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Revenue down over 3% YoY in Q1 2019 for Resources Connection

Resources Connection, Inc. has released its financial results for the first quarter ended 24th August 2019.

“We engaged in decisive actions this quarter to improve our financial performance over the mid and longer term – including an important acquisition, a divestiture and an office closure,” said Kate W. Duchene, chief executive officer. “We are very pleased to have completed these strategic moves in Q1 of FY20 and continue to progress with our transformation efforts. At the same time, we are disappointed by our revenue results this quarter, and although the decline was modest, we have specific plans to build momentum in the second quarter and are encouraged by the strengthening pipeline.”

Revenue for the first quarter of fiscal year 2020 decreased 3.6% and 5.4% from the first and fourth quarters of fiscal year 2019, respectively to $172,225,000. On a constant currency basis, revenue decreased 3.0% and 5.3% from the first and fourth quarters of fiscal year 2019, respectively. Compared to the prior year first quarter, the decrease in revenue in the first quarter of fiscal 2020 reflects the impact of reduced client demand in the Nordics as well as the wind-down of technical accounting implementation projects.

Gross margin for the first quarter was 39.2%, increasing 100 basis points from the first quarter of fiscal year 2019, and decreasing 90 basis points sequentially. The year-over-year increase is related primarily to an improved bill/pay ratio, driven by the impact of internal initiatives to improve pricing and a decrease in pay rate. The sequential quarter decrease is primarily due to an increase in holiday pay for consultants for the Memorial Day and July 4th holidays in the US while the bill/pay ratio remained the same between the two quarters.

SG&A was 33.1% of revenue for the first quarter of fiscal 2020 compared to 31.6% and 31.2% of revenue in the first and fourth quarters of fiscal year 2019, respectively. The year-over-year percentage increase relates to higher payroll and benefits costs due to an increase in headcount to support anticipated revenue growth, an increase in retention bonus, an increase in costs resulting from exit activities in our European operations, and an increase in costs from the Veracity acquisition, partially offset by a decrease in transformation and system implementation costs, and lower incentive and bonus compensation due to lower revenue.

The company’s board of directors approved a $0.14 per share dividend to shareholders in the first quarter for $4.5m (paid on 19th September 2019), compared to a $0.13 per share dividend for $4.1m in the prior year first quarter. The Company did not buy back any of its common shares during the first quarter of fiscal 2020. As of 24th August 2019, approximately $90.1m remained available for future common stock purchases.

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