- Company reports revenues of $148.3
million, up 3.4% over prior year quarter (6.3% constant
currency)
- Earnings per share increases to $0.19,
up 35.7% from $0.14 in prior year quarter
- Adjusted EBITDA* improves 16.3% to
$15.7 million (10.6% of revenue)
- Company returns $9.2 million in capital
to shareholders
* Adjusted EBITDA is defined as earnings before interest, income
taxes, depreciation, amortization and stock-based compensation
Resources Connection, Inc. (NASDAQ: RECN) today announced
financial results for its first fiscal quarter ended August 29,
2015. Resources Connection, Inc. (the “Company”) is a multinational
professional services firm that provides to clients – through its
operating subsidiary, Resources Global Professionals (“RGP”) –
consulting and business support services in the areas of
accounting; finance; corporate governance, risk and compliance;
corporate advisory, strategic communications and restructuring;
information management; human capital; supply chain management;
healthcare solutions; and legal and regulatory.
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.
ABOUT RGP
RGP, the operating subsidiary of Resources Connection, Inc.
(NASDAQ: RECN), is a multinational professional services firm that
helps business leaders execute internal initiatives. Partnering
with business leaders, we drive internal change across all parts of
a global enterprise – accounting; finance; corporate governance,
risk and compliance; corporate advisory, strategic communications
and restructuring; information management; human capital; supply
chain management; healthcare solutions; and legal and
regulatory.
RGP was founded in 1996 within a Big Four accounting firm.
Today, we are a publicly traded company with over 3,200
professionals, annually serving over 1,700 clients around the world
from 68 practice offices.
Headquartered in Irvine, California, RGP has served 87 of the
Fortune 100 companies.
The Company is listed on the NASDAQ Global Select Market, the
exchange’s highest tier by listing standards. More information
about RGP is available at http://www.rgp.com.
RGP will hold a conference call for interested analysts and
investors at 5:00 p.m. ET, today, October 7, 2015. This conference
call will be available for listening via a webcast on the Company’s
website: http://www.rgp.com. An audio replay of the conference call
will be available through October 14, 2015 at 855-859-2056. The
conference ID number for the replay is 32516778. The call will also
be archived on the RGP website for 30 days.
Certain statements in this press release are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements may be identified by words such as
“anticipates,” “believes,” “can,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“remain,” “should” or “will” or the negative of these terms or
other comparable terminology. In this press release, such
statements include the Company’s expectations regarding its
programs for returning capital to shareholders. Such statements and
all phases of the Company’s operations are subject to known and
unknown risks, uncertainties and other factors that could cause our
actual results, levels of activity, performance or achievements and
those of our industry to differ materially from those expressed or
implied by these forward-looking statements. Risks and
uncertainties include seasonality, overall economic conditions and
other factors and uncertainties as are identified in our most
recent Annual Report on Form 10-K and our other public filings made
with the Securities and Exchange Commission (File No. 0-32113).
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also affect our business or
operating results. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date hereof. The Company does not intend, and undertakes no
obligation, to update the forward-looking statements in this press
release to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events, unless required
by law to do so.
RESOURCES CONNECTION, INC. CONSOLIDATED
STATEMENT OF OPERATIONS (Amounts in thousands, except per
share amounts) Three Months Ended August
29, August 30, 2015 2014 (Unaudited)
Revenue $ 148,340 $ 143,447 Direct costs of services 90,877
87,222 Gross margin 57,463 56,225 Selling,
general and administrative expenses (1) 43,957
44,279
Operating income before amortization and
depreciation (1)
13,506 11,946 Amortization of intangible assets 30 424 Depreciation
expense 858 854 Operating income (1)
12,618 10,668 Interest income (32 ) (38 ) Income
before provision for income taxes (1) 12,650 10,706 Provision for
income taxes (2) 5,517 5,311 Net income
(1), (2) $ 7,133 $ 5,395 Net income per common share:
Basic (1), (2) $ 0.19 $ 0.14 Diluted (1), (2) $ 0.19
$ 0.14 Weighted average common shares outstanding:
Basic 37,295 38,180 Diluted
37,847 38,335 Cash dividends declared per
common share $ 0.10 $ 0.08
EXPLANATORY
NOTES
(1) SG&A expenses
include non-cash compensation expense for employee stock option
grants and employee stock purchases of $2.2 million and $1.5
million for the three months ended August 29, 2015 and August 30,
2014, respectively. The expense for the first quarter of fiscal
2016 includes approximately $900,000, or $0.01 per share, related
to the Board of Director’s approval of accelerated vesting of
127,500 stock options related to Don Murray’s transition from
Executive Chairman to non-employee Chairman of the Board.
(2) The Company's effective tax rate was approximately 44% and
approximately 50% for the three months ended August 29, 2015 and
August 30, 2014, respectively. For all periods presented, the
Company is unable to benefit from, or has limitations on the
benefit of, tax losses in certain foreign jurisdictions. To a
lesser extent, the accounting treatment under GAAP for the cost
associated with incentive stock options and shares purchased
through the Employee Stock Purchase Plan have caused volatility in
the Company's effective tax rate.
