exceeding the high end of guidance. Run rate SG&A spend was $52.5 million, coming in more favorable than guidance. Adjusted EBITDA margin was 12.6% for the quarter, in line with our stated goal of improving to mid-teen performance. With respect to full-year performance, I'll highlight three points. We grew 1% year-over-year organically. Given the declining and uncertain macro environment during the second half of our fiscal year due to heightened inflation, interest rate increases, talent shortages worldwide, and ongoing geopolitical conflict, we're proud to report real growth. We also improved gross margin by 110 basis points to 40.4%. Driven by improved bill rates, this is our highest full-year gross margin in over a decade. Adjusted EBITDA was also up for the full year to $100.2 million, or 12.9% of revenue, again representing our highest margin in over a decade. As we look ahead to fiscal 24, we note that in June, the World Economic Forum reported that chief economists are now equally divided on whether a recession will happen. Last Monday, a leading investment bank cut the probability of a U.S. recession in 2023 to 20% from 25%, citing inflation declines and economic resiliency. The conference board's chief economist predicted in her June report that the growth curve in the U.S. returns broadly in early calendar 2024, and the likelihood of a soft landing for the economy is much higher today. In our client base, the buying environment is starting to show some green shoots in certain geographies and industries. For example, Europe and Asia Pacific revenue trends are improving. Our digital transformation business, delivered by Veracity, achieved strong double-digit growth over the prior year quarter, supporting our conviction that clients are continuing to pursue digital agendas. We believe we will see a steadier stream of opportunity as inflation moderates, interest rates stabilize, and companies feel more secure that potential recession, if it comes at all, will be short and shallow. Next, I want to spend a few minutes outlining what we are focused on to execute against the opportunity ahead. First, we're moving into the testing phase of our global technology transformation, Project Phoenix. This project includes replacing our core financial and talent software systems and optimizing Salesforce and Workday HCM. And we will go live with our improved software platform and capability this fiscal year. We are investing in new systems to drive global visibility in our operations, increase efficiency through self-service automation and generative AI, and provide better data and analytics for improved decision making. We expect the investment to improve financial returns through headcount leverage and supply and demand optimization. We will continue to focus and deepen our service offerings to grow the technology, data, and digital business. We have transitioned a part of our project consulting services practice from core RGP into Veracity to enhance our ability to cross-sell and deliver these services. In a recent CEO survey published by the Conference Board, digital transformation continues to be the number one priority investment for senior leaders. While other investments may be on hold, this category of transformation marches forward and we're well-positioned to deliver. More than 30% of Veracity's revenue in fiscal 23 was delivered in the core RGP client base. So the cross-selling strategy is paying off. We will also continue to enhance our gross margin. We've undertaken a comprehensive review of our rate card versus the competition. We know the caliber and capability of our consultant set and will uplift our rate cards in fiscal 24 to reflect value delivered and market dynamics. This move will better reflect the experience and expertise of the consultants who deliver for the RGP brand while continuing to provide exceptional value to our clients. Our consultants bring both functional expertise and experience in business and professional services, which enables them to drive impact faster. We deliver the rare trifecta, a point of view, independence, and judgment. On that topic, I want to highlight at least two workforce trends I believe serve as tailwinds for our business. Last week, Bain and Company published a global research study on the rise of older workers filling more jobs in the future, which bodes well for RGP and what it offers these more experienced individuals. Specifically, Bain predicts that 150 million jobs across the globe will shift to workers over the age of 55 by 2030. The trend is pronounced in high-income countries with significant labor force gaps, like the U.S. and Japan, two of our primary markets. Bain also found that these workers want autonomy and flexibility, which again is perfectly aligned to RGP's model. Bain concludes that companies who embrace a workforce strategy utilizing this talent pool will experience significant competitive advantage. We at RGP certainly agree. In the U.S., the accounting profession is under serious duress as more than 300,000 accountants left their jobs in the past two years. Accountants are increasingly rejecting the traditional accounting firm path in favor of finance, technology, and consulting roles. They want careers with greater flexibility and choice. This pandemic-induced exodus provides increased opportunity for RGP and HUGO, our digital engagement staffing platform for mid- to lower-level accounting and finance talent, to find project work through self-service. We can provide impactful project work for this in-demand talent set while delivering the choice, flexibility, and control they desire. In closing, I want to thank our employees for their hard work and commitment this year. We are united in our purpose to dare to work differently. We take pride in our disruptive brand and are committed to delivering excellence every day for our clients and each other. We embrace working differently in a collaborative, learning-oriented culture focused on people above all else. Backed by the tailwinds of today's world of work, our vision is to continue to disrupt the professional services marketplace with our unique approach that offers greater flexibility, value, and engagement. We're excited about the year ahead. I'll now turn the call over to Tim for an update on operations.