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. 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 23rd, 2024. 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 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 25, 2024 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, Kate DeShane.

Thank you, Operator. Welcome to our second quarter call, and Happy New Year, everyone. Thank you for joining us today. I'm pleased to report that we delivered sequential improvement in revenue, gross margin, run rate SG&A, and adjusted EBITDA in Q2. Specifically, we grew top line revenue by over 6%. We delivered gross margin of 38.5% and improvement of 200 basis points and adjusted EBITDA of 9.7 million or a margin of 6.6% up from 2.3 million in Q1. While overall results were still off year over year as expected, all measures exceeded our outlook. Turning to performance highlights. First, Europe improved top line sequentially by 18%, while Asia also grew steadily at 4%, delivering overall segment improvement of 10%. The on-demand segment revenue was up slightly from Q1 and is continuing to stabilize. Our consulting segment, Veracity, grew 10% in Q2, with improved bill rates and utilization metrics. The outsource services business, County, was essentially flat sequentially and grew 4% year over year, adding 25 new logos during the quarter. These positive results reinforce the soundness of our long-term strategy and demonstrate steady progress in our business against a macro backdrop that remains choppy. Since the close of Q2, we also accomplished a major milestone with the implementation of our new technology platform in North America. We successfully went live on Workday Financials and Workday Professional Services Automation module and optimized Workday HCM and our Salesforce platform. 75% of our business is now run on a modern, state-of-the-art technology platform, enabling increased use of artificial intelligence and automation in the delivery of our services as well as back office operations. We expect these new tools will drive greater efficiency in our processes and accelerate speed to market across the enterprise. The significant technology modernization is also highly beneficial as we increase the use of global teams to deliver services, especially in the finance and accounting, risk and compliance, and digital transformation practices. I want to applaud our entire project team, especially our management employees and RGP consultants for the excellent implementation plan and hard work to deliver this major initiative. We will continue to execute our plan to roll out the technology to our international regions. As we embark on the second half of our fiscal year, we're going to drive continued progress against our strategy to deliver diversified service offerings to our exceptional clients. Our rich portfolio of diversified offerings, encompassing professional staffing support, consulting, and outsource services creates a strategic powerhouse that we believe will drive value for investors over the long term. Let's review a few of the advantages. First, our model is designed to meet clients where they are and serve them in a truly tailored fashion. In today's interconnected and fast-paced economy, businesses face multifaceted challenges that require customized solutions. Offering professional staffing, consulting, and outsourcing allows us to address clients' challenges both flexibly and holistically depending on whether they need to fill immediate talent gaps, review and refine strategy, or design, lead, and execute a project all the way through. This constructive collaboration ensures that clients can choose how and when to engage and also receive end-to-end solutions under one roof, saving time and reducing complexity. Second, diversified offerings better positions RGP to be a preferred partner in both good times and bad in the years ahead. Market dynamics are constantly shifting, and businesses must remain agile to succeed. Diversified service offerings enable our clients to pivot based on immediate needs and market conditions. For example, during periods of rapid growth, on-demand services can ramp up workforce capacity without the risks associated with permanent hires. During downturns, consulting helps optimize operations with process redesign and cost containment initiatives, and outsourcing ensures critical functions are maintained efficiently. We believe this adaptability will strengthen RGP's market position throughout economic cycles moving forward, as it is intended to build inherent resilience and shield the business from cyclical impact. Next, diversification also deepens client relationships by enabling RGP to function as a trusted advisor rather than a one-off vendor. By serving a client holistically, we gain a comprehensive understanding of their business, challenges, and goals. This knowledge fosters stronger partnerships, increased trust, and long-term collaborations. Our clients are more likely to rely on us since we evolve with their needs, and offer a seamless client experience rather than fragmented solutions. We can create economies of scale that translate into cost savings for clients. Badrash will share specific examples of this cross-sell dynamic in contracts we have recently won as well as our pipeline. Finally, a diversified services portfolio also attracts a wide array of talent. from consultants who excel at strategy to specialists who thrive in execution. This diverse talent pool fosters innovation as professionals with different skill sets collaborate to solve problems creatively. Additionally, the integration of services promotes cross-functional expertise, offering clients insights and solutions informed by a broader perspective. Veracity, for example, is growing in partnership with our on-demand business, building scalable consulting teams that bring together strategists and execution specialists. Reference Point, our financial services strategy group, and On Demand also collaborated to close multiple contracts during the quarter that each would not have successfully pursued alone. RGP's flexible talent model continues to be a key differentiator and growth driver for the business. even as we're deepening our consulting capabilities and serving clients in new ways. The time is now to bring our diversified offerings to market as the global professional services industry is poised for growth and transformation in the next five years. According to research published by Statista, the industry is expected to grow to 95 billion worldwide by 2029, or a CAGR of 6%. In addition, the finance, accounting, risk, and compliance sectors within professional services are poised for significant changes in 2025 and beyond. As a result, the global finance and accounting professional services market is expected to grow at a compound annual growth rate of over 9% from 2020 to 2027, as reported by Grandview Research. RGP's core buyer has traditionally been the CFO and or his or her direct reports, and now we have more to offer that buyer than ever before. As such, we are successfully engaging our longstanding CFO relationships to introduce us to additional buyers in our client environments. This is particularly true for consulting services focused on transformations spanning finance, human resources, supply chain, customer, and employee experience. With almost every client spending on technology, data and digital transformation initiatives, we now have a rich services portfolio that is aligned with market demand. Veracity, for example, uniquely brings together domain, technical and UX expertise to lead and deliver such projects with differentiated value and flexibility. In closing, we beat expectations this quarter as we continue to transform RGP as a global partner to our clients for services critical to the future of their businesses. The changes we have undertaken to strengthen the business and our position in the marketplace are not easy, but necessary to enhance long-term value for our stakeholders. We are heads down in the execution of our strategy and are making steady progress. We are excited and optimistic on the long-term outlook as reinforced by the Board's recent authorization to increase our stock buyback program. I'll now turn the call to Pradesh to provide more color around our Q2 performance and the signs of inflecting trends we're closely tracking as we look ahead.

