Resources Connection’s Q1 revenue decreases 3.3%
Resources Connection, Inc. has announced financial results for its first fiscal quarter ended 27th August 2016.
Revenue for the first quarter of fiscal 2017 decreased 3.3% (3.1% constant currency) to $143.4m compared to the prior year's first quarter of $148.3m. The revenue decrease is partially attributable to fewer business opportunities in the financial services and energy sectors. In addition, approximately 0.9% of the quarter-over-quarter revenue decrease is attributable to the shift of the Memorial Day holiday to the first quarter of fiscal 2017 (Memorial Day calendar 2015 was in the fourth quarter of fiscal 2015). On a sequential basis, first quarter revenue decreased 6.0% (5.9% constant currency) compared to $152.5m in the fourth quarter of fiscal 2016. Approximately 1.8% of the sequential quarter revenue decrease is attributable to the Memorial Day and July Fourth holidays. Constant currency quarter-over-quarter is computed using the comparable first quarter fiscal 2016 conversion rates and the sequential quarter is computed using the comparable fourth quarter fiscal 2016 conversion rates for revenue generated internationally.
Revenue in the U.S. decreased 4.5% quarter-over-quarter and 7.0% sequentially. The Memorial Day holiday had an unfavourable impact on U.S. revenue of 1.1% on a quarter-over-quarter basis; on a sequential basis, the Memorial Day and July Fourth holidays had an unfavourable impact on revenue of 2.1%. International revenue improved 1.9% quarter-over-quarter (3.1% constant currency) but decreased 1.4% sequentially (0.9% constant currency).
The Company's net income declined in the first quarter of fiscal 2017 to $5.6m, or $0.15 per diluted share, compared to $7.1m, or $0.19 per diluted share, in the prior year's first quarter.
Tony Cherbak, president and chief executive officer ("CEO") of RGP, said, "Our strong balance sheet allows us to return capital to our shareholders as evidenced by the $9.3 million we returned in the first quarter from our dividend and stock repurchase programs.
"We are continuing to focus on business development with new and existing clients in an ongoing effort to stimulate revenue growth."
In a separate press release issued today, the Company announced that Cherbak will resign as the Company's president and CEO effective Friday 7th October 2016 due to health considerations. Kate W. Duchene, the Company's chief legal officer, executive vice president, human resources and secretary, will serve as interim CEO while the company's board of directors oversees a search for a permanent CEO.
Gross margin was 38.0% in the first quarter of fiscal 2017, compared to 38.7% in the prior year quarter. Gross margin in the first quarter of 2017 decreased more than expected primarily due to an unfavourable change in the bill rate/pay rate ratio. Sequentially, gross margin decreased 190 basis points from 39.9% in the fourth quarter of fiscal 2016, due primarily to two paid holidays in the U.S. during the first quarter and an unfavourable change in the bill rate/pay rate ratio.
Selling, general and administrative expenses for the first quarter of fiscal 2017 were $43.6m (30.4% of revenue) compared to $44.0m (29.7% of revenue) in the prior year's first quarter and $44.4m (29.1% of revenue) in the fourth quarter of fiscal 2016. The prior year quarter includes $900,000 in additional stock compensation expense for acceleration of vesting of certain options; the remaining quarter-over-quarter increase is related to compensation and related benefit costs. The sequential decrease is primarily related to reduced marketing spend.
Cash used in operations and Adjusted EBITDA were $7.1m and $12.2m (8.5% of revenue), respectively, for the first quarter of fiscal 2017 compared to cash used in operations and Adjusted EBITDA of $4.6m and $15.7 m (10.6% of revenue), respectively, for the first quarter of fiscal 2016. Cash flows in the first quarter of the fiscal year are typically used in operations as the Company pays its year-end incentive based compensation in that quarter.
In the first quarter of fiscal 2017, the Company repurchased approximately 375,000 shares of its common stock for $5.7 million and paid a quarterly dividend totaling $3.6m ($0.10 per diluted share) to shareholders. Currently, the Company has a total of $132.9m available for share purchases under its existing repurchase program. As of 27th August 2016, the Company's cash, cash equivalents and short-term investments were $102.9m compared to $116.0m at fiscal year-end 28th May 2016.
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