Resources Connection reports Q3 results
• Company reports revenue of $132.7 million and earnings per share of $0.06 in fiscal 2014 third quarter
• Company returns $10.1 million in capital to shareholders in dividends and stock buy-backs during third quarter
• Company announces fourth quarter European headcount reductions with estimated severance costs of $2.8 million or $0.07 per share
Resources Connection, Inc. has announced financial results for its fiscal third quarter ended February 22, 2014. Resources Connection, Inc. (the "Company") is a multinational professional services firm that provides to clients - through its operating subsidiary, Resources Global Professionals ("RGP") - consulting services in the areas of accounting, finance, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, healthcare solutions, and legal and regulatory services.
Revenue for the third quarter of fiscal 2014 was $132.7 million, decreasing 3.8% (3.4% on a constant dollar basis) compared to the prior year's third quarter and 9.1% (9.0% on a constant dollar basis) sequentially. Revenue in the U.S. decreased 2.4% quarter-over-quarter and 8.4% sequentially. U.S. revenue in the third quarter of fiscal 2014 was unfavorably impacted by an estimated $3.3 million, as the Thanksgiving holiday fell in the third quarter this year but occurred in the second quarter last year. International revenue decreased 8.7% quarter-over-quarter and 11.5% sequentially (6.9% quarter-over-quarter and 11.5% sequentially on a constant dollar basis).
The Company's net income for the third quarter of fiscal 2014 was $2.3 million, or $0.06 per diluted share, compared to net income for the third quarter of fiscal 2013 of $4.5 million, or $0.11 per diluted share.
"While our revenues for the third quarter were clearly impacted by the additional major holiday (Thanksgiving) and severe winter weather in the U.S., they were also hurt by continued weakness in Europe," said Tony Cherbak, president and chief executive officer of RGP. "As a result, we will take a charge for severance, estimated at $2.8 million or $0.07 per share, in our fourth quarter. We expect these headcount reductions to result in annual savings of $4.5 million or $0.12 per share beginning in fiscal 2015."
Gross margin decreased 110 basis points quarter-over-quarter to 36.0% in the third quarter of fiscal 2014 and 330 basis points sequentially. The decrease in sequential gross margin was primarily attributable to the reset of payroll taxes in the third quarter, three paid holidays in the U.S. as compared to only one paid holiday in the second quarter and decreased leverage on other fixed expenses. The third quarter gross margin quarter-over-quarter decline was attributable to the Thanksgiving holiday falling in the third quarter in fiscal 2014 (the holiday fell in the second quarter in fiscal 2013) and a slight decrease in the current quarter's bill rate/pay rate ratio.
Selling, general and administrative expenses for the third quarter of fiscal 2014 were $41.6 million (31.3% of revenue), the same as the prior year quarter dollar amount (30.1% of revenue) and a decrease of $1.5 million sequentially (from $43.1 million or 29.5% of revenue).
Cash flow from operations and Adjusted EBITDA (Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, stock-based compensation and contingent consideration adjustments, if any) were $5.2 million and $7.8 million (5.8% of revenue), respectively, for the third quarter of fiscal 2014 compared to $13.0 million and $11.4 million (8.3% of revenue), respectively, for the third quarter of fiscal 2013.
"U.S. weekly revenues the first four weeks of our fourth quarter have trended 4.4% higher than the comparable weeks a year ago," said Don Murray, executive chairman of RGP. "We are pleased with the traction we are getting in the U.S. and hope that, over time, this momentum will expand internationally."
The Company's revenue for the nine months ended February 22, 2014 was $410.4 million compared to $416.2 million for the nine months ended February 23, 2013. The Company's net income for the nine months ended February 22, 2014 was $13.0 million, or $0.33 per diluted share. This compares to net income in the nine months ended February 23, 2013 of $15.2 million, or $0.37 per diluted share.
During the third quarter of fiscal 2014, the Company repurchased 522,200 shares of common stock for $7.4 million. As of April 2, 2014, the Company has approximately $50.9 million remaining under its board authorized stock buyback program. On March 20, 2014, the Company paid a quarterly dividend totaling $2.7 million ($0.07 per share) to shareholders. As of February 22, 2014, the Company's cash, cash equivalents and short-term investments were $107.3 million compared to $119.0 million at fiscal year-end May 25, 2013.