Thank you, Kate, and Happy New Year. I'm pleased to share our quarterly update and walk you through the progress we've made in executing our strategy along with our continued focus on growth. RGP is a challenger brand, uniquely empowering our clients to select how they prefer to engage with us throughout their transformation and operational journeys while eliminating the internal barriers that can hinder progress. This quarter, we made significant strides in cross-selling, optimizing our pricing approach, and improving operational efficiency. As a result, we achieved sequential growth for the first time in nine quarters at 6.3%, along with a 4% improvement in average weekly run rate and an increase in hourly bill rates compared to our previous quarter. Our pipeline remains stable with a steady flow of opportunities with existing clients and new logos, particularly in finance transformation, focusing on ERP consolidation, migration, and upgrades, along with supply chain modernization and change management. Additionally, HR transformation with an emphasis on employee experience and digital transformation powered by automation and AI-driven operational processes are also gaining momentum. all core to our capabilities and cross-sell strategy. While we remain cautiously optimistic about the state of the macro environment, especially as it drives our on-demand segment, the stability of our overall business gives us confidence in our established baseline moving forward. Additionally, we're seeing positive results from our pricing initiative. On new contracts, we've achieved notable rate increases, highlighting the growing demand for our service offerings and the recognition of the value we provide to our clients. Now I'll provide an update on our quarterly performance by segment. Our consulting segment achieved 6.8% sequential organic growth, underscoring the soundness of our strategy to segment the business. This growth was driven by our expansion into new buying centers within existing clients and higher-level conversations around client transformation initiatives. As we continue bringing our consulting capabilities together, with reference points, Their expertise in data, digital, and AI is adding significant depth to the value we deliver to a broader range of clients beyond financial services. Including ReferencePoint, our consulting segment revenue grew 10.2% from the first fiscal quarter. Bench utilization rates have also increased, while we continue to balance rising pay rates with improved bill rates. This quarter, we secured several consulting contracts valued at over $1 million and are actively pursuing multiple opportunities, each with a potential value exceeding $10 million. Each of those wins and opportunities is representative of the momentum and the differentiation we've been working hard to build and communicate to the marketplace. Our on-demand segment achieved growth of 1.9% in top-line revenue alongside an improvement in gross margin compared to the first quarter. Despite macroeconomic challenges, the business is benefiting from our cross-selling efforts, which are driving incremental opportunities and strengthening client relationships. Our flexible on-demand talent model is also a key driver of our consulting business. accelerating project staffing and enabling us to scale more quickly while mitigating the financial risk of a traditional bench model. Our Europe and Asia Pacific segment achieves sequential quarterly growth, as Kate mentioned earlier. This is a positive step given the broader regional challenges. In Asia Pacific, our business remains stable while we continue to leverage existing relationships to navigate inherent geographic complexities. Our offshore services segment remains on track with the majority of the wins coming from early stage clients in the technology sector. The combination of new business and expanding existing relationship lends confidence in our ability to sustain this momentum. While we relentlessly execute our growth strategy, we continue to refine our operating model to enhance the efficiency with which we deliver our services. One of the key steps we've taken this quarter is the consolidation of our talent acquisition and go-to-market talent organizations, enabling us to serve our segments more centrally, streamline talent acquisition, and align resources to better meet the needs of our clients across segments. Last, as Kate mentioned, we're officially live with our North America technology and digital transformation efforts. We'll soon begin our efforts to migrate our international operations onto our new platform. In summary, we're excited by the progress we're making on all fronts, including strategy execution, financial performance, pipeline growth, and operational efficiency. This is only our second quarter under a new operating model, and we're already seeing tangible results reflected in the financial performance we reported today. While the macroeconomic environment presents uncertainty, our focus on cross-selling and driving efficiency across the business puts us in a strong position to continue growing and optimizing our operations in the quarters ahead. I'll now hand the call over to Jen.