Resources Connection, Inc. Reports First Quarter Results for Fiscal 2016
Revenue for the first quarter of fiscal 2016 increased 3.4% to $148.3 million compared to the prior year's first quarter of $143.4 million. On a sequential basis, first quarter revenue was down 0.3% compared to $148.8 million in the fourth quarter of fiscal 2015. Using the comparable first quarter fiscal 2015 conversion rates to adjust for the impact of currency fluctuations, fiscal 2016's first quarter revenue would have been $152.4 million, up 6.3% quarter-over-quarter. Revenue in the U.S. increased 4.6% quarter-over-quarter and 0.4% sequentially. International revenue decreased 1.4% on a quarter-over-quarter basis and 3.5% sequentially. Adjusting for the impact of currency fluctuations, international revenue increased 13.4% quarter-over-quarter using the comparable first quarter fiscal 2015 conversion rates and declined sequentially 3.2% using the comparable fourth quarter fiscal 2015 conversion rates. The Company's net income in the first quarter of fiscal 2016 improved 31.5% to $7.1 million, or $0.19 per diluted share, compared to the prior year's first quarter net income of $5.4 million, or $0.14 per diluted share. Net income in the first quarter of fiscal 2016 includes a $0.01 per share charge for stock-based compensation expense of approximately $900,000 related to the accelerated vesting of options held by Donald Murray related to his transition from Executive Chairman to non-employee Chairman during the quarter. Net income in the first quarter of fiscal 2015 included a $0.02 per share charge for severance related to the Company's European operations. "Our first quarter results reflect solid improvement in our financial metrics such as revenues and adjusted EBITDA, driven by our United States operations," said Tony Cherbak, president and chief executive officer of RGP. "In addition, our practices in Asia Pacific grew 17.0% quarter-over-quarter (27.7% constant currency), with particular strength in Shanghai, Hong Kong and Singapore and Europe showed continued signs of stability, growing 1.9% on a constant currency basis." Gross margin was 38.7% in the first quarter of fiscal 2016, compared to 39.2% in the prior year quarter. The 50 basis point decrease results from higher costs in the Company's self-insured medical plan and an increase in zero margin reimbursable expenses, partially offset by improved bill/pay rate spreads. Sequentially, gross margin decreased 20 basis points from 38.9%, due to a slight reduction in bill rate/pay rate spreads and higher medical costs, partially offset by lower zero margin reimbursable expenses. Selling, general and administrative expenses ("SG&A") for the first quarter of fiscal 2016 were $44.0 million (29.7% of revenue) compared to the prior year first quarter amount of $44.3 million (30.9% of revenue) and the preceding quarter amount of $42.5 million (28.5% of revenue). The first quarter of fiscal 2016 amount includes approximately $900,000 of stock-based compensation expense related to the accelerated vesting of options held by Donald Murray the prior year quarter included approximately $700,000 of severance charges related to the Company's European operations. Excluding these charges, SG&A was $43.1 million (29.1% of revenue) in the first quarter of fiscal 2016 and $43.6 million (30.4% of revenue) in the first quarter of fiscal 2015. The quarter-over-quarter decrease is primarily attributable to lower marketing related costs. Cash used in operations and Adjusted EBITDA were $4.6 million and $15.7 million (10.6% of revenue), respectively, for the first quarter of fiscal 2016 compared to cash used in operations and Adjusted EBITDA of $8.7 million and $13.5 million (9.4% of revenue), respectively, for the first quarter of fiscal 2015. Cherbak added: "Our business model, which provides intellectual capital on demand to our clients, continues to generate cash that allowed the Board to recently announce a 25% increase in our dividend rate to $0.10 per share, the fifth consecutive year in which we have increased our dividend. Combined with our stock buy-back program, we have a solid foundation of programs to return capital to our shareholders." In the first quarter of fiscal 2016, the Company repurchased 395,000 shares of common stock for $6.2 million and paid a quarterly dividend totaling $3.0 million ($0.08 per diluted share) to shareholders. During the quarter, the Company's Board of Directors authorized a third stock repurchase program with a dollar limit of $150 million the Company now has a total of $160.5 million available for share purchases when combined with the balance remaining from the previous authorization. As of August 29, 2015, the Company's cash, cash equivalents and short-term investments were $101.2 million compared to $112.2 million at fiscal year-end May 30, 2015.