RESOURCES CONNECTION, INC. RECONCILIATION OF NET INCOME
TO ADJUSTED EBITDA (Amounts in thousands, except Adjusted
EBITDA Margin) Three Months Ended August
29,2015 August 30,2014 (Unaudited)
Net income $ 7,133 $ 5,395 Adjustments: Amortization of intangible
assets 30 424 Depreciation expense 858 854 Interest income (32 )
(38 ) Provision for income taxes 5,517 5,311
EBITDA 13,506 11,946 Stock-based compensation expense
2,155 1,546 Adjusted EBITDA $ 15,661 $
13,492 Revenue $ 148,340 $ 143,447 Adjusted
EBITDA Margin 10.6 % 9.4 %
EXPLANATORY
NOTE
The Company utilizes certain financial measures and key
performance indicators that are not defined by, or calculated in
accordance with, GAAP to assess our financial and operating
performance. A non-GAAP financial measure is defined as a numerical
measure of a company's financial performance that (i) excludes
amounts, or is subject to adjustments that have the effect of
excluding amounts, that are included in the comparable measure
calculated and presented in accordance with GAAP in the statement
of operations; or (ii) includes amounts, or is subject to
adjustments that have the effect of including amounts, that are
excluded from the comparable measure so calculated and presented.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are
non-GAAP financial measures. EBITDA is calculated as net income
before amortization of intangible assets, depreciation expense,
interest income and income taxes. Adjusted EBITDA is calculated as
EBITDA plus stock-based compensation expense. Adjusted EBITDA
Margin is calculated by dividing Adjusted EBITDA by revenue. We
believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
provide useful measures to our investors because they are financial
measures used by management to assess the core performance of our
Company. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not
measurements of financial performance or liquidity under GAAP and
should not be considered in isolation or construed as substitutes
for net income or other cash flow data prepared in accordance with
GAAP for purposes of analyzing our profitability or liquidity.
These measures should be considered in addition to, and not as a
substitute to, net income, earnings per share, cash flows or other
measures of financial performance prepared in accordance with GAAP.
RESOURCES CONNECTION, INC. CONSTANT
CURRENCY REVENUE COMPARISON (Dollars in thousands)
(Unaudited)
Revenue for the Three Months Ended
August 29,
2015
GAAP
August 30,
2014
GAAP
May 30,
2015
GAAP
% Increase
August 29, 2015 vs.
August 30, 2014
GAAP
% Increase
August 29, 2015 vs.
August 30, 2014
Constant Currency (1)
% Decrease
August 29, 2015 vs.
May 30, 2015
GAAP
% Decrease
August 29, 2015 vs.
May 30, 2015
Constant Currency (2)
$ 148,340 $ 143,447 $ 148,814 3.4% 6.3% -0.3% -0.3%
(1) The percentage change in revenue on a
constant currency basis is calculated using the average foreign
exchange rates for the first quarter of fiscal 2015 and applying
those rates to foreign-denominated revenue in the first quarter of
fiscal 2016. (2) The percentage change in revenue on a
constant currency basis is calculated using the average foreign
exchange rates for the fourth quarter of fiscal 2015 and applying
those rates to foreign-denominated revenue in the first quarter of
fiscal 2016.
EXPLANATORY
NOTE
In order to provide a more comprehensive view of trends in
our business, this table shows revenue data on an as reported basis
(GAAP) for the respective periods and relative change in the same
periods from the impact on revenue of exchange rate fluctuations
between the United States dollar and currencies in countries in
which the Company operates.
RESOURCES CONNECTION, INC. SELECTED BALANCE SHEET, CASH
FLOW AND OTHER INFORMATION (Amounts in thousands, except
consultant headcount) August 29,2015
May 30,2015 (Unaudited) Cash, cash
equivalents and short-term investments $ 101,220 $ 112,238 Accounts
receivable, less allowances $ 94,510 $ 96,574 Total assets $
404,726 $ 416,981 Current liabilities $ 54,398 $ 68,946 Total
stockholders’ equity $ 343,106
$
340,452 Consultant headcount, end of period 2,501 2,516 Shares
outstanding, end of period 37,143 37,273
Three Months
Ended August 29,2015 August 30,2014
(Unaudited) Cash flow from operating activities $
(4,553 ) $ (8,669 ) Cash flow from investing activities $ (572 ) $
8,645 Cash flow from financing activities $ (5,694 ) $ (4,859 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151007005479/en/
For Resources Connection, Inc.Media
Contact:Michael Sitrick(US+)
1-310-788-2850mike_sitrick@sitrick.comorAnalyst Contact:Nate
Franke, Chief Financial Officer(US+)
1-714-430-6500nate.franke@rgp.com